Aiming in context with the divisional plans - In this step, the contributions made by

each department or division or product category within the organization is identified

and accordingly strategic planning is done for each sub-unit. This requires a careful
analysis of macroeconomic trends.

Performance Analysis - Performance analysis includes discovering and analyzing the

gap between the planned or desired performance. A critical evaluation of the
organizations past performance, present condition and the desired future conditions
must be done by the organization. This critical evaluation identifies the degree of gap
that persists between the actual reality and the long-term aspirations of the
organization. An attempt is made by the organization to estimate its probable future
condition if the current trends persist.

Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course
of action is actually chosen after considering organizational goals, organizational
strengths, potential and limitations as well as the external opportunities.

Q8. Describe Management Control System in strategic planning.

Strategic Planning

According to Anthony:

"Strategic planning is the process of deciding on the goals of the organization and the
strategies for attaining these goals."

Strategies are guidelines for deciding the appropriate actions for attaining the organization's
goals. The essential difference between strategic planning and management control is that the
strategic planning process is unsystematic.

Strategic control occurs in three ways. First, strategic planning is itself a form of control.
Second, strategic plans are converted into reality not only by their influence on the
management control activity but also by the key decisions regarding allocation of resources.

Third, while capital budgeting systems can respond to requests for resources that are
consistent with the accepted strategic plan, the period between formal, comprehensive
strategic planning exercises can give rise to unanticipated changes in the environment or
unexpected internal crises.
Anthony views management planning and control as the processes by which (1)
organizational objectives are achieved and (2) the use of resources is made effective and
efficient.

"Management control is the process by which managers influence other members of the
organization to implement the organization's strategies."

Management control decisions are made within the guidance established by strategic
planning. Management control is a systematic process. It is done by managers at all levels; it
is done on regular basis; it involves the whole organization; and it involves a large amount of
personal interaction and relatively less judgment.

There are two somewhat different types of management control activities: (1) the
management control of operating activities, and (2) the control of operational projects.

Process for operating activities has four phases: programming, budget preparation, execution,
and evaluation.

Programming is the process of deciding on the major programs that the organization will
undertake to implement its strategies and the approximate amount of resources that will be
devoted to each.

Budget preparation. An operating budget is the organization's financial plan for a specific
period, usually one year.

Execution and evaluation. During the year managers execute the program or part of a
program for which they are responsible. Reports on responsibility centers show both
budgeted and actual information. They are used as a basis for control. The process of
evaluation is a comparison of actual amounts with the amounts that should be expected of
actual circumstances.

A projects is a set of activities intended to accomplish a specified end result of sufficient

importance to be of interest to management (for example: construction projects,
research/development projects, and motion picture productions).
In a project, and in each of its components, the focus is on three aspects: (1) its scope (that is,
the specifications for the end product), (2) its schedule (that is, the time required), and (3) its
cost.

In actual operations, project managers engage in both planning activities and control
activities. They control when they act to improve effectiveness and efficiency.

Anthony views this third category of organizational planning and control as (1) focusing on
specific, discrete tasks and (2) the process of ensuring that those tasks are done effectively
and efficiently.

"Task control is the process of ensuring that specific tasks are carried out effectively and
efficiently."

As the definition suggests, the focus of operational control is on individual tasks or

transaction: scheduling and controlling individual jobs through a shop, as contrasted with
measuring the performance of the shop as a whole; procuring specific items for inventory, as
contrasted with management of inventory as whole: and so on.

Task control is distinguished from management control in the following ways:

The management control system is basically of similar throughout the organization. Each
type task requires a different task control system.

In management control, managers interact with other managers; in task control either humans
are not involved at all, or the interaction is between a manager and a nonmanager.

In management control the focus is on organizational units called responsibility centers; in

task control the focus is on specific tasks.

Management control relates to activities that are not specified; task control relates to
specified tasks.

In management control the focus is equally on planning and on execution; in task control it is
primarily on execution.
An essential characteristic of the process is that the "standard" against which actual
performance is measured is consistent with the organization's strategies. Exhibit 6-3 outlines
differences among the three types of processes with respect to the nature of the problems that
typically are addressed in each process and the types of decisions that are relevant for these
problems.

As another way of explaining the differences among the three processes, Exhibit 6-4 gives
some examples of activities associated with each.

Most commentators would agree with the definition of strategic control offered by Schendel
and Hofer:

"Strategic control focuses on the dual questions of whether: (1) the strategy is being
implemented as planned; and (2) the results produced by the strategy are those intended."

This definition refers to the traditional review and feedback stages which constitutes the last
step in the strategic management process. Normative models of the strategic management
process have depicted it as including there primary stages: strategy formulation, strategy
implementation, and strategy evaluation (control).

Strategy evaluations concerned primarily with traditional controls processes which involves
the review and feedback of performance to determine if plans, strategies, and objectives are
being achieved, with the resulting information being used to solve problems or take
corrective actions.

Recent conceptual contributors to the strategic control literature have argued for anticipatory
feedforward controls, that recognize a rapidly changing and uncertain external environment.

Schreyogg and Steinmann (1987) have made a preliminary effort, in developing new system
to operate on a continuous basis, checking and critically evaluating assumptions, strategies
and results. They refer to strategic control as "the critical evaluation of plans, activities, and
results, thereby providing information for the future action".
Schreyogg and Steinmann based on the shortcomings of feedback-control. Two central
characteristics if this feedback control is highly questionable for control purposes in strategic
management: (a) feedback control is post-action control and (b) standards are taken for
granted.

Schreyogg and Steinmann proposed an alternative to the classical feedback model of control:
a 3-step model of strategic control which includes premise control, implementation control,
and strategic surveillance. Pearce and Robinson extended this model and added a component
"special alert control" to deal specifically with low probability, high impact threatening
events.

The nature of these four strategic controls is summarized in Figure 6-4. Time (t ) marks the
point where strategy formulation starts. Premise control is established at the point in time of
initial premising (t ). From here on promise control accompanies all further selective steps of
premising in planning and implementing the strategy. The strategic surveillance of emerging
events parallels the strategic management process and runs continuously from time (t )
through (t ). When strategy implementation begins (t ), the third control device,
implementation control is put into action and run through the end of the planning cycle (t ).
Special alert controls are conducted over the entire planning cycle.

Planning premises/assumptions are established early on in the strategic planning process and
act as a basis for formulating strategies.

"Premise control has been designed to check systematically and continuously whether or not
the premises set during the planning and implementation process are still valid.

It involves the checking of environmental conditions. Premises are primarily concerned with
two types of factors:

Environmental factors (for example, inflation, technology, interest rates, regulation, and
demographic/social changes).

Industry factors (for example, competitors, suppliers, substitutes, and barriers to entry).

All premises may not require the same amount of control. Therefore, managers must select
those premises and variables that (a)are likely to change and (b) would a major impact on the
company and its strategy
 International Business
Q1. What are the four steps of the global pricing strategy
Four steps of four steps to global pricing strategy are
• Keegan’s four steps to global pricing strategy
• General pricing strategies
• Problems with pricing for multinational markets
• Problems with foreign currency and economic conditions
• Grey markets

I Keegan’s four steps to global pricing strategy

1. Determine the price elasticity of demand (Inflexible demand will allow for a higher
price)
2. Estimate fixed and variable manufacturing costs (product adaptation costs must be
calculated)
3. Identify all costs associated with the marketing programme
4. Select the price that offers the highest contribution margin

II General pricing strategies

• Market skimming
a pricing approach in which the producer sets a high introductory price to attract
buyers with a strong desire for the product and the resources to buy it, and then
gradually reduces the price to attract the next and subsequent layers of the market.

• Market penetration
an approach to pricing in which a manufacturer sets a relatively low price for a
product in the introductory stage of its life cycle with the intention of building market
share.

• Market holding - strategy intended to :

Maintain their share of the market