Scribd
Upload
693 views22 pages

Strategic Management Insights

This document provides an overview of management control systems and strategies. It discusses that the primary goals of organizations are profitability and maximizing shareholder value. It also notes that strategies describe how an organization plans to achieve its goals. Management control systems are the processes that managers use to influence others to implement organizational strategies through planning, coordinating, communicating, evaluating, and decision making. The document outlines factors like organizational structure, lines of control, and the controller's role that influence management control.

Uploaded by

Ruth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
693 views22 pages

Strategic Management Insights

This document provides an overview of management control systems and strategies. It discusses that the primary goals of organizations are profitability and maximizing shareholder value. It also notes that strategies describe how an organization plans to achieve its goals. Management control systems are the processes that managers use to influence others to implement organizational strategies through planning, coordinating, communicating, evaluating, and decision making. The document outlines factors like organizational structure, lines of control, and the controller's role that influence management control.

Uploaded by

Ruth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

Management Control Systems

Chapters 1 & 2,
Management Control Systems, 12th Ed.,
Anthony and Govindarajan
Chapter 2
Understanding Strategies
Chapter Objectives
 To study and understand the goals in any
organization

 To understand strategies at two levels-


The corporate level and
The business unit level
 Profitability- most important goal, broadest
isGOALS - Profitability
a product of two ratios:
1. profit margin percentage
X
2. investment turnover i.e.

(revenues-expenses/revenues) X
(revenues/investment)
Result is Return on Investment (ROI)=
((revenue-expenses)/investment)
 Profitability refers to profits in long run

Q)
 What does profitability depict?

 Does the company’s goal, change its


interpretation of profitability equation?
GOALS - Maximizing Shareholder
Value
Q)
 Maximizing Shareholder Value means what?
 Is earning maximum and increasing
profitability same?

 Maximizing shareholder value may be a


major goal but not the only goal
GOALS- Risk
 Risk also means POSSIBILITIES

 The risk-taking varies from company to


company, among personalities and
managers

 Some companies make it very clear that the


primary responsibility is to preserve
company’s assets
GOALS -Multiple Stakeholder
Approach
 Organizations deal in – capital market,
product market, factor market

 The firm has responsibilities to all these


multiple stakeholders

The Concept of Strategy
Strategies describe the general direction in which an
organization plans to move to attain its goals

Core Competencies Industry Opportunities

Strategies
Strategy

 Corporate Strategy
 To maximize use of resources

 Business Strategy
 To compete in selected markets
Goals and Strategy

 Strategy Formulation
 Goals
 How to attain
 Strategy Implementation (Execution)
 Objectives
 Management Control Systems
Management Control

 The process by which managers influence


other members of the organization to
implement the organization’s strategies.
Management Control

 Activities include:
 Planning
 Coordinating
 Communicating
 Evaluating
 Deciding
 Influencing
Management Control Systems

 Facilitate management control


 Primarily focus on strategy execution
 Encompass both quantitative and
qualitative performance measures
 Concerned with broadly defined activities
Conflict of Interests

 Goal congruence implies that individual


goals and organizational goals are
consistent

 Agency Theory implies the opposite


Good Management Control

 Achieves goal congruence by aligning


 Organizational goals
 Individual goals
Goal Congruence

 Influenced by
 Informal factors
 External – work ethic
 Internal – culture, management style, informal
organization, perception, communication
 Formal factors
 Rules
 Formal control system
Organizational Structure

 Functional organization
 Highly centralized
 Matrix organization
 Business unit organization
 Highly decentralized
Lines of Control within the
Organization

 Solid lines
 Direct reporting

 Dotted lines
 Coordination / reporting
The Controller

 Responsible for
 Design of the Management Control System
 Operation of the Management Control
System
 Normally the CFO

You might also like