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CHAPTER 11
Strategic Control and
Continuous Improvement
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Chapter Topics
• Establishing Strategic Controls
•
•
•
•
Premise Control
Strategic Surveillance
Special Alert Control
Implementation Control
• The Quality Imperative: Continuous
Improvement to Build Customer Value
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What is Strategic Control?
Tracks a strategy as it is
implemented, detects
problems or changes in its
underlying premises, and
makes necessary
adjustments
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Questions Involved in Assessing a
Strategy’s Success
1. Are we moving in the proper direction? Are our
assumptions about major trends and changes correct?
Should we adjust or abort the strategy?
2. How are we performing? Are objectives and schedules
being met? Are costs, revenues, and cash flows matching
projections? Do we need to make operational changes?
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Ex. 11-1: Four Types of Strategic Control
Strategic Surveillance
Premise Control
Special Alert Control
Implementation Control
Strategy Formulation
Time 1
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Strategy Implementation
Time 2
Time 3
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Ex. 11-1: Characteristics of the Four Types
of Strategic Control
Basic
Characteristics
Premise
Control
Implementation
Control
Strategic
Surveillance
Occurrence of
recognizable but
unlikely events
High
High
Objects of
control
Planning
premises and
projections
Key strategic
thrusts and
milestones
Degree of
focusing
Data
Acquisition:
Formalization
Centralization
High
High
Potential
threats and
opportunities
related to the
strategy
Low
Medium
Low
High
Medium
Low
Low
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Special Alert
Control
High
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Ex. 11-1 (contd.)
Basic
Characteristics
Use with:
Environmental
factors
Industry factors
Strategy-specific
factors
Companyspecific factors
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Premise
Control
Implementation
Control
Strategic
Surveillance
Special Alert
Control
Yes
Seldom
Yes
Yes
Yes
No
Seldom
Yes
Yes
Seldom
Yes
Yes
No
Yes
Seldom
Seldom
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Definitions of Types of Strategic
Controls
• Premise Control – Designed to check systematically and continuously
whether premises on which the strategy is based are still valid
• Strategic Surveillance – Designed to monitor a broad range of events
inside and outside the firm that are likely to affect the course of its
strategy
• Special Alert Control – Thorough, and often rapid, reconsideration of
the firm’s strategy because of a sudden, unexpected event
• Implementation Control – Designed to assess whether the overall
strategy should be changed in light of the results associated with the
incremental actions that implement the overall strategy
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Types of Implementation Control
Monitoring
strategic
thrusts
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Milestone
reviews
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Establishing Effective Operational
Control Systems
Set standards of performance
Measure actual
performance
Steps involved
in postaction
control systems
Initiate
corrective action
Identify deviations from
standards set
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Concepts Related to TQM
• Viewed as a new organizational culture and
way of thinking
• Foundations of TQM
– Intense focus on customer satisfaction
– Accurate measurement of every critical
variable in a business’s operation
– Continuous improvement of products,
services, and processes
– Work relationships based on trust and
teamwork
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Key Elements of Implementing TQM
• Define quality and
customer value
• Develop a customer
orientation
• Focus on company’s
business processes
• Develop customer and
supplier partnerships
• Take a preventive
approach
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• Adopt an error-free
attitude
• Get the facts first
• Encourage all levels of
employees to participate
• Create an atmosphere of
total involvement
• Strive for continuous
improvement
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The Value Chain Approach to
Developing a Customer Orientation
Input
External
suppliers
Internal
suppliers
(functions)
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Input
Function
(like production)
Seeking:
Quality
Efficiency
Responsiveness
Outputs
Outputs
External
(ultimate)
customer
Other
internal
customers
(activities)
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What is Six-Sigma?
A highly rigorous and analytical
approach to quality and continuous
improvement with an objective to
improve profits through deficit
reduction, yield improvement,
improved customer satisfaction and
best-in-class performance
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Differences Between TQM and SixSigma
• Acute understanding of customers and the
product or service provided
• Emphasis on the science of statistics and
measurement
• Meticulous and structured training
development
• Strict and project-focused methodologies
• Reinforcement of the doctrine advocated by
Juran such as top management support and
continuous education
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ISO 9001
• The ISO 9001 standard focuses on achieving
customer satisfaction through
•
•
•
•
Continuous measurement
Documentation
Assessment
Adjustment
• It specifies requirements where an organization
• Needs to demonstrate its ability to consistently provide
product and services that meet customer requirements
• Aims to enhance customer satisfaction through the
effective application of the system, including processes
for continual improvement of the system and the
assurance of conformation to customer requirements
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The Balanced Scorecard Methodology
• Intends to provide a clear prescription as to what
companies should measure in order to “balance” the
financial perspective in implementation and control of
strategic plans
• It adapts the TQM ideas of customer-defined quality,
continuous improvement, employee empowerment,
and measurement-based management/feedback into an
expanded methodology that includes traditional
financial data and results
• Uses four perspectives: the learning and growth
perspective, the business process perspective, the
customer perspective, and the financial perspective
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Ex. 11-7: Integrating Shareholder Value and
Organizational Activities Across Organizational
Levels
Sales
Targets
Margin
COGS/
Sales
Dev. Cost/
Sales
Shareholder
value
creation
ROCE
Economic
Profit
Inv.
Turnover
Capital
Turnover
Cap.
Utilization
Cash
Turnover
CEO
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Corporate/Divisional
Functional
Order Size
Customer Mix
Sales/Account
Customer Churn
Rate
Deficit Rates
Cost Per Delivery
Maintenance Cost
New Product Dev.
Time
Indirect/Direct
Labor
Customer
Complaints
Downtime
Accounts Payable
Time
Accounts
Receivable Time
Depts. And Teams
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