STRATEGIC MANAGEMENT & BUSINESS POLICY 11 TH EDITION

1. CHAPTER 11 Evaluation & Control STRATEGIC MANAGEMENT & BUSINESS POLICY11TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER

2. Evaluation and Control Whatever is measured gets management attention. Whatever is rewarded gets management action.

3. Evaluation and Control • Evaluation and Control Information – • Performance data • Activity reports

4. Evaluation and Control • Measuring performance – • The end result of activity

5. Evaluation and Control • Output controls • What is to be accomplished; focus on end result through performance targets • Input controls • Resources – skills, abilities, values, motives Activity Behavior controls How something is done through policies, procedures, rules, SOP’s e.g.ISO 9000 Standards Series, ISO 14000 Standards Series

6. Evaluation and Control • Types of Controls – • Activity Based Costing (ABC) • Allocation of indirect and fixed costs to individual products or product lines • Based on value-added activities • More accurate charge of costs • Enterprise Risk Management (ERM) • Identify risks • Rank risks • Measure risks

7. Evaluation and Control • Primary Measures of Performance (Output) • Traditional Financial Measures • Return on investment (ROI) • Earnings per share (EPS) • Return on equity (ROE) • Operating cash flow • Free cash flow • Shareholder • Shareholder value • Economic value added (EVA) • Market value added (MVA) • Balanced Scorecard Approach • Financial • Customer • Internal business perspective • Innovation and learning

8. Evaluation and Control

9. Evaluation and Control • Evaluating Top Management & Board – • Chairman-CEO Feedback Instrument • Management Audit • Strategic Audit

10. Evaluation and Control • Divisional & Functional Performance – • Responsibility Centers • Standard cost centers • Revenue centers • Expense centers profit centers • Investment centers

11. Evaluation and Control • Using Benchmarking – • Continual process of measuring products, service, and practices against the toughest competitors or those companies recognized as industry leaders

12. Evaluation and Control • International Measurement Issues – • International transfer pricing • Repatriation of profit • piracy

13. Evaluation and Control • Strategic Information Systems – • Enterprise Resource Planning (ERP) • Divisional and functional IS support

14. Evaluation and Control • Problems in Measuring Performance – • Short-term orientation • Goal displacement • Behavior substitution • Suboptimization

15. Evaluation and Control • Guidelines for Proper Control – • Minimum amount of information necessary • Meaningful activities and results • Timely • Long and short-term • Pinpointing exceptions • Meeting/exceeding standards

16. Evaluation and Control • Strategic Incentive Management – • Weighted-factor method • Long-term evaluation method • Strategic funds method