Strategic Management: Formulation and Implementation

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:

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:

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 if the did.

Strategic implantation control provi