LESSON 1: Introduction to Strategic Business Analysis

Concept Development

The student shall research on the strategic business analysis and steps in business
transformation. thru Google or any other internet browser and discuss their research findings by
answering the guide questions/assessment (C) in a separate sheet of paper. 

Discussion Content 

Strategic business analysis involves outcome focused thinking, simultaneously understanding

business context, business challenges, and the complexities of the internal and external
environment to frame the scope of the transformation, articulate the business need/outcome, and
shape the agenda for transformation. 

Strategic business analysis requires a focus on all aspects of the organization. It leverages
business analysis, change leadership, and program and project management. Strategic business
analysis focuses on ‘what and why’, not the ‘how’ of solution implementation.

Strategic management has become crucial in the world of business and the fast-changing world
in which we live and work. Building a sound business strategy is now a requirement, only
recently we have seen British brand, House of Fraser, go into administration because of poor
strategy and other brands such as Debenhams have reinvented themselves and also improved
their digital offering, something House of Fraser have failed to do. Another example is
Blackberry, who fell behind to the innovations and forward-thinking of competitors, like Apple.

What is strategic business management?

Strategic management is an essential component of businesses. It refers to the formulation and

implementation of the goals and initiatives involved in the strategies, laid out by the stakeholders
of an organization. In simpler words, to ensure wise decision-making processes, it is important
that strategies are in place to support the business functions and operations. Strategic
management therefore entails evaluating business goals, the organization’s vision and objectives
as well as the future plans. In addition, a strategic management process is employed to ensure
that the business runs effectively and efficiently. Communicating this strategy internally and
externally is crucial for success, in order for both staff and the organization to understand the
purpose and direction along with external parties understanding what you as an organization
stands for.
 
Strategic management has become crucial in the world of business and the fast-changing world
in which we live and work. Building a sound business strategy is now a requirement, only
recently we have seen British brand, House of Fraser, go into administration because of poor
strategy and other brands such as Debenhams have reinvented themselves and also improved
their digital offering, something House of Fraser have failed to do. Another example is
Blackberry, who fell behind to the innovations and forward-thinking of competitors, like Apple.
 
What is the role of strategic business management?
Strategic management is a broad term that includes innovative thinking, a strategic planning
process and operational strategizing. Strategic business management, more specifically, relies
largely on research. It is imperative that for a business strategy to be successful, customers’
opinions, employees’ contribution and the industry’s best practices are all considered. A
common way to encourage strategic business management, is to incorporate a lot of planning
into board meetings, have trustees with valued and varied experience, and to carefully consider
the impacts of decisions on each business function within the organization. Annual plans for
businesses are often put together, but within the 21st century, it is important to be flexible and
adapt to changing environments and demands.
 
Why is strategic business management important?

The main importance of strategic business management is to assist the business’ profit and
decision making, yet its functions can also be broken down. Here are some reasons why strategic
management is a crucial business practice:
Planning: This is an essential management tool for any company. The main task in the strategic
planning process is predicting future trends that will help the business in building In order to
make this happen, strategic planning tools need to be used instead of simple planning processes.
 
Forward thinking: Through a well thought out strategy, you will be able to draw up clear, long
term goals. These goals are important so that you have a distinct idea of how to move forward
which can prove beneficial for an organization’s overall growth.

Resource allocation: The tough aspect of strategy management is that you are pushed to make
choices under pressure, often with limited resources. Strategy management teaches you to ensure
the company’s resources, in terms of products and services, are used wisely and vested in the
most promising opportunities. This is why a good strategy manager will tell you that less is
more, as long as it is the best.
 
Strengths and weaknesses: No one knows a business better than its owner, who will be able to
recognize the strengths and weaknesses of their company. However, just being aware of the
shortcomings and strong points of a business is not enough. Strategic planning is employed to
bridge the gap between the capability void and the strength of a company.

Environmental impact: When running a business, you must know how your business impacts
the environment and vice-versa. Strategy management involves being aware of the future
potential shifts in the market that may affect the business and its environmental impacts.
Courses in strategic business management

9-Step Roadmap for Successful Business Transformation

*taken from International Institute of Business Analysis (IIBA) 

Program Strategy

The program strategy provides the foundations for a transformation or change. It helps to
determine how to solve business problems in a way that will ensure the best result. A program
strategy is a coherent set of program activities designed to achieve a specified goal or set of
objectives.

Sponsorship and Governance Framework

The sponsorship and governance framework creates a terms of reference document that outlines
the program organization structure, roles, and responsibilities of each of the functional areas.  
 
Several factors have combined to draw attention to the importance of sponsorship of projects and
programs. One factor is that after several decades of attempting to improve success rates of
projects by focusing on project-based management and the project management competence of
practitioners, convincing evidence demonstrates that success or failure of projects is not entirely
within the control of the project manager and project team. Another factor that has drawn
attention to the sponsorship role is increased focus on corporate governance, resulting from
numerous high-profile corporate collapses, which has highlighted the need for accountability,
transparency, and ability to implement strategy.

Stakeholder Strategy 

The purpose of the stakeholder strategy is to form partnerships with the stakeholders, with the
“term partnership” referred to as establishing working and committed relationships.
 
The stakeholder strategy provides approaches for building and maintaining positive relationships
with stakeholders. It also helps you to define who should participate, in what ways and at what
stage of the project cycle stakeholders should be involved. This will contribute to realize a well-
designed project and to be successful with your initiative!

Execution Roadmaps

Execution roadmaps have value because they provide a high-level view of all the moving parts
of programs in context. They also provide focus on the outcome and what is needed when and by
whom. 
 
Intentional or not, every company follows an execution roadmap, where teams allocate time, i.e.
resources, to execute against a list of initiatives in certain order. Building an execution roadmap
typically starts with setting priorities. Many tools are built to allow easy ranking of feature
priorities. Your team works through this list of priorities and delivers features to market. This
works quite well when most work is done exclusively within an agile team.
 
Business Case

A business case captures the reasoning and justification for initiating the program or project and
the anticipated commercial benefits. It enables the executive to make an investment decision. 
 
A business case provides justification for undertaking a project, programmed or portfolio. It
evaluates the benefit, cost and risk of alternative options and provides a rationale for the
preferred solution.
 
Five elements of a business case
1. A common way of thinking about a business case is using these five elements:
2. Strategic context: The compelling case for change.
3. Economic analysis: Return on investment based on investment appraisal of options.
4. Commercial approach: Derived from the sourcing strategy and procurement strategy.
5. Financial case: Affordability to the organization in the time frame.
6. Management approach: Roles, governance structure, life cycle choice, etc.

Sourcing Strategy

A sourcing strategy guides procurement. It ensures alignment with the information,

communication, and technology (ITC) strategy.  It is a process that creates efficiencies across all
spend categories minimizes supply risks with improved supplier selection, and gives visibility
into pricing and forecasting.
 
Strategic sourcing is a procurement process that connects data collection, spend analysis, market
research, negotiation, and contracting. It stops short of the actual purchase of and payment for
goods and services.

Strategic sourcing can be customized to meet a customer’s specific needs, but its main goal is to
leverage a single, integrated system to enhance profitability.

Strategic sourcing best practices include: digitizing documents, participating in a digital business
network, and automating workflows. The process can be broken down into four steps:

1. Data collection and spend analysis: Spend analysis concentrates supplier data into one source,
letting organizations know exactly what’s being spent where and presenting the opportunity to
streamline vendors.

2. Supplier discovery and RFx: Sourcing becomes a strategic advantage when organizations can
access supplier data through a digital business network, allowing them to request RFPs and have
suppliers compete for their business.

3. Negotiations and contracting: Automated tools can speed workflows, simplify the digital
signature process, and create an electronic repository of contracts where organizations can set
renewal alerts. 

4. Implementation and optimization: When sourcing is automated and digitized, organizations

can move faster, build in feedback loops for continual optimization, and constantly evaluate
suppliers to make sure they're getting the best sourcing agreements possible.
 
User Journeys 
 
User journeys are the visualization of the strategy. Their construction leverages design thinking
and are part of sensemaking for stakeholders. 
 
A user journey is a path a user may take to reach their goal when using a particular website. User
journeys are used in designing websites to identify the different ways to enable the user to
achieve their goal as quickly and easily as possible.

Transition Strategy 

A transition strategy focuses on the long-term strategy of the transformation and the future
releases and generations. It helps inform the sourcing strategy and procurement of services
for ongoing support and maintenance of products and services.  
 
Transition strategies are techniques used to support individuals with ASD during changes in or
disruptions to activities, settings, or routines. The techniques can be used before a transition
occurs, during a transition, and/or after a transition, and can be presented verbally, auditorily, or
visually.

Change and Adoption Strategy 

A change and adoption strategy focuses on adoption and the strategies for change. It is key to
delineating the strategic change and activities required for the transformation and the
organization change and activities required. 
 
Technological advancement has been happening at a fast pace for a couple of decades now.
However, the new changes put in place by remote work combined with the increasing pressure to
stay as productive as possible are pushing organizations to implement even more tech than
before.  An effective adoption change management strategy will provide a structured plan to help
employees know why they need new technology while also guiding them in understanding how
to use it.
LESSON 2: Strategic Cost Management

1. What is Strategic Cost Management?

 Strategic cost management is the process that aims to strengthen a company's strategic
position by carefully controlling costs according to the company's broader objectives.
More specifically, it integrates cost information into the decision-making structure as a
means of reinforcing the organizations business strategy.
 When we are talking about strategic cost management, we are not just referring to the
idea of decreasing the cost of a product that we are offering to the market, because if we
talk about decreasing the cost what we are referring to is the traditional cost management
programs which primarily focus on cost reduction and cost control by allocating
production overheads and costs. The downside of this is that excessively focusing on cost
reduction has severe negative impacts since we end up ignoring other important factors
which is on quality, customer experience, development and business growth, which
makes traditional methods unreliable. So in strategic cost management, what we are
doing here is reduce costs while simultaneously strengthening a firm's strategic position.
Unlike traditional cost management in SCM the priority is not just the costs reduction
instead its primary objective is cost control plus cost reduction and value improvement at
the same time. This way SCM is helping the company achieve a competitive advantage in
a sustainable manner through product differentiation and cost leadership since strategic
cost management focuses more on continuous enhancement to provide consumers with
superior quality products.

2. Three important components of strategic cost management

2.1 Strategic Positioning Analysis
2.2 Cost Driver Analysis
2.3 Value Chain Analysis 

2.1 Strategic Positioning Analysis

Positioning – refers to creating an appealing image that leverages a brand's unique strengths.
Marketers may also create positioning statements for companies and individual products. The
ideal customer must have a reason for wanting to buy the product or do business with the
company. So that is what strategic positioning analysis is all about. We all know that good
positioning allows consumers to know why the organization's product/service is preferable to the
competition. In a growing market where consumer needs change every day, it's essential to find a
way for your product to stand out.
  What is the company's competitive position in the market?
 Strategic positioning reflects choices a company makes about the kind of value it will
create and how that value will be created differently than rivals. Strategic positioning
should translate into one of two things: a premium price or lower costs for the company.
 Achieving Superior Performance Within an Industry
o How can a strategist increase profitability? The answer lies in having a
competitive advantage. Companies must search out “white space” in the industry,
which usually means competing on one of two fronts.
o Differentiation - driving up prices is one way to increase profitability. To
command a premium price, a company must deliver distinctive value to
customers. This is differentiation.
o Cost Leadership - Driving down costs is another way to increase profitability. To
compete on cost, companies must balance price with acceptable quality. This is
cost leadership.
So firms are competing on low cost and be differentiated at the same time. So when we
say differentiated is just about the idea of what makes your product different from the other.
What is it that makes your product more appealing than the other. There is actually a theory of
Michael porter which he calls the kiss of death. What he is referring to as the kiss of death is
when companies that try to be all things to all customers can wind up getting stuck in the middle.
What porter is trying to point here is that it is best to choose which generic strategy to adopt and
then stick rigorously to it. Failure to do this leads to a danger of being stuck in the middle’ i.e.
doing no strategy well.
It is really important to focus on one strategy and stick to it since failure to do so usually
leads to danger of having no strategy at all. Firms can choose between focus on differentiation or
cost leadership. The Differentiation strategy achieves competitive advantage through offering
something unique beyond competitors. This could be a brand or a product or service feature. For
example, a candy company may differentiate their candy by improving the taste or using
healthier ingredients. In contrast the Cost Leadership achieves competitive advantage by
becoming more efficient in production and resource usage. Examples of cost leadership as a
strategic marketing priority in many big corporations such as Walmart and McDonald's.

2.2 Cost Driver Analysis

 Identifying the activities generating costs in the organization. Costs are then divided into
one of two categories: Structural Cost Drivers and Executional Cost Drivers. Each cost
driver is measured and examined in terms of how the costs relate to or affect specific
activities of the organization.
  Cost Driver - is the unit of an activity that causes the change in activity's cost. cost driver
is any factor which causes a change in the cost of an activity. Cost driver analysis is all
about analyzing the various possible cost drivers for a particular type of cost or activity
etc. and explaining their cause and effect relationship between the activity and cost
driver.
 Structural Cost Drivers - these are concerned with the economics of structure,
technology, and the boundaries. of the firm (e.g. outsourcing). These are derived from the
business strategic choices about its underlying economic structure such as scale and
scope of operations, complexity of products, use of technology, etc.
 Executional Cost Drivers - these are concerned with. continuous improvement such
as quality, productivity, speed, and punctuality. These are derived from the execution of
the business activities such as capacity utilization, plant layout, work-force involvement,
etc.
The structural and executional activities determine the nature and number of the daily
activities performed in the company. A cost driver simplifies the allocation of manufacturing
overhead. The correct allocation of manufacturing overhead is important to determine the true
cost of a product. Internal management uses the cost of a product to determine the prices of the
products they produce.

2.3 Value Chain Analysis

 The process where a firm identifies its primary and support activities that add value to its
final product and then analyze these activities to reduce costs or increase differentiation.
 Value chain represents the internal activities a firm engages in when transforming inputs
into outputs
 A value chain is used to describe all the business activities it takes to create a product
from start to finish (e.g., design, production, distribution, and so on). A value chain
analysis gives businesses a visual model of these activities, allowing them to determine
where they can reduce costs. With this analysis, you can take steps to create a
competitive advantage, improve efficiency, and increase profit margins.
 Value Chain Analysis consists of the following:
 Primary activities - primary activities contribute to a product or service's physical
creation, sale, maintenance and support. These activities include the following:
o Inbound operations. The internal handling and management of resources coming from
outside sources -- such as external vendors and other supply chain sources. These outside
resources flowing in are called "inputs" and may include raw materials.
o Operations. Activities and processes that transform inputs into "outputs" -- the product
or service being sold by the business that flow out to customers. These "outputs" are the
 core products that can be sold for a higher price than the cost of materials and production
to create a profit.
o Outbound logistics. The delivery of outputs to customers. Processes involve systems for
storage, collection and distribution to customers. This includes managing a company's
internal systems and external systems from customer organizations.
o Marketing and sales. Activities such as advertising and brand-building, which seek to
increase visibility, reach a marketing audience and communicate why a consumer should
purchase a product or service.
o Service. Activities such as customer service and product support, which reinforce a long-
term relationship with the customers who have purchased a product or service.
o As management issues and inefficiencies are relatively easy to identify here, well-
managed primary activities are often the source of a business's cost advantage. This
means the business can produce a product or service at a lower cost than its competitors.

 Secondary activities
The following secondary activities support the various primary activities:
o Procurement and purchasing. Finding new external vendors, maintaining vendor
relationships, and negotiating prices and other activities related to bringing in the
necessary materials and resources used to build a product or service.
o Human resource management. The management of human capital. This includes
functions such as hiring, training, building and maintaining an organizational culture; and
maintaining positive employee relationships.
o Technology development. Activities such as research and development, IT management
and cybersecurity that build and maintain an organization's use of technology.
o Company infrastructure. Necessary company activities such as legal, general
management, administrative, accounting, finance, public relations and quality assurance.
EXAMPLE:
Value Chain Analysis of Mc Donald’s
Completing a value chain analysis allows businesses to examine their activities and find
competitive opportunities. For example, McDonald's mission is to provide customers with low-
priced food items. The analysis helps McDonald's identify areas for improvement and activities
that add value to their products and services.
Primary Activities
Inbound Logistics: McDonald's has pre-selected, low-cost suppliers for the raw materials for
their food and beverage items. It sources suppliers for items like vegetables, meat, and coffee.
Operations: The business is a franchise and each McDonald's location is owned by a franchisee.
There are more than 39,000 McDonald's locations worldwide.
Outbound Logistics: Instead of formal, sit-down restaurants, McDonald's has restaurants that
focus on counter-service, self-service, and drive-through service.
Marketing and Sales: Its marketing strategies focus on media and print advertising, including
social media posts, magazine advertisements, billboards, and more.
Services: McDonald's strives to achieve high-quality customer service. It provides its thousands
of employees with in-depth training and benefits so they can best assist their customers.
Support Activities
Firm Infrastructure: The McDonald’s corporation has both C-suite executives and Zone
Presidents who oversee the firm’s operations in various regions, with a general counsel
overseeing legal matters.
Human Resource Management: It maintains a career page where job seekers can apply to both
corporate and restaurant roles. It pays both hourly and salaried rates and promotes its tuition
assistance program to attract talent.
Technology Development: The restaurant has invested in touch kiosks to facilitate ordering and
increase operational efficiency.
Procurement: The firm uses Jaggaer, a digital procurement firm, to establish relationships with
key suppliers across various regions of the world.

3. Stages of Strategic Cost Management

 After examining the organization structure, examining and categorizing cost drivers, and
identifying the various aspects of the organizational value chain, Cost Management
practices are implemented in Four Stages:
1. Formulating Strategies - Identify methods for strengthening the organization's
competitive position by reducing costs.
2. Communication - Communicated these strategies throughout the organization.
3. Execution - This includes identifying and executing tactics in furtherance of the
identified strategies.
4. Controls - Controls include developing methods of monitoring and measuring
activities to gauge the effectiveness of strategies and execution.

4. Effect of Strategic Cost Management

 Allows for a better understanding of the cost structure when making management
decisions.
 It improves upon traditional cost analysis measures by integrating organizational strategy.
  It relates costs to the various elements of the value chain.
 Uses specific metrics in furtherance of achieving competitive advantage through cost
leadership.

TRIVIA:
To distinguish cost accounting from strategic cost management. Cost Accounting these are all
about the cost information of the product alone. But if all of these costs information’s are now
used for making strategic decisions it is now what we call Strategic Cost Management.

LESSON 3: Definitions of Management Control System

Definitions of Management Control System

 Management Control System is comprised of combination of control practices designed
and implemented by top managers to increase the profitability that the lower-level
managers and employees will behave in ways consistent with the organization’s mission,
goals and strategies (Hartmann et. al., 2022).
Practice comprises of different aspects, or different rules and systems in place, in general, this
are the different ways to do things. When we talk about management control we talk about
practices and its implementations. Management control deals with the implementation aspect of
the organization. The purpose of those implemented practices intends to increase the probability
that the lower level managers and employees will behave in ways consistent with mission, goals
and strategies. So as you know, strategies are usually crafted at the top management. Top
management sets strategies for the organization but of course, lower level management are
expected to implement those strategies. Top management can't do it on their own given that they
have many responsibilities and activities to do, so the need their lower level managers. The
problem is since strategies are crafted by different set of people or by top management their is a
disconnection or gap between top management and lower management. This gap causes some
problems. Strategies are good in paper but you don't see them materializing in the field or in
actuals. So the aspect of management that eliminates those gap is what we call Management
Control System. It ensures that whatever is on the paper in terms of strategies gets implemented
on the ground.
 Management Control is the process by which the managers influence other members of
the organization to implement the organization’s strategies (Anthony and Govindarajan,
2003).
Behavior and influence are important/critical terms in the definitions. The management aims to
have a direct impact on the employees of its organization. It adopts necessary strategies to
influence their mindset and workings so that they start believing that their personal and
professional goals are in tandem You cannot control a person on what he/she is going to do or to
decide on but there has to be a set system that will allow a person or the lower level managers to
decide and behave in which the outcome is consistent with the strategies of an organization. This
process includes comparing actual and planned performance, measuring the difference between
the two, identifying the causes that have lead to the difference and taking corrective action to
minimize or remove the difference.
 According to Malmi and Brown (2008), management control systems can be divided into
two important categories; formal and informal control systems.
Formal Control System- controls are laid down by the management in writing to influence the
behavior of the employees in achieving organization’s goal. FCS establishes well defined
organizational structure, procedures to be followed by the members of the organization. Formal
control system are initiated by the management and this usually include plans, budgets,
regulations and quotas.
FCS can be classified into three types:
 Input control- actions taken by the company before a planned activity is implemented.
These measures help the company to select the right way to undertake the activity. Input
controls include selection criteria, recruitment and training programs, manpower allotments,
strategic plans and resource allocations. So as you notice, before an employee officially starts
his/her job they undergo trainings to have an idea how a company operates and for them to
strengthen their skills and enhance their knowledge.
 Process control- involve tracking certain variables and taking corrective action whenever
there is any deviation from specified parameters in the variables.
The control action takes place before the process of transformation is completed and the output is
produced. Process control is exercised when the firm attempts to influence the ongoing activity
to achieve the desired ends. Process control is simply, an activity that ensures a process is steady,
predictable, and constantly operating at the set level of performance. It enables managers to
monitor and adjust a process to achieve the desired output.
 Output control- is exercised when performance standards are set and monitored, and the
results are evaluated. takes place when the control activity is based on the comparison of
actual and planned outcomes.
This are the measurable outcomes within an organization. In output control, management must
decide the acceptable level of performance communicate the general expectations to the
employees and track whether the performance values meet the expectations and make any
needed changes.
Informal Control System- these are unwritten, people initiated mechanisms that influence
the behavior of individuals or groups in business units. Informal controls includes group norms
and organizational culture.
IFCS can be classified into three types:
  Self-control-deals with the establishment of the personal objectives by the individual,
monitoring their attainment and adjusting the behavior in the organization to attain the
goals.
Self-control in the workplace can lead to healthier and more productive relationships. More
specifically, becoming aware of and effectively managing your responses to. avoid undesirable
behaviors, increase desirable ones, and achieve long-term goals Self-control can be beneficial to
an organization if the organization’s goals are in congruence with the individual’s goals. But if
the goals do not match then the performance of the employee is affected.
 Social controls- refers to the prevailing social perspectives and patterns of interpersonal
interactions within subgroups in the firm.
In this type of control, an organization establishes certain standards, monitors conformity with
the standard and takes action when deviations occur. Social control arises out of the
internalization of values and mutual commitment towards some common goals.
 Cultural control- realized by norms of social interaction, and stories, rituals and legends
relating to the organization.
According to William G Ouchi, culture is “the broader values and normative patterns that guide
worker behavior within the entire organization.” it is the proper way to behave within the
organization. When an organization has a strong culture, three things happen: Employees know
how top management wants them to respond to any situation, employees believe that the
expected response is the proper one, and employees know that they will be rewarded for
demonstrating the organization's values.
Purpose of Management Control
 Ensuring alignment between plans and actions implemented by an organizations
Strategies looks good in paper but do you know the steps needed to achieve that strategy? once
you know the steps do you know who's going to do it. Once you know who’s going to do it, are
you giving that person enough resources? So these are all part of management control. It ensures
that it goes where the leader wants it to go.
 Providing feedback to top management of the results of implementation that will aid in
calibrating tactics to implement overall strategy.
Management control is a feedback mechanism. If you are able to track what’s happening on the
ground this can be an input on how you can recalibrate or develop your strategies.
Important Features of Management Control System
Nature of Decisions Management- control decisions are based on the framework established by
the organization’s strategies. Management control decisions also take into account the quantity
and quality of resources available. Within the constraints of the available resources and the
policies of the organization, a manager should be able to implement activities that are best suited
for a particular business unit.
Decisions are Systematic and Rhythmic Decisions- in management control process are
systematic and rhythmic i.e. they are in accordance with the strategies and procedures laid down
by the top management. Plans developed for a unit must encompass the whole organization, and
the plans for each of the organization’s units must be coordinated with one another, so that there
is a balance between different activities.
Strategy Implementation Tool Management- control helps an organization to move towards
its strategic objectives. It is an important vehicle for the execution of strategy. It explains how
strategies are implemented through management controls, organizational structures, human
resource management, and culture.
Management Control Activities
1. Planning what the organization should do
2. Coordinating the activities of several parts of the organization
3. Communicating information
4. Evaluating information
5. Deciding what, if any, action should be taken
6. Influencing people to change their behavior

The Need for Management Control

 Lower-level managers and employees may not automatically understand the mission,
goals and strategies of the organization, nor how they can contribute to it.
Strategies are usually top level initiatives. What the top level wants may not be understandable in
lower level management and they might not know how they are going to contribute towards
those goals. Like for example when an organization wants to achieve a certain amount of profit
yearly, it does not necessarily mean that individual managers and employees automatically
understand how this profit should be achieve. So there has to be a way to connect people to the
high level strategy and the way to connect them is through MCS.
 Lower-level managers and employees may not automatically agree with the
organizational mission, goals and strategies.
. If lower level managers do not agree with the strategies they might not be motivated to
implement those strategy. And as a result, the implementation is inefficient because there is
resistance. It is also possible the lower level managers might say that they better know what’s on
the ground which gives them reason whether to agree or not. Like sales manager, they are more
often better informed about local market conditions compared to high level managers in the firm.
 Lower-level managers and employees may not automatically have the resources needed
to act according to the organizational mission, goals and strategies.
Lower level managers and employees might understand their contribution and also agrees with
those strategy but they don't have the resources to implement it. They don't have the money, the
skills or physical resources for instance. So Management Control ensures that needed resources
are available to implement those strategy.
Factors influencing Management Control System
Size and Spread of the Enterprise. The larger the enterprise, the more complex the MCS will
be. Responsibilities in a large enterprise would be divided into multiple units. The management
would therefore be in charge of different aspects of the organization, and there would be a
number of sub-units. On the other hand, a small business, is unlikely to have many
responsibility centers. When we talk about responsibility these are organization units that is
headed by a responsible manager.
The Nature of the operations and their Divisibility. Management is influenced by the nature
of the operations it is supposed to manage and this will impact the implementation of
Management Control System. Part of the nature of operations deals with their divisibility into
sub-sections. The less divisibility there is, the different the management control process will be.
The variety of responsibilities within the organization. Management Control System is also
driven by the different responsibility centers an organization might have. The more
responsibilities, the more different control systems are needed to keep operations flowing.
The people of the organization and their perceptions. The final factor influencing the
implementation of MCS deals with the people within the organization. People’s perceptions of
the MCS need to be taken into account and considered before you implement the framework.
Different people might have a varying view in terms of the effect the system has on their work,
job satisfaction and security, and the general well-being and motivation to perform tasks. When
you are designing MCS and implementing the system, consideration of these perceptions can
help you monitor performance, implement the right type of system, and ensure people’s
perceptions are either fulfilled, if positive, or changed around, if negative.
Management Control vs. Strategy Formulation
strategy formulation is the master plan, its like the map from point A to B and how are going to
get their. Strategy formulation is compose of two critical areas. First is you have to decide on the
goals of the organization and of course define strategies on how you are going to achieve those
goals. Management control on the other hand, is the process of implementing those strategies and
we implement by making sure that lower level managers has the knowledge of the strategies,
they agree with it, and they have the resources needed to achieve it.
Management Control vs. Task Control
Task control basically is the process of assuring that specified tasks are carried out effectively
and efficiently while management control does not seek to have eyes over the employees. It
involves not just transactional monitoring of task but it aims to align goals and behavior to
ensure strategy is implemented.
There are several components that make up a management control system.
Clear managerial assignments. The larger a company, the more likely there are managers with
different responsibilities. It's important to understand what every department is working toward
so that each manager can be held accountable for meeting objectives.
Bureaucratic controls. Bureaucratic controls are the rules and guidelines of a business
operation meant to enhance efficiency and maintain organization. They define the chain of
command and delegate responsibilities within each division of an operation. Well-designed
bureaucratic controls answer as many questions as possible ahead of time so issues can be
resolved in an orderly fashion. In management control systems, it's important that you establish
bureaucratic controls early so employees and management can have a shared sense of what the
future should look like.
Financial controls. Financial controls are the targets a business establishes as necessary for
growth and profitability. This could be, for instance, the costs of production or the return from
sales. In management control systems, managers closely monitor financials to identify the
adjustments needed to remain aligned with the business's goals.
Quality controls. Quality controls ensure that a business's product or service meets its own
standards. They make sure that the sales taking place are helpful for continued growth by leaving
clients and customers satisfied.
Normative controls. Normative controls are behavior-based patterns that unify a team in its
approach and attitude toward goals. They are often less formal than other types of controls that
use number-based indicators of success. You might not be able to address every aspect of
workplace behavior in writing, but you can encourage certain habits by repeating them.
If all the components of a management control system are in place, then your business might
meet its goals more often and predict difficulties in advance. Here are tips for making the most of
your management control systems:
Make informed comparisons
As you collect information for your financial and quality controls, consider how to make the
most of it. Your business may be trying to reach new levels of productivity, rival competitors or
focus on producing the same quantity of goods more efficiently. In each instance, you may have
to adapt the numbers you target to confirm departments' success.
Understand variation from goals
When you come across a variation from a goal, your first aim should be to identify the cause.
You might be falling short of a quota or exceeding sales goals, but in both cases, the purpose of
the management control system is to clarify what's driving the difference.
Plan to correct variations
Use your insights from analyzing variations to plan for the future. Perhaps you can aim for more
sales or you realize an avoidable lack of supplies affected your productivity. A slight change in
planning can lessen mistakes while capitalizing on successes.

LESSON 4: Benchmarking

WHAT IS BENCHMARKING?
 Benchmarking is a continuous process of

 Comparison
 Projection
 Implementation

It involves:
 Comparing:

 Organization and its parts with the best organizations, regardless of the industry or
country
 Business processes with the best similar processes in any or all industries to define
best value
 Production processes with the best similar processes in any or all industries to
define best value
 Organization's products and services with those of the best competitors
 Different types of equipment to select the best value equipment for the specific
application
 Implementing defined best practices
- Example Are Engage Workers, Reward Effort, unrecognized, Vulnerable and Stay Committed)
 Projecting future trends in best practices and proactively leading to these trend
- can give you the intelligence to anticipate a downturn in sales and plan for it. Also, it can alert
you to periods when you can expect an increase in sales and you can organise additional staffing
ahead of time.
 Meeting and exceeding customer/consumer expectations
- It gives you an opportunity to make right changes at the right time to improve upon the
customer journey and meet their needs. it creates loyal customers for life who will even refer
your business to friends, family and colleagues)
BENCHMARKING IS:
 Robert C. Camp, in his book Benchmarking - The Search for Industry Best Practice That
Lead to Superior Performance, has defined benchmarking as

“The process of continually researching for new ideas, methods, practices and processes,
and either adopting the practices or adapting the good features, and implementing them to obtain
the “best of the best”.
 David T, Kearns, chief executive officer of Xerox Corporation, defines benchmarking as
“The continuous process of measuring products, services, and practices against the
toughest competition or those companies recognized as industrial leaders.”
 “A systematic way to identify, understand, and evolve superior products, services, designs,
equipment, processes, and practices to improve an organization's real performance.”

In summary, bbenchmarking is a never-ending discovery and learning experience that

identifies and evaluates best items in order to integrate their best features into an organization's
items.
Improvements in effectiveness, efficiency, and adaptability will maximize their value --
an added contribution to the organization.
 Base on the video presented benchmarking process is a lot like a detective story,
and the person doing the benchmarking operates a lot like a detective. He or she
must search through the many clues available in the public domain to find leads,
then dissect these leads to define root causes. Once the many clues are understood,
they fall together to give the benchmarking team the best-value future-state
solution. It can be an exciting and enlightening adventure

WHY USE BENCHMARKING?

 To set challenging but realistic goals\
 To define how goals can be accomplished
 To define gaps between the organization's performance and its competitors' performance
 Because a breakthrough improvement is required to stay competitive
 Because the organization is losing its market share and needs to turn around
 Because overhead costs are running too high
 Because the competition's quality is much better
 Because the competition is bringing product to market much faster
 Because one function in the organization is trying to impress upper management
 To test the soundness of the organization's strategy
 To define competitors' future strategies and resource investment plans
 Because there is a need to supplement the organization's ideas with fresh thoughts
 Primary reasons
 Setting goals
 Identifying how the goals can be accomplished

In benchmarking it It highlighting problem areas as well as the potential for

improvement, benchmarking provides an incentive to change and assists in the setting of
objectives and targets. Furthermore, its emphasis on understanding the processes underlying
successful practice makes it a useful tool in establishing action of 24 plans and initiatives for
achieving these goals. Also, the unique value of the benchmarking process is that it not only tells
you how good you can be, it also tells you how to change the way you are doing business so that
you can be that good.

FUNCTIONS OF THE BENCHMARKING

 Comparative analysis (the what)
What good is defining the gap between your organization and your competitors or world-
class organizations if you do not know how to improve your processes to narrow the gap?
 Product / system knowledge (the how)
Knowing that you are inferior, but not being able to improve, just
discourages everyone.
Providing the "WHAT"
 Without the ability to measure, you cannot control your organization.
 Obtaining quantitative data is absolutely essential in the pursuit of becoming, and
then staying, world class. By using ratios instead of real values, you can exchange
information with other organizations without having to disclose production or
absolute values.

What should be measured in the benchmarking process?

 How fast
 How good
 How much vs Where
 When
 How long
 Size, shape, form, and fit

 Use ratio measurements

 To encourage free exchange of information between organizations, it is often necessary
to use ratio measurements whenever applicable. By using ratios instead of real values, you can
exchange information with other organizations without having to disclose production or absolute
values.
 Providing the "HOW"

 Another real advantage of the benchmarking process is that it provides insights into
how others have become the best.
 This aspect focuses on discovering how world-class organizations developed their
processes and products to ensure superior performance.
 The specifics you might analyze are:

 Knowledge
 Ways
 Processes
 Methods

 Can apply this knowledge to your benchmark item, adapting and/or improving it
to meet the unique requirements of the customers, employees, and products that
make up your organization's personality.

TYPES OF BENCHMARKING
 Internal benchmarking
One of the easiest benchmarking investigations is to compare operations among functions within
your own organization.
 This type of investigation is applicable to multidivisional or international firms.
 Data should be readily available and reportable on a consistent basis.
For example, warehousing and shipping of products from one site of a company, can be
compared to warehousing and shipping of a product from a different warehouse of the company.
 Competitive benchmarking
 Direct product or service competitors are the most obvious to benchmark.
 measures where and how your organization stands against your competitors. By
using a set of predetermined metrics, benchmarking allows you to compare your
company's performance against your competitors and other best-in-class brands.
For example, Sales Quota Attainment, Calls Handed, Number of New Customers Acquired,
Lead-to-Close Rate.
 Functional benchmarking
 Functional benchmarking investigates leaders in dissimilar industries.
 The relevance of comparison is maintained by defining the performance
characteristics that must be similar to your own functions.
 It is not necessary to limit comparison to direct competitors.
  In fact, a narrow focus may risk missing potential breakthroughs.
For example, a local coffee shop could compare its brand recognition to those of nearby fitness
centers. Alternatively, a luxury hotel could benchmark its customer service quality to that of an
airline company
 Generic benchmarking

 It extends functional benchmarking by removing the constraints imposed by

limiting the investigation to practices with similar characteristics.
 It holds the potential for revealing the “best of the best”.
 It requires broad conceptualization.
 Although it is the most difficult type of benchmarking to use, it probably provides
the highest potential payoff.
For example, your company tries to improve its marketing capabilities and benchmarks itself
against company 'A'.

APPROACHES
 Strategic Approaches Benchmarking
Benchmark to identify weaknesses and strengths within a specific area or
functional unit
 Organizational Approaches Benchmarking
Benchmark to support and direct the business plan. If improved, that will
impact the organization’s competitive position.
BENEFITS
 Provides-a way to improve customer satisfaction.
 Helps eliminate the not-invented-here syndrome.
 Includes the use or proven approaches, methods, processes and technologies.
 Identifies your competitive position, strengths and weaknesses.
 Increases the effectiveness, efficiency and adaptability of your processes.
 Transforms complacency into an urgent desire to improve.

SEVEN STEPS TO BENCHMARKING

Step 2:
Example: quantitative and qualitative measures of performance quantitative data is useful in
showing performance gaps between one's institution and the benchmarking partner, while
qualitative data helps explain this gap.
Step3:
Points to Consider When Deciding on a Benchmarking Partner
 the performance standards of the potential partner
 the accessibility of the potential partner
 the cultural similarity and compatibility of the potential partner in relation to one's
own institution
 the geographical proximity of the potential partner (cost and ease of site visit and
other communication)
 the willingness of the potential partner to participate; and
 the ability of the potential partner to participate.
Step 4:
 Collect data from own organization
It is important that we first study our own institution, and understand what is currently being
practiced, before attempting to measure the performance of any other institution. Parts of this
study may be begun in the planning stage of the benchmarking exercise, when school / area
priorities for improvement are investigated. This self-analysis will enable a clearer focus if it is
decided that a visit to the benchmarking partner is essential.

 Collect data from benchmarking partner

Direct site visits, where appropriate, allow for discussion and exchange of information, and the
observation of processes.
Step 5:
 Information obtained from the benchmarking partner is compared with that from
the internal evaluation. Three key questions need to be considered here: Is the
partner better? How much better are they? Why are they better?
 Identification of the gap and its magnitude are the easy parts of this process; the
main difficulty lies in understanding which factors are responsible for the success
of the partner organization. Such an understanding is crucial, however, if best
practices are to be incorporated into one's own institution. As a guideline, it may
be useful to consider differences in the benchmarking partner in the following
areas:
 Operating procedures
 Leadership and management systems (for example, resource allocation,
planning, and communication between management and other areas of the
organization)
 Evaluative systems: how performance is measured within the
organization, and how these data are acted upon.
 Staffing policies and support for staff.
 Organizational culture; and
 Structure (for example, the nature of the organization, its location and
tradition, levels of government funding, and the amount of direct
competition).
Step 6:
 Rather than merely aiming to equal the partner's current performance, an estimate
of their future performance should be made, and goals for parity or superiority
constructed in relation to this