Very Short Question Answer
1. What is premise control ?
Premise control is designed to check methodically and constantly whether the premises on which a strategy is grounded on are still valid. If it is discovered that an important premise is no longer valid, the strategy may have to be changed.
2. What is special alert control?
A special alert control is the rigorous and rapid reassessment of an organization’s strategy because of the occurrence of an immediate, unforeseen event. Such an event will trigger an immediate and intense reassessment of the firm’s strategy.
3. What is strategic control?
Strategic control is also used to evaluate the degree to which the firm focuses on the requirements to implement its strategies. It’s a continuous process and ensures the effective implementation of strategies. In other words, strategic control focuses on taking the necessary corrective measure to bring activities into conformity with strategic plans.
4. Write any two importance of strategic control.
- It ensures right direction to the strategy implementation
- It provides an early warning system to control
5. What do you mean by strategy evaluation?
Strategy evaluation involves measuring the organizational performance. This involves comparing the expected result to the actual result, investigating deviations from plans, evaluating individual performance and examining progress being made.
Short Question Answer
1. What do you mean by strategic control? How does it differ from operational control? Explain with illustration.
Control is taking corrective actions if any deviation exists between the standard and actual performance. The process of strategic management assumes that the strategies are formulated under a number of assumptions. The assumptions may not be valid or relevant due to the considerable gap between the strategy formulation and implementation. Strategic controls take into account the changing assumptions that determine a strategy, continually evaluate the strategy as being implemented and take the necessary steps to adjust the strategy to the new requirements. It is an early warning system which is different from the post action control. It attempts to answer the question as are we moving in the right direction? It aims at proactive and continuous questioning of the basic direction of the strategy. Hence, its main concern is steering the organization’s future direction. It mainly focuses on external environment and considers a long period of time. It is exercised by the top management in support of the middle and lower level. The main techniques of strategic control are environmental scanning, information gathering, questioning and review.
Operational Control
Operational control is basically related to the evaluation of the present performance of an organization. It is concerned with the allocation and use of the resources. Hence, it is an action control. It focuses on internal environment of the organization and covers a short term time horizon. Under it, exercise of control is mainly done by executive of middle level management on the direction of the top level management. The main techniques of operational control are budgets, schedules and MBO.
The differences between strategic and operational control are presented in the following table.
| Bases of Difference | Strategic Control | Operational Control |
| 1. Time | It is concerned with the performance for along period of time. | It is concerned with the performance of short period normally 1 or below year. |
| 2. Support | It supports the achievement of strategic objective. | It support the achievement of operational objective. |
| 3. Scope | It is pre-performance control. | It is post performance control. |
| 4. Focus | It focuses the external
environment. |
It focuses on internal environment. |
2. Explain the process of strategic evaluation.
The process of evaluation and control may be mentioned through the following points:
- Determine what to measure: The first step in the evaluation and control process is determining the major control areas of an organization. The controls are based on the organizational mission and objectives developed during the strategic planning process.
- Set control standards: The second step in the evaluation and control process is establishing control standards. A standard is a target against which the subsequent performance is compared.
- Measure performance: Once standards are determined, the next step is measuring the actual performance. Under this, assessment is made in a regular manner to ensure that plans, programs, projects, budget and procedures are moving ahead towards organizational objectives.
- Compare performance to standards: After the measurement of actual performance, it should be compared to the standards. It determines the variation between actual performance and standard.
- Determine the reasons for the deviations: The fifth step of the strategic do evaluation and control process involves finding the reasons of deviations between the standard and actual performance. The organization needs to identify the deviations are due to internal shortcomings or external changes which are beyond the control of the organization.
- Take corrective action: The final step in the strategic control process is to determine the corrective action. This includes re-examination of plans, on programs, goals, and strategies. When standards are not met, managers must carefully assess the reasons why and take corrective action.
3. Write the characteristics of strategic control.
Control is taking corrective actions if any deviation exists between the standard and actual performance. Strategic controls take into account the changing assumptions that determine a strategy, continually evaluate the strategy as being implemented and take the necessary steps to adjust the strategy to the new requirements. It is an early warning system which is different from the post action control. Following are some of the important characteristics of strategic evaluation.
- Provides direction: Strategic control ensures that the organization is moving in the right direction.
- Continuous activity: Strategic control is related to implantation of strategy. Hence, it is a continuous activity.
- Top management activity: Since strategic control is a sensitive activity, the top management is involved on this.
- Cost effective: Strategic control should be viable from cost benefit view. In other words, the benefits sought from strategic control should exceed the cost associated with this.
- Focus on key performance: Strategic control focuses on key performance area. It mainly emphasizes the external elements that affect the strategy implementation directly.
- Future oriented: Strategic control guides strategy implementation over a long period of time. Hence, it is future oriented.
4. Write about different types of strategic control.
The different types of strategic control are mentioned below.
- Premise control: Strategies are developed on a basis of certain environmental and organizational assumptions. With the changes in the environmental forces, they will have a direct impact on strategy to a large extent. Realizing Is this fact, premise control is designed to check systematically and continually whether the premises on which the strategy is based are still valid. If the premises are no longer valid, the associated strategy may have to be changed. For example, if a strategy is based on certain premises, related to industry or er certain environmental forces such as political or economic, any change in such premises will force a rethink in strategy to make necessary changes to adopt with.
- Implementation control: Implementation control is aimed at evaluating whether the plans, programs, and projects are actually guiding the organization towards its predetermined objectives or not. If, at any time, it is felt that the commitment of resources to a plan, program or project would not benefit the organization as envisaged, they have to be revised. In this manner, strategic implementation control may lead to strategic rethinking.
- Strategic surveillance: It is designed “to monitor a broad range of events inside and outside the firm that are likely to affect the course of its strategy”. It is difficult to monitor all informational sources, therefore, strategic surveillance help to make a closer look at unanticipated information. In the process of strategic surveillance, if any new course of action develops it will be timely detected and corrective measures are to be followed.
- Special alert control: The last of the strategic control systems is the special alert control, which is based on a mechanism for rapid response and immediate reassessment of strategy in the light of sudden and unexpected events. Special alert control can be exercised through the formulation of contingency strategies and assigning the responsibility of handling unforeseen events to crises management teams. Examples of such events can be the sudden fall of a government at central or state level, instant change in competitor’s posture, an unfortunate industrial disaster, or a natural catastrophe.
5. Write about the criteria of evaluating strategies.
Strategy is a long term action plan formulated and implemented for a sustainable competitive advantage. Effective formulation and implementation of strategy increases the possibility of achieving organizational objectives. Hence, it should be evaluated continuously. According to Richard Rumelt, strategy should be evaluated on four bases: consistency, consonance, feasibility, and advantage. Consonance and advantage are based on a firm’s external assessment, whereas consistency and feasibility are based on an internal assessment.
Consistency: A strategy should be consistent with the organizational goals and policies. Organizational conflict and interdepartmental disputes are the sign of strategic inconsistency. An inconsistent strategy decreases organizational effectiveness.
Consonance: A strategy should be in consonance with its environment. It must be responsive to the external as well as internal environment of the organization. Hence, strategy should be developed with due for considerations of the environmental factors.
Feasibility: A strategy should be feasible to the organization in terms of its at resources and capabilities. The organization should ensure that it possesses the abilities, competencies, skills, and talents needed to carry out a given strategy.
Advantage: A strategy should be evaluated in terms of creation of competitive advantage in form of resources, skills, or position. In other word, strategy should be able to create competitive advantage for sustainability.
Long Question Answer
1. Define strategic and operational controls. Examine the importance of such controls in steering the business towards strategic success. What are the key considerations in monitoring deviations from performance standards?
Concept of Strategic and Operational Controls
Control is taking corrective actions if any deviation exists between the standard and actual performance. The process of strategic management assumes that the strategies are formulated under a number of assumptions. The assumptions may not be valid or relevant due to the considerable gap vib between the strategy formulation and implementation. Strategic controls take into account the changing assumptions that determine a strategy, continually evaluate the strategy as being implemented and take the necessary steps to adjust the strategy to the new requirements. It is an early warning system which is different from the post action control. It attempts to answer the question as are we moving in the right direction? It aims at proactive and continuous questioning of the basic direction of the strategy. Hence, its main concern is steering the organization’s future direction. It mainly focuses on external environment and considers a long period of time. It is exercised by the top management in support of the middle and lower level. The main techniques of strategic control are environmental scanning, information gathering, questioning and review.
Strategic control may be classified into the following wing four types.
- Premise control
- Implementation control
- Strategic surveillance
- Special alert control
Importance of Strategic and Operational Controls
- The importance of strategic control may be explained in the following ways.
- It ensures right direction to the strategy implementation
- It provides an early warning system to control
- It provides the future direction to the strategy.
- It focuses on the forces external to the organization to adjust with them.
Operational control is basically related to the evaluation of the present performance of an organization. It is concerned with the allocation and use of the resources. Hence, it is an action control. It focuses on internal environment of the organization and covers a short term time horizon. Under it, exercise of control is mainly done by executive of middle level management on the direction of the top level management. The main techniques of operational control are budgets, schedules and MBO.
Considerations in Monitoring Deviations
The key considerations in monitoring the deviations from performance standards are mentioned below
- Setting up performance standards: In the first step of strategy implementation and control process the standards of performance are set up. It allows the comparison of the standards with the actual.
- Measure the actual performance: After the standards are set, the second step is to measure the actual performance with the standard.
- Identify deviations: After comparing the actual performance with the standard, deviations are identified.
- Take corrective actions: After ascertainment of the deviations, corrective actions are to be taken for improvement.
2. The effectiveness of strategic management depends not only on sound planning but also on effective control. In the light of this statement, examine the importance of different types of control and also explain the measures of performance evaluation.
Importance of Different Types of Control
The two importance of strategic control are as follows:
- It ensures right direction to the strategy implementation
- It provides an early warning system to controller to control
Measures of Performance Evaluation
The strategy evaluation involves measuring the organizational performance. This involves comparing the expected result to the actual result, investigating deviations from plans, evaluating individual performance and examining progress being made. For this process, both the long term and short term objectives are used. Criteria for evaluating strategies should be measurable and easily verifiable.
Corrective actions should be taken for the failure to accomplish long term and annual objectives. Many factors unreasonable policies, unexpected changes in economy, unreliable suppliers, ineffective strategies can result in unsatisfactory progress towards meeting objectives.
Many variables should be included in measuring organizational performance. Strategy evaluation is based on both qualitative and quantitative criteria. Selecting the exact set of criteria depends on a particular organization’s size, industry, and strategy and management philosophy. For example, an organization following retrenchment strategy could have an entirely different set of evaluation criteria from an organization pursuing market development strategy. Normally, ratios are used to evaluate strategies as quantitative criteria. It is used to make the following comparisons.
Firm’s performance over different time periods
- The firm’s performance to competitors
- The firm’s performance to industry average.
- Some of the key financial ratios used for evaluation of a firm’s performance are given below.
- Return on investment
- Return on equity
- Profit margin
- Market share
- Debt to equity
- Earning per share
- Sales growth
- Asset growth