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Differentiated Strategies &Service Organizations
Chapters 13 & 14
Management Control Systems, 11th Ed.,
Anthony and Govindarajan
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Differentiated Strategies
Corporate Strategy
The right mix of businesses Single industry
Related diversified industries
Unrelated diversified industries
Allocation of resources to support the mix
Business Strategy
How to compete in a particular market
Based on the resources allocated by the corporate
strategy
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Organizational Structure
Continuum
From single industry (Functional)
Through related diversified (Business units)
To unrelated diversified (Holding company)
Must be considered in developing a
management control system
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Control Considerations
Increased diversification reduces knowledge
levels of management
Results in increased vertical planning systems
Results in greater budgetary control at lower
levels
Results in less subjectivity for incentive plans
Results in less goal congruence at the highestcorporate level
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Business Unit Strategy
Basis how to compete in a given market
Usually have one of four missions Build
Hold
Harvest
Divest
Two ways to compete Low cost
Differentiation
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Implications
Build
Less certainty, greater subjectivity Use of interactive control systems
Hold
Greater certainty, balance of subjectivity andobjectivity
Heavier use of diagnostic control systems
Harvest
Almost absolute certainty, greater objectivity
Use of diagnostic control systems
Divest
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Top Management Style
Managers are different
Management control systems must take that
into consideration Personal versus impersonal controls
Tight versus loose controls
Want some examples?
All taken from Fortune, November 18, 2002
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John PattersonNational Cash Register Company
1884-1921
Three-step approach to employeedevelopment
Break a mans self-esteem
Rebuild it from scratch Then fire him
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John F. WelchGeneral Electric
1981-2001
Redefined the CEOs central purpose in
life:
Increase the stock price, pure and simple
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Albert J. DunlapScott Paper / Sunbeam Corporation
Mid 1990s
Scott Paper
Boosted stock price by 225%
Cut 11,000 employees, R&D, plantimprovements, and almost everything within
reach
Im a superstar in my field, much like MichaelJordan in basketball
Sunbeam Corporation Bankrupt
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Service Organizations
General Characteristics
Quality Control
Labor Intensive
Often Multi-Unit
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Organization Types
Professional Services
Financial Services
Health Care OrganizationsNonprofit