Business Strategy and Management Control Measures for Success!

Background: Studying the relationship between strategy and Management Control Systems (MCS) is not a new phenomenon. The main purpose with the MCS has long been to attain the strategic goals that have been set for the organisation. Scholars have therefore argued that MCS should be adapted in harmony to the strategy employed by the company. There exists however little empirical evidence to support this claim.
Problem:Recent studies shows that the largest problem companies’ face today is that their MCS doesn’t focus enough on the organisations’ critical success factors. This made us question whether companies choose MCS that support their strategy. This study focuses on Management Control Measures (MCM) as one dimension of the companies’ total MCS and on the companies’ business strategy.
Purpose:The purpose was to investigate whether companies’ choose MCM that support the companies’ employed business strategy. Since measuring strategy and MCM at one point of time may result in that some companies may be in an adaptation phase of either strategy or MCS, where the MCS or MCM doesn’t support the business strategy. We were therefore also interested in investigating if the lack of adaptation between the companies’ MCM and their business strategy could be explained by changes in business strategy and/or MCM over the past two to three years.
Method:A further developed strategy typology based on Porter’s typology was used to classify the studied organisation’s business strategy. Cluster analysis was used to create categories (taxonomy) for the companies’ use for MCM. Effectiveness of different combinations of business strategy and MCM group were measured to determine if companies chose MCM that support their employed business strategy.
Conclusions:The general conclusion is that companies choose MCM that support their employed business strategy. The study shows that a Traditional use of MCM best supports the Cost leader strategy. Among the differentiation strategies an Intense use of MCM is the most effective use of MCM. The second conclusion is that we can’t explain the lack of adaptation between the companies’ MCM and their business strategy by changes in their business strategy and/or MCM over the past two to three years.

Reference URL: Visit Now

Author: Kent Marshall, Mikael Snygg

Source: Blekinge Institute of Technology

Contents

1. Problem Discussion
1.1. Relationship – Strategy and Management Control Systems
1.1.1. Strategy and MCS
1.2. Business Strategy
1.3. Management Control Systems (MCS)
1.3.1. Management Control Measures (MCM)
1.4. Perspectives
1.5. Problem Formulation
1.5.1. Purpose
1.6. Disposition
2. Theoretical Frame of Reference
2.1. Contingency Approach
2.1.1. Fit and Effectiveness
2.2. Business Strategy
2.2.1. Miles & Snow
2.2.2. Porter
2.2.3. Choice of Strategy Typology
2.3. Management Control
2.3.1. Means of Control
2.3.2. Management Control
2.3.3. Tightness or Looseness
2.3.4. Performance Measurement Systems (PMS)
2.3.5. The Balanced Scorecard (BSC)
2.3.6. Management Control Measures
3. Methodology
3.1. General Approach
3.2. Practical Approach
3.2.1. Selecting the Companies’ Features
3.2.1.1. Choice of Respondents
3.2.2. Construction of Survey
3.2.2.1. Developing Business Strategy Questions
3.2.2.2. Developing Use of Management Control Measure Questions
3.2.2.3. Developing Effectiveness Measuring Questions
3.2.3. How Many Companies Should Be Included in The Study?
3.2.4. Contacting the Companie
3.2.5. Collecting Empirical Data
3.2.6. Compiling the Data
3.2.7. Analysis Methods
3.2.7.1. Classifying Business Strategy
3.2.7.2. Classifying MCM
3.2.7.3. Cluster Analysis
3.2.7.4. Factor Analysis
3.2.7.5. Analysis Model
3.3. Reliability
3.4. Validity
4. Presentation of Survey Results
4.1. Drop of Analysis
4.2. The Studied Companies
4.2.1. Branch, Number of Employees and Owner Structure
4.2.2. Subcontractor
4.2.3. Products
4.3. Critical Success Factors and Business Strategy
4.3.1. The Companies’ Critical Success Factors
4.3.2. The companies’ business strategy
4.4. Management Control Measures
4.4.1. Today’s Use of Management Control Measures
4.4.2. The Use of Management Control Measures Two to Three Years Ago
4.5. Effectiveness
5. Classification of Business Strategies
5.1. Cluster Analysis
5.1.1. Classification According to Miles & Snow’s Typology
5.1.2. Further Analysis of the Cluster Analysis
5.1.3. Classification According to the Further Developed Typology
5.2. Factor Analysis of the Strategy Variables
5.2.1. Classification of Business Strategies According to the Factor Analysis
5.3. Summary and Validity of the Classification
5.3.1. Further Analysis of the Business Strategies
5.3.1.1. Success Factors
5.3.1.2. Subcontractors
6. Creating Taxonomy for the Use of MCM
6.1. Cluster Analysis of the Use of MCM
6.1.1. Further Analysis of the MCM
7. Effectiveness
7.1. Measuring Effectiveness
8. Business Strategy and MCM – Fit or Misfit
8.1. Business Strategy and Different Groups of MCM
8.2. Business Strategy, Groups of MCM and Effectiveness
8.3. Fit or Misfit Between MCM and Business Strategy
8.3.1. Cost Leader Strategy
8.3.2. Marketing Strategy
8.3.3. Customisation strategy
8.3.4. Product Development Strategy
8.4. Summary
8.5. Misfits
8.5.1. Eventual Changes of Business Strategy
8.5.2. Eventual Changes of MCM Group
8.6. Summary
8.7. Further Analysis of High and Low Effective Companies
9. Results
9.1. Summary
9.2. Conclusion
9.2.1. Other Conceivable Explanations to the Misfits
9.3. Is the Study’s Results Reasonable?
9.4. Suggestions to Further Studies
9.5. The Authors’ final words
References
Appendix