STREGIC CONTROL

MODYULE-8

The strategic management process is not complete after a strategy has been formulated
and implemented. A means of evaluating its success and failure must also be established.
Strategic Control consists of deterring the extent to which the organization’s process is
tracked and adjustments to the strategy are made as necessary. It is during the process of
strategic control that gaps between the intended and realized strategies (what was planned
and what really happened) are identified and addressed.

. Strategic control guiding & Evaluating Strategies

The strategic control: The process of deterring the extent to which an organization’s
strategies are successful in attaining in goals and objectives

The strategic control is concerned with tracking a strategy as it is being implemented,

detecting problems or changes in its underlying premises, and making necessary
adjustments. It consists of postdating control

The evaluation of strategy is that phase of the strategic management process in which the
top managers determine whether their strategic choice as implemented is meeting the
objectives of the enterprise.

There are two aspects in this phase of strategic management: evaluation which
emphasizes measurement of results of a strategic action and control which emphasizes on
taking necessary actions in the light of gap that exists between intended results and actual
results in the strategic action. However, because of on-going nature of strategic
evaluation and control process, both these are intertwined. In practice, the term control is
used in the broad sense which includes evaluative aspect too because unless the results of
an action known, control actions cannot be taken.

Five steps to control are,

1. Top management determines the focus of control by identifying internal factors

that can serve as effective measures for the success or failure of a strategy, as well
as outside factors that could trigger responses from the organization.
2. Standards (i.e. benchmarks) are established for internal factors with which the
actual performance of the organization can be compared after the strategy is
implemented.
 3. Management measures or evaluates the company’s actual performance, both
quantitatively and qualitatively.
4. Performance evaluations are compared with previously established standards.

If performance meets or exceeds the standards, corrective action is usually not necessary.
If performance fails below the standard, then management must take remedial action

Establishing Strategic Controls

Strategic Control is the process of taking into account the changing assumptions, both
external and internal to the organization, on which the strategy is based, continually
evaluating the strategy as it is being implemented, and taking corrective actions to adjust
the strategy to the new requirements. This process is necessitated because strategy
formulation is based on certain assumptions. Since there is time lag between strategy
formulation and its implementation, some of these assumptions may not hold good, either
fully or partially. To that extent, the strategy may not work as collectively as the
strategist might have thought.

1. Premise Control: Based on premises, i.e. assumptions or predicted conditions. A

strategy may be valid only as long as the planning premises remain valid. Hence
the importance of the premise control which “is designed to check systematically
and continuously whether or not the premise set during the planning and
implementation process still valid. Premises on factors related to government
policies and regulations, socio-demographic factors, economic conditions, internal
structure, market competition etc.

2. Implementation control: Implementation of a strategy may not progress as

planned or the cost, sales volume, revenue etc. May be at considerable variance
with the planned ones. The lessons of the first phases of the implementation
could be helpful in the implementation of the subsequent phases. Implementation
control is designed to asses whether the overall strategy should be changed in the
light of unfolding events and results associated with incremental steps and actions
that implement the overall strategy.

3. Strategic Surveillance: The strategy of a Co could be deferred by certain such

events. It is therefore necessary that the company exercise surveillance for timely
direction of such developments and correction action. Strategic surveillance is
designed to monitor a broad range of events inside and outside the company that
are likely to threaten the course of the firms strategy.
 4. Special Alert Control; Sudden and unexpected developments like alliance
between competitors, takeover, mergers, political coup, a major competitive move
by competitor etc could have serious impact on a firm’s strategy. A special alert
control is the need to thoroughly and often suddenly, reconsiders the firm’s basic
strategy based on a sudden, unexpected event. Is designed to check systematically
and continuously whether or not p

Operational Control Systems

Strategic controls by which top management monitors and steers the basic direction of
the company should be supplemented by a control system at the operational level of
strategy implementation. “Operational control systems guide, monitor and evaluate
progress in meeting annual objectives. While strategic controls attemps to steer the Co
over an extended time period (usually 5 years or more), operational controls provide
post-action evaluation and control over short time periods – usually from one month to
one year.

Operational Control Systems involves the following steps

1. Establishing Criteria and Standards : Criteria for evaluating strategies should be

measurable and easily verifiable. Criteria that predict results may be more
important than those that reveal what already ha happened. Effective control
requires accurate forecasting. Eg; Quarter to quarter or month to month
evaluation. Selection of criteria for evaluation depends on a number of factors
such as of critical importance of variables like internal and external environment,
management philosophy. The criteria can be Qualitative and Quantitative which
establishes standards which are to be realistic.
2. Measuring and comparing Performance: The actual performance is measured and
is compared with the standards to identify the shortfalls, if any.
3. Performance gap analysis: Performance gap is the difference between the actual
performance of a given organizational unit and the planned performance of that
unit. If there is a gap, it is necessary to identify the reasons for the gap to
determine appropriate corrective measures. In other words, performance ga
analysis is a diagnostic step.
4. Taking corrective measures: Corrective measures will depend on the reasons for
the ga, the extent of the gap and, in some cases, a re-assessment of the SWOT.
Depending on the nature and characteristics of the performance gap, corrective
measures may include any one or more measures such as steps for more effective
implementation of the strategy, modification of the objectives, strategy, standards
etc. Continuous monitoring of the environment and implementation of the
strategy is essential.
Types of Operational Control

1. Budgeting - Is a forerunner of strategic management. A budget is a statement of

planned or estimated expenditure or receipts in respect of a specific purpose or
function over a specific period of time. Budgets set standards against which
performance can be compared in all areas like sales, various costs of expenditure,
customer evaluation etc.
2. Scheduling: Is a very important planning tool for allocating the use of a time
constrained resource or arranging the sequence of interdependent activities.
Scheduling helps optimum utilization of facilities resulting in low level of
inventory, fast distribution channels etc.
3. Key Success Factors: Focus on key success factors i.e. critical factors which
contribute to success as productivity, quality, employee morale, and market share
etc.

Essential Features of An Effective Evaluation & Control System

1. Objective Based - Clarity about the purpose of evaluation is very much essential for
choosing the appropriate evaluation system. It will provide adequate, useful and timely
information for effective control.
2. Economic: Strategy evaluation system must be economical. The costs must be
justifiable with its utility. Too much information, time consuming leading to confusion is
to be avoided.
3.Objectivity: Must be reality oriented ,purposeful, logical. The standards or targets
must reflect the internal and external realities. The recession or boom or changes in the
competitive environment must receive due consideration in setting or revising standards.
4. Pervasiveness: In the sense that the need for it is appreciated throughout the
organization in general and by the functional areas concerned and people directly
associated with it in particular. This wil improve the confidence level of people. The
strategy evaluation process should not dominate decisions, it should foster mutual
understanding, trust, common sense and generate co-operation.
5.Simplicity: Not to adopt complex systems of evaluation. Variables to be monitored and
measured, accuracy required, size of the organization and diversity of activities etc are to
be fair and not cumbersome.
6.Communication and Involvement: It is necessary to take people into confidence to
ensure their positive and active involvement at both the mental and activity level in
achieving the objective. This is done through a good communication system. All parties
must appreciate the evaluation system whole heartedly.
7. Congruence: Consistent with the events measured/ The scope, range, magnitude and
accuracy of measurement should be related to the objective and usefulness.
8.Operational: Must be focused on action rather than information is their purpose. The
findings of the control must react the persons responsible to take need action.
Contingency Planning;

A company should also be well prepared to deal with contingencies i.e. unforeseen or
other critical developments that affect the company, like major changes in competitive
environment, government policy or budget allocation, strikes, boycotts, war, internal
disturbances, natural calamities etc. A contingency plan thus, is a plan to cope with
critical developments which mark major deviations from the strategic planning premise.

Following Examples are,

1. If an important player is taken over by another important firm, what strategy

should the company employ to deal with the new situation.
2. If the Govt lowers the import barrier, how will the company face the competitive
forces unleashed by it.
3. How will the company face a collective boycott of its products (as did by the
traders in Kerala in respect of HLL products)?
4. If the pruning down of govt allocation to a sector or project, due to financial
stringency or other reasons, affect the demand for the company’s products, what
should the company do?
5. If an expanded/new opportunity is provided by govt policy budgetary allocations,
how can the company exploit it?
6. The natural calamity or a strike by truckers/railway dislocate transportation, how
can the company cope up with the situation?
7. What strategy shall the company employ if there will be a recession/boom?
8. If there will be a power cut, how can the problem be overcome?
9. If the market is affected by a short supply, should and will the company be able to
increase supply to take advantage of the situation.
10. How will the Co face technological breakthrough or new product launches by
competitors?

Crisis Management

The process of planning for and implementing the response to a wide range of negative
events that could severely affect an organization

Crisis are threats from outside. At the forecasting stage, one has to foresee the negative
factors and events that are coming in the way. Remedial steps are to be (r problem
solving) are to be incorporated. This approach is called as Crisis Management. Crisis are
foreseen and possible steps are knitted to the same. Disasters, terrorists attacks, natural
calamities which are generally beyond the control of man are considered as crisis.
Stategies suffer due to crisis. Hence at the planning stage, the safe-guards are provided
which acts as a Control over Strategic Management.