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PART B: STRATEGY, MANAGEMENT CONTROL AND PERFORMANCE MANAGEMENT :star: …
PART B: STRATEGY, MANAGEMENT CONTROL AND PERFORMANCE MANAGEMENT
:star: :beer_mugs:
LIMITATIONS OF TRADITIONAL CONTROLS
:warning:
Criticism of Accounting-Based Controls:
Traditional measures like Return on Investment (ROI) have significant limitations.
High ROI on small investments vs. lower ROI on larger investments
.
Managers might reject profitable investments if they lower current ROI, which can be detrimental (có hại) to the organization.
Accounting-Based Controls:
Focus on financial metrics like ROI, profit margins, and cost control.
Use standard accounting practices and financial year cycles.
Emphasize short-term financial performance and compliance.
Fixed Targets and Budgets:
Set annual budgets and performance targets.
Rely on historical data and fixed assumptions.
Less flexibility to adapt to changing market conditions.
Different approach
where traditional accounting tools failed to help the organisation’s strategy
1. Cash Flow-Based Model:
Focus on cash flow, sales volume, and reinvestment in R&D.
Use a dynamic spreadsheet model updated frequently.
Emphasize long-term growth and market share over short-term profits.
2. Non - Financial Measures:
Include non-financial metrics like innovation, customer targeting, and market intelligence.
Gather data from various sources, including industry exhibitions and competitor analysis.
3. Flexibility and Adaptability:
Continuously update performance measures and targets based on real-time information.
Adapt strategies to current market conditions and competitive landscape.
4. Focus on Long-Term Goals:
Prioritize long-term market share growth and technological leadership.
Invest in R&D and legal protections for patents, even at the expense of short-term profits.
MODELS OF PERFORMANCE MANAGEMENT
:confetti_ball:
OPERATIONAL AND STRATEGIC PERFORMANCE
1. Operational Performance:
Focuses on short-term financial performance to meet shareholder expectations.
Each business unit must contribute to overall performance throughout the financial year.
Balances short-term needs with long-term sustainability.
2. Strategic Performance:
Concerned with long-term, sustainable performance at the organizational level.
Takes into account strategic goals, economic conditions, and competitive environment.
Linked to risk management and the organization's risk appetite.
3. Performance Measures:
Operational measures assess short-term performance.
Strategic measures focus on long-term strategy implementation.
Financial and non-financial measures provide a comprehensive view of performance.
Intended Strategy vs Realised Strategy
Intended Strategy
(chiến lược dự định)
Planned Actions
: This is the strategy that an organization plans to implement. It's like a roadmap created by the management to achieve specific goals.
Set Goals
: It includes the objectives and steps the organization intends to follow.
Example
: A company plans to launch a new product to increase market share.
Realised Strategy
(chiến lược đã thực hiện)
Actual Actions:
This is the strategy that actually gets implemented, which may differ from the intended strategy.
Adaptation
: It includes adjustments made in response to real-world conditions and unforeseen challenges (những thách thức không lường trước được).
Example
: The company faces unexpected competition, so it modifies its product launch strategy to focus on a different market segment.