Controls for Differentiated Strategies
Different strategies influence management control processes, internal and external factors like size, environment, technology, interdependence and strategies forge together to what researchers call as the contingency theory. These strategies and their influences in management control systems are tendencies, not hard and fast rules. Linking controls to strategies is based on various thinking: (1) Different organizations operate in different strategic context, (2) Different strategies require different tasks, success factors, perspective and behaviour, (3) Controls are systems that influence the people behind the activities being measured and (4) Behaviour induced by the system is consistent with the strategy.
Corporate strategy is about being in the right mix of businesses. It addresses are the definition of businesses where they compete and the deployment of resources to these businesses. Three categories classify companies in their corporate strategies: (1) Single industry, a firm operating one line of business, (2) Related Diversified operates in several industries with common core competencies and (3) Unrelated Diversified operates various businesses without connection except financial. Different corporate strategies imply different control structures based on organizational structures. Single industries would be functionally organized, related diversified will be structured as business units while unrelated diversified would be structured as a holding company. Corporate management’s familiarity with range from high to low from single industry to unrelated diversified. Functional background of corporate management starts from relevant operating experience from single industry to mainly finance for unrelated diversified. Decision making authority as a single industry is more centralized to a more decentralized authority on unrelated diversified. Corporate staff size, Reliance on internal...
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