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Controls for
Differentiated
Strategies
Rules
Rules
(Chp
(Chp3)3)
Other
Other
information
information
Reward (feedback)
Strategic
Strategic
Planning
Planning
(Chp
(Chp8)8)
Revise
Budgeting
Budgeting
(Chp
(Chp9)9)
Revise
Responsibility
Responsibility
center
center
Performance
Performance
(Chp
(Chp10
10&&11)
11)
Corrective
action
Report
Report
actual
actualvsvsplan
plan
Was
Was
performance
performance
satisfactory?
satisfactory?
(Chp
(Chp11
11&&12)
12)
Measurement
Feedback
Communication
Yes
No
Introduction
1.
2.
3.
4.
Corporate Strategy
Different strategy
different task
priorities, key success factors, skill,
perspectives & behaviors.
Strategy
Control Systems
Measurement
Implication for
Organization Structure
Single Industry
Organizational Structure
Functional
Related Diversified
Business units
Unrelated Diversified
Holding company
Low
Functional background of
corporate management
Relevant operating
experience
Mainly finance
Decision-making authority
More centralized
More decentralized
High
Low
Reliance on internal
promotions
High
Low
High
Low
Corporate Culture
Strong
Weak
Implications for
Management Control
Single Industry
Strategic planning
Vertical-cumhorizontal
Related Diversified
Unrelated Diversified
Vertical only
Budgeting:
Low
Relative control of business
unit manager over budget
formulation
High
Importance attached to
meeting the budget
Low
High
Transfer pricing:
Importance of transfer
pricing
High
Low
Sourcing flexibility
Constrained
Arms-length market
pricing
Continued
Single Industry
Related Diversified
Unrelated Diversified
Incentive compensation:
Bonus criteria
Financial &
nonfinancial criteria
Primarily financial
criteria
Bonus determination
approach
Primarily subjective
Primarily formulabased
Bonus basis
Based both on
business unit &
corporate
performance
Based primarily on
business unit
performance
Mission
Pure Build
Pure Harvest
Implications for
Strategic Planning Process
Build
Hold
Harvest
Importance of strategic
planning
Relatively high
Relatively low
Formalization of capital
expenditure decisions
Less formal
More formal
More emphasis on
nonfinancial data
More emphasis on
financial data
Discount rate
Relatively low
Relatively high
Relatively high
Relatively low
Hold
Harvest
More a short-term
planning tool
Relatively high
Relatively low
Relatively difficult
Frequency of informal
reporting & contacts with
superiors
More frequent on
policy issues; less
frequent on operating
issues
Less frequent on
policy issues; more
frequent on operating
issues
Less often
More often
Continued
Build
Hold
Harvest
Relatively low
Relatively low
Relatively high
Behavior control
Output control
Hold
Harvest
Relatively high
Relatively low
Bonus criteria
More emphasis on
nonfinancial criteria
More emphasis on
financial criteria
More subjective
More formula-based
Less frequent
More frequent
Competitive Advantage
Choosing differentiation approach, rather than a
low-cost approach, increases uncertainty in a
business units task environment.
Differentiation
Low-cost
Product innovation
Produce competing
products
Produce no-frill
commodity products