Differentiated Strategies

1
Differentiated Strategies Service Organizations

• Chapters 12 13,
• Management Control Systems, 12th Ed.,
• Anthony and Govindarajan

2
Differentiated Strategies

• Corporate Strategy
• The right mix of businesses
• Single industry
• Related diversified industries
• Unrelated diversified industries
• Allocation of resources to support the mix
• Business Strategy
• How to compete in a particular market
• Based on the resources allocated by the corporate
  strategy

3
Organizational Structure

• Continuum
• From single industry (Functional)
• Through related diversified (Business units)
• To unrelated diversified (Holding company)
• Must be considered in developing a management
  control system

4
Control Considerations

• Increased diversification reduces knowledge
  levels of management
• Results in increased vertical planning systems
• Results in greater budgetary control at lower
  levels
• Results in less subjectivity for incentive plans
• Results in less goal congruence at the highest
  corporate level

5
Business Unit Strategy

• Basis how to compete in a given market
• Usually have one of four missions
• Build
• Hold
• Harvest
• Divest
• Two ways to compete
• Low cost
• Differentiation

6
Implications

• Build
• Less certainty, greater subjectivity
• Use of interactive control systems
• Hold
• Greater certainty, balance of subjectivity and
  objectivity
• Heavier use of diagnostic control systems
• Harvest
• Almost absolute certainty, greater objectivity
• Use of diagnostic control systems
• Divest

7
Top Management Style

• Managers are different
• Management control systems must take that into
  consideration
• Personal versus impersonal controls
• Tight versus loose controls
• Want some examples?
• All taken from Fortune, November 18, 2002

8
John PattersonNational Cash Register
Company1884-1921

• Three-step approach to employee development
• Break a mans self-esteem
• Rebuild it from scratch
• Then fire him

9
John F. WelchGeneral Electric1981-2001

• Redefined the CEOs central purpose in life
• Increase the stock price, pure and simple

10
Albert J. DunlapScott Paper / Sunbeam
CorporationMid 1990s

• Scott Paper
• Boosted stock price by 225
• Cut 11,000 employees, RD, plant improvements,
  and almost everything within reach
• Im a superstar in my field, much like Michael
  Jordan in basketball
• Sunbeam Corporation
• Bankrupt

11
Service Organizations

• General Characteristics
• Quality Control
• Labor Intensive
• Often Multi-Unit

12
Organization Types

• Professional Services
• Financial Services
• Health Care Organizations
• Nonprofit