Copyright © 2005 Pearson Education Canada Inc.

Concepts in يحيحيحيحStrategic Management, Canadian Edition

Wheelen, Hunger, Wicks 10-1

Chapter 10

Evaluation and Control

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Evaluation and Control

Process that ensures that the company is achieving what it set out to accomplish.

Compares performance with desired results.

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Corporate Governance

Refers to the relationship among the board of directors, top management, and shareholders in determining the direction and performance of the corporation.

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Agency Theory

Problems arise in corporations because the agents (top management) are not willing to bear responsibility for their decisions unless they own a substantial amount of stock in the corporation.

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Stewardship Theory

Executives tend to be more motivated to act in the best interest of the corporation than their own self-interests. Theory argues that over time, senior executives tend to view the corporation as an extension of themselves.

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Corporate GovernanceRESPONSIBILITIES

•Setting corporate strategy, overall direction, mission or vision

•Hiring and firing the CEO and top management

•Controlling, monitoring, or supervisingtop management

•Reviewing and approving the use of resources

•Caring for shareholder interests

Board of Directors

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Corporate Governance

Ownership ConcentrationThe situation when a small number of large

investors own a larger proportion of a corporation’s shares

Concepts in يحيحيحيحStrategic Management, Canadian Edition

Wheelen, Hunger, Wicks 10-8Copyright © 2005 Pearson Education Canada Inc.

Corporate Governance

Executive CompensationThe use of financial incentives to align the

interests of the owners and managers of a corporation

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Evaluation and Control

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Evaluation and Control

Types of Controls:Behaviour Controls

Policies, rules, SOP’s, directives

Output Controls Objectives, targets, milestones

Input Controls Resources, knowledge, skills, values

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Evaluation and Control

Activity-Based Costing:ABC

Allocating indirect and fixed costs to individual product lines based on the value-added activities going into that product

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Evaluation and Control Balanced Scorecard:

Financial How do we appear to shareholders?

Customer How do customers view us?

Internal Business Perspective What must we excel at?

Innovation and Learning Can we continue to improve and create value?

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Evaluation and Control

Strategic Information Systems:Communicate to those people responsible for

formulating and implementing strategic plans ERP (enterprise resource planning)

Unites all of a company’s major business activities from order processing to production within a single family of software modules

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Evaluation and Control

Problems in Measuring Performance:Short-term orientationGoal displacementBehaviour substitutionSuboptimization

Concepts in يحيحيحيحStrategic Management, Canadian Edition

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Evaluation and Control

Guidelines for Proper Control:1. Minimum amount of information

2. Monitor meaningful activities

3. Timely

4. Long-term and short-term

5. Pinpointing exceptions

6. Reward meeting or exceeding standards