STRATEGIC CONTROL MECHANISM

Strategic Control

There are different ways on viewing strategic control. It is a very important component

of strategy implementation. Strategic control is the process of monitoring the various strategies

of the organization and determining whither is a parallelism between the organizational miles

and that of the environment. As early emphasize, strategic control should always be discussed

and actualize in the contest at the environment, thus the ward, the word Strategic control can be

categorized in two different perspectives according to purpose and according to process.

Types of Strategic Control According to Purpose

There are four types of strategic control according to purpose presupposition control,

implementation control, strategic surveillance and vigilance control.

1.Presupposition control is designed to check systematically and regularly whether the

arguments set during the planning and implementation processes are still binding. When

strategies are formulated, these are based on certain premises or assumptions. However, since

the external environment are continuously changing there is a need to close or the strategies

and make the necessary change or changes when needed

2. Implementation control is applied to evaluated whether the intermediaries’ strategies are

consistent with the overall strategy. In many stances, a strategy consists of small activities that

complement each other and beads the ultimate attaint of the math stated in cases when these

transitional activities become misaligned for one reason another, then the it need to review the

reasons for such occurrence

3.Strategic surveillance in a monitoring system whereby a broad range of occurrence inside and

out on the origination threatens the implementation of an organizations strange. Surveillance

means shadowing, observing, and scrutinizing the milieu. It demands constant awareness,

consciousness, and knowledge of how the implementation of the strategy/strategies is faring.

4 Vigilance control is a special type of strategic control that is applied when immediate

reconsideration of an organizations strategy/strategies is pursued. This is called when usual

events happen and there is no choice but for the organization to attend to it and do the

corresponding changes.

Types Strategic Control According to Approach

1. Sequential Strategic Control – is the traditional way of looking at strategic monitoring. It

is sequential, in that the formulation of strategy/strategies is followed progressively by
the implementation of these designed strategies. Once the strategies have been
employed, it is only then that strategic monitoring is carried out.

2. Interactive Strategic Control – is the more appropriate approach for strategic control.
Described as interactive, this approach shows the communicating and collaborative
nature of the processes of strategy formulation, strategy implementation, and strategy
control.
Feedback Strategic Control – is a combination of the sequential and interactive approaches.

Although strategy formulation, strategy implementation, and strategy monitoring appear to be

sequential as shown in Figure 8.3, the feedback loop is essentially interactive. Constant

feedback is affected with respect to the formulated and implemented

Performance Metrics

GROSS PROFIT MARGIN

Gross profit margin is the percentage of sales revenue that a company is able to convert

into gross profit. Companies use gross profit margin to determine how efficiently they generate

gross profit from sales of products or services. If a company has net sales revenue of $100 and

gross profit of $36, its gross profit margin is 36%. For every dollar of product sold, the company

makes 36 cents in gross profit.

• Gross profit margin is a metric that assesses how efficiently the company generates profit

from sales of products or services.

• Gross profit margin can help companies compare performance against industry peers, and

also assess their own performance over time.

• Gross profit margin does not provide a complete picture of a company’s profitability because

it excludes costs that are not directly related to making and selling its products.

• Gross profit margins tend to vary by industry, due to industry-specific costs and the level of

competition.

NET PROFIT MARGIN

The net profit margin, or simply net margin, measures how much net income or profit is

generated as a percentage of revenue. It is the ratio of net profits to revenues for a company or

business segment. Net profit margin is typically expressed as a percentage but can also be

represented in decimal form. The net profit margin illustrates how much of each dollar in

revenue collected by a company translates into profit.

• Net profit margin measures how much net income is generated as a percentage of revenues

received.

• Net profit margin helps investors assess if a company’s management is generating enough

profit from its sales and whether operating costs and overhead costs are under control.

• Net profit margin is one of the most important indicators of a company’s overall financial

health.

RETURN ON CAPITAL EMPLOYED (ROCE)

The term return on capital employed (ROCE) refers to a financial ratio that can be used to

assess a company’s profitability and capital efficiency. In other words, this ratio can help to

understand how well a company is generating profits from its capital as it is put to use. ROCE is

one of several profitability ratios financial managers, stakeholders, and potential investors may

use when analyzing a company for investment.

• Return on capital employed is a financial ratio that measures a company’s profitability in

terms of all of its capital.

• ROCE is similar to return on invested capital.

• It’s always a good idea to compare the ROCE of companies in the same industry as those

from differing industries usually vary.

• Higher ratios tend to indicate that companies are profitable.

• Many companies may calculate the following key return ratios in their performance analysis:

return on equity, return on assets, return on invested capital, and return on capital employed.

ASSET TURNOVER

The asset turnover ratio measures the value of a company’s sales or revenues relative to the

value of its assets. The asset turnover ratio can be used as an indicator of the efficiency with

which a company is using its assets to generate revenue. The higher the asset turnover ratio,

the more efficient a company is at generating revenue from its assets. Conversely, if a company

has a low asset turnover ratio, it indicates it is not efficiently using its assets to generate sales.

• Asset turnover is the ratio of total sales or revenue to average assets.

• This metric helps investors understand how effectively companies are using their assets to

generate sales.

• Investors use the asset turnover ratio to compare similar companies in the same sector or

group.

• A company’s asset turnover ratio can be impacted by large asset sales as well as significant

asset purchases in a given year.

Liquidity Measure

Current Ratio is used as a general metric of financial health since it shows a company’s ability

to pay off short-term debts.

Inventory holding period shows how many days it takes for inventory to rotate in the business.
Collection period- to determine whether or not your average collection period results are good,

simply compare your average against the credit terms you offer your clients.

Accounts payable refers to money owed by a business to its vendors (creditors).

Gearing (Risk) Measure and Other Investor’s Measure (Weygandt 2008)

Gearing Ratio – show the long-term debt as a percentage of equity. A low level of gearing

Interest Cover- the operating profit (profit before finance charge and tax) divided by the finance

cost. A decrease in the interest cover is higher than the finance cost.

Other investor’s Measure Earning Per Share (EPS) – Measure the profit attributable to each

share ideally, must show an increase in earnings per share.

Dividend Cover – an increase in dividend cover means that the company is more able to make

dividend payments to shareholders.

Dividend Yield – an increase in dividend yield means an increase in return to shareholders.

Efficiency and Productivity Performance Metrics

Efficiency and productivity are the emphasis of every organization that aims to achieve success.

Measures of success are quantitative.

Metrics

Productivity of Resources – the ratio of the output over input helps determine how a company

can fully maximize its resources possible to help achieve higher sales and revenues

Employee Labor Productivity – the ratio of the productivity of the entire plant (total number of

products manufactured) by the total number of hours workers for a specific period

Individual Employee Sales Productivity – the ratio of the individual net sale over the number

of hours they worked

Efficiency Ratio – percentage of expenses over revenues

Strategic Management Revisited

In summary, the book titled Strategic Management Made Simple presents strategic

management in a clear and straightforward manner. It discusses the salient issues and
concerns in the corporate and business world and addresses these challenges through practical

and well-tested approaches that are constructive, functional, and valuable.

The book primarily presents the importance of the external, internal, and organizational

environments to any organization. The external environment includes a confluence of social,

political, technological, economic, environmental, and legal forces that influence organizational

direction and strategic decision- making, while the internal environmental variables consist of

the government, culture, the stakeholders, competitors, suppliers, customers, and the

community. In addition, management, employees, facilities and equipment, financial resources,

and organizational

 Given the awareness and cognizance of the impact of these independent and internal factors,

an organization can undertake strategic planning in the context of their vision, mission, goals,

and objectives. Unique to their thrust and industry orientation, organizations can determinedly

craft their business and corporate strategies. Strategies are activities that organizations prepare

and articulate to achieve their desired intents, of which are significant to their organizational

existence.

 Today, strategies cannot be framed as ordinary and prosaic. To help companies stay

competitive and achieve a high degree of organizational success, strategies need to outsmart

competitors. Speed in implementing these strategies is likewise necessary because this

oftentimes makes the much-needed difference. Another important featureble of strategies is

flexibility or the ability to adapt to the changes in the industry milieu.

 While competition is that much-talked about commonality reference, organizations should

continue to possess and demonstrate a differentiated mindset that can help create both their

comparative and competitive advantages. These can be demonstrated through the products

and services they supply, the prices they offer, and the branding image they promote.

Organizations can similarly come up with products that are new when possible, or create distinct

market niches in a hypercompetitive environment in this manner.

 Strategy implementation almost always presents the premise for success. Organization can

apply varied but ingenious modes of executing their well-planned strategies. This is the

challenge to organizations and in reality, many organizations may succeed while

 Lastly but more importantly is strategic control. The best-laid plans can end up in disarray and

failure when strategic monitoring is left unattended. Strategic monitoring is effectively assessed

through the use of quantifiable measures or performance metrics. Performance metrics are

important to measure the extent or degree of accomplishment. Otherwise, the entire process of

strategic management becomes arbitrary, unproductive,

In short, strategic management is a useful process in overseeing an organization and it

is up to the organization to maximize their physical resources and optimize their people

resources. The extent, width, and depth to organizational success are unlimited because the

endowments of human are infinite. Ultimately, organizational leadership, characterized by a

forward-looking and adaptable paradigm with a passion that inspires and motivates and a smart

outlook that creates a chasm of creativity, distinctiveness, and monopolistic leverage is the

pivotal force that will be

Facets of Strategy

Strategy Thinking (Cogency to creativity)

Strategy Thinking Cogency to creativity Strategy thinking need not be too logical. To be
over rational is to bring stiffness to one's way of thinking. What is highly suggested is the
development of imagination, originality, and inspiration in one's way of looking at planning,
assessing, and implementing strategies.

Strategy Goal (Profit- Orientation to Communal Focus)

Generally, the primary goal of an organization is to make profit. After all, it needs to be
self-sufficient to survive. It even needs to earn in return for its investments. However,
organizations need to veer away from being self-serving to being socially responsible.
Strategy Formulation (Purpose to Evolution)

Although strategies are deliberately planned and designed to achieve organizational and
functional goals, they can be emergent, something that naturally develops. New, better or more
relevant plans may be designed and formulated continuously.

Strategy Implementation (Constraint to Structure)

While strategies are strictly implemented and controlled to make sure that the set plans
are actualized, unintended and spontaneous activities may be carried out to allow for more
originality, effectiveness, and feasibility. There is no such thing as absolute and strict strategy
implementation.

Strategy Attitude (Rigidity to Openness)

Some organizations may look at strategy planning and implementation as the be-all and
end-all of attaining organizational success. They exhibit an attitude of inflexibility and rigidity.
Although strategies carry out the goals and objectives of organizations, an outlook of openness
to strategy changes and improvements need to be cultivated.

Strategy Response (Reactivity to Anticipatory)

While the reality of a volatile and unstable environment is a fact, strategy responses
may vary from being reactive to being proactive. Some facts, factors, or realities are not
expected that organizations have no choice but to react. But these do not happen all the time. In
many instances, organizations should be prepared for changes to prevent themselves from
being overtaken by inevitabilities.

Each facet of strategy is unique. As discussed in this book, strategy may possess all the
best characteristics: from smart, measurable, time-bound, realistic, attainable, relevant,
adaptable, flexible, fast, open, focused, proactive, innovative, to one-of-a-kind. However, each
organization is distinct. There are no two same organizations. People may vary. Needs, goals,
services, and products, as well as success objectives may vary. Emphasizing one aspect more
than the other or placing more importance on a concern varies with each organization. In short,
the adoption of the nuances of strategy is unique to the specific organization.

Thus, an organization's way of thinking strategically, formulating, and implementing

strategies are likewise idiosyncratic. They form a continuum of extreme ends that may range
from optimum minimum to optimum maximum and may differ in reach, breadth, scope, and
depth. In particular, strategy thinking may range from cogency to creativity, while strategy goal
may move from profit-orientation to communal focus. Strategy formulation may prioritize profit
maximization or communal sharing while implementation may be purposive or emerging. Lastly,
strategy attitude may range from being rigid to being open, while strategy response may be both
reactive and proactive. In summary, therefore, strategies and strategic management in any
organization are all about ownership.