Discuss the contingent nature of strategic controls. How would controls be different for firms pursuing overall low costs strategies versus differentiation strategies?

Question

What will be an ideal response?

Answer 1

There is no "one best way" to design strategic control systems for an organization. Effective controls are contingent on many factors and are related to the choices made by the organization regarding its business-level and corporate-level strategies. For example, firms competing on the basis of overall cost leadership must implement tight cost controls, frequent and comprehensive reports to monitor the costs associated with outputs, and highly structured tasks and responsibilities. Not surprisingly, incentives tend to be based on explicit financial targets, since innovation and creativity are expensive and might tend to erode competitive advantages. However, firms pursuing a differentiation strategy would typically want to encourage the development of innovative products and services, requiring the employment of experts who can identify the crucial elements of intricate, creative designs and formulate innovative marketing decisions. Highly trained professionals, such as scientists and engineers, are essential for devising, assessing, implementing, and continually changing complex product designs. New product design also requires collaboration and co-operation among specialists and functional managers from different areas within a firm. Such individuals must, for example, evaluate and implement a new design, constantly bearing in mind marketing, financial, production, and engineering considerations.