CBME Finals Exam - Organizational Analysis and Competitive Advantage PDF

V.︱Organizational Analysis and Competitive Advantage CBME 21 TOPIC 5: ORGANIZATIONAL ANALYSIS AND COMPETITIVE ADVANTAGE LEARNING COMPETENCIES 1. Explain the different company business models 2. Apply the value chain analysis to assess the activities of a par...

V.︱Organizational Analysis and Competitive Advantage CBME 21 TOPIC 5: ORGANIZATIONAL ANALYSIS AND COMPETITIVE ADVANTAGE LEARNING COMPETENCIES 1. Explain the different company business models 2. Apply the value chain analysis to assess the activities of a particular business 3. Identify the different strategies to attain competitive advantage WHAT IS A BUSINESS MODEL? implementation. Being the first to market A business model is a company’s method with an innovation allows a pioneer such of making money relevant to its business as Google to earn extraordinary returns. environment. It involves the key structural and operational characteristics of a firm EFFICIENCY MODEL considering its target market, product This model involves product offerings, competitive advantage, and standardization and uses low-priced, after-sales services among others. low-margin approach to appeal to the mass market. Business Models CUSTOMER SOLUTIONS MODEL PROFIT MULTIPLIER MODEL This model is often used by consulting This model involves developing a concept firms in providing business solutions to that may or may not make money on its other firms. own but, through synergy, can spin off many profitable products. PROFIT PYRAMID MODEL This model lies on the strategy of getting DE FACTO INDUSTRY STANDARD customers to buy products at the MODEL lowpriced, low-margin entry point and later This model involves offering a product free on encourage them to buy the high priced or at a very low price to saturate the and high-margin products, where the market and become the industry standard. company makes its money. Once users are locked in, the company offers higher-margin products using this ADVERTISING MODEL standard. This model offers its basic product free to make money on advertising. It originates Value-Chain Analysis (VCA) in the newspaper industry, commercial Value chain represents the internal radio, and television. activities of a firm when transforming inputs into outputs. Value-Chain Analysis SWITCHBOARD MODEL (VCA) is a process that involves This model involves a firm who acts as an identifying the primary and support intermediary to connect multiple sellers activities of a particular organization or and buyers. industry. TIME MODEL This model requires product research and development for successful 1 V.︱Organizational Analysis and Competitive Advantage CBME 21 accuracy, and quality in the processes of a firm. Procurement. This refers to the acquisition of raw materials and other inputs or resources, which enables the company to create value-adding products or services. COST ADVANTAGE This approach is used when organizations compete in achieving lower product and service costs. It involves understanding VALUE CHAIN PRIMARY ACTIVITIES the sources of cost advantage and Inbound logistics. This involves receiving, identifying the factors which drive those warehousing, and inventory control of costs. input materials. Operations. This involves transforming Identify the firm’s primary and support inputs into the final product or service to activities. It requires an adequate create value. knowledge of the company’s operations Outbound logistics. This involves activities because value chain activities are not organized in the same way as the that deliver the final product to the company itself. customer, including warehousing and Establish the relative importance of order fulfillment.. each activity in the total cost of the Sales and marketing. This involves product. It involves identifying the total activities related to buyers purchasing the costs of producing a product or service. product, including advertising, pricing, and These costs must be broken down and distribution channel selection. assigned to each activity. Services. These are initiatives that Identify cost drivers for each activity. It maintain and improve a product’s value, involves understanding the factors which including customer support, repair, and drive costs and focusing on improving warranty service. them. Costs for labor-intensive activities Firm infrastructure. This allows managers are driven by work hours, work speed, and to monitor the business environment. This wage rate, among others. consists of different activities or Identify links between activities. It departments such as finance, planning, involves reducing cost in a particular public affairs, etc. activity, which may lead to further cost Human resource management. This reductions in subsequent activities. involves skills development and training of Identify opportunities for reducing employees. This includes all those costs. It involves improving inefficient activities associated with hiring, training, activities and cost drivers. development, and compensation of employees. DIFFERENTIATION ADVANTAGE Technology development. This involves This approach is driven by a firm’s desire activities or tools which provide speed, to create superior products and services using innovation. Global companies like 2 V.︱Organizational Analysis and Competitive Advantage CBME 21 Apple, Google, and Starbucks use this Divisional Structure approach. It is appropriate for a large corporation with many product lines in several related Identify the customers’ value-creating industries. Employees here tend to be activities. It involves identifying all value functional specialists organized according chain activities and focusing on improving to product/market distinctions. those activities that contribute the most in creating customer value. Evaluate the differentiation strategies for improving customer value.. It involves using strategies that increase product differentiation and customer value. Identify the best sustainable differentiation. It involves combining interrelated activities and strategies to create superior differentiation and customer value Strategies to Competitive Advantage Cost Leadership Basic Organizational Structures The goal of this strategy is to increase profits by reducing costs while charging Simple Structure industry-standard prices, or to increase It has no functional or market share by reducing the sales price product categories and is while retaining profits. appropriate for a small, Differentiation entrepreneur-dominated The goal of this strategy is to create company with one (1) or products that are significantly different two (2) product lines that operate/s in a from the competition. In addition, the reasonably small, easily identifiable products and services must have a greater market niche. value to the public. Focus Functional Structure The goal of this strategy is to select a It is appropriate for a medium-sized firm niche market in which to sell a company’s with several product lines in one industry. products and services. A niche refers to a Employees here tend to be specialists in small but profitable segment of a market the business functions that are important suitable for focused attention by a to that industry, such as manufacturing, marketer. marketing, finance, and human resources Blue Ocean Strategy The goal of this strategy is to create new demand for a particular product. Companies that use this approach develop uncontested market space rather than fight over a shrinking profit pool. 3  TOPIC 6-STRATEGY FORMULATION: CORPORATE STRATEGY -Part 1 FUNCTIONAL STRATEGY AND STRATEGIC CHOICE-Part II Learning Objectives: 1. Develop a well crafted vision and mission statement for a corporate firm 2. Propose an appropriate corporate strategy that addresses key issues of a corporation 3. Apply the BCG Growth-Share Matrix in the context of business cases A vision refers to a “big picture” of what an A mission is a general statement describing organization desires to achieve. It how an organization will achieve its vision. communicates the beliefs and governing The mission statement concrete and principles of a company to the community “action-oriented”. and the members of its organization. A good vision statement should be brief and clear ✔ Concise. A mission must be able to deliver its point across in just one (1) ✔ Demanding purpose. A vision must sentence. help in understanding the ✔ Outcome-oriented. A mission must importance of work and must explain the overarching results that provide meaning to the daily an organization is working to activities of an organization. achieve. ✔ Results-oriented. A vision must ✔ Inclusive. A mission must include all describe a clear picture of what the the stakeholders involved in the future will look like for an implementation of a company’s organization. strategy ✔ lluminating values. A vision must connect to the morals and principles We are an institution committed to provide of the employees of an organization. knowledge through the development and delivery of superior learning systems. ✔ Vibrant. A vision must be based on a proactive goal of a company. We strive to provide optimum value to all ✔ Identifiable. A vision must be our stakeholders – our students, our faculty concise and accurate. members, our employees, our partners, our ✔ Never-ending. A vision must shareholders, and our community. demonstrate a clear magnitude larger than the thought of beating We will pursue this mission with utmost the competition. integrity, dedication, transparency, and ✔ Guiding. A vision must provide creativity. direction for daily decisions and actions of an organization. To provide goods and vital services well within the reach of every Filipino, making We are San Miguel. Guided by a strong everyday life a celebration. sense of social, environmental, and economic responsibility, our businesses will Objectives are the specific and measurable lead efforts to deliver on national goals, results focused on achieving the mission of setting the pace of progress in the an organization. An organization's Philippines. objectives generally lay out how much of what will be accomplished by when. To be the leader in innovative and relevant education that nurtures individuals to Behavioral. These objectives become competent and responsible consider changing the actions of members of society. people and the products or results of their actions.  Community-level. These are prolonged rapid growth. related to behavioral outcome c.2.No Change strategy: It is a objectives but are more focused on decision to do nothing new. It is a communal level instead of an demonstrated by a management choice to individual or group level. continue current operations and policies for Process objectives. These include the foreseeable future of a company. the implementation of activities c.3.Profit strategy-It is a decision to necessary to achieve other do nothing new in a worsening situation but objectives. instead to act as though the company’s problems are only temporary. Corporate Strategy DIRECTIONAL STRATEGY-It refers to the d. Retrenchment Strategies: These refer to firm’s overall orientation toward growth, the firm’s actions to pursue cutback or stability, or retrenchment. ultimate divestment when it has a weak competitive position in some or all of its Growth Strategy-These refer to the firm’s product lines resulting in poor performance. actions to expand its activities. The two (2) d.1.Turn-around basic growth strategies involve strategty-Companies improve their concentration and diversification. performance by cutting costs and expenses or by selling off assets. This strategy Growth Strategy: involves three phases: Contraction, a. Vertical growth Consolidation, and Rebirth. It can be achieved by taking over a function d.2. Captive Company Strategy-It previously provided by a supplier or involves giving up independence in distributor. The company, in effect, grows by exchange for security. In this way, the making its own supplies and/or by corporation may be able to reduce the distributing its own products. scope of some of its functional activities to b. Horizontal growth-It can be achieved by reduce costs significantly. expanding a company’s operation into other d.3.Sell-out/Divestment Strategy-A geographic locations and/or by increasing sell-out involves selling the entire company the range of products and services offered to another firm at a good deal, given that the to current markets. shareholders and the employees can keep their jobs Horizontal growth d.4.Bankruptcy/Liquidation Strategy b.1.Concentric diversification. It can be Bankruptcy involves giving up achieved through enlargement of production management of the firm to the courts in portfolio by adding new products. return for some settlement of the b.2. Conglomerate diversification. It can be corporation’s obligations. achieved by moving new products or d.4.Bankruptcy/Liquidation Strategy services that have no technological or Bankruptcy involves giving up commercial relation with current products, management of the firm to the courts in equipment, distribution channels, but which return for some settlement of the may appeal to new groups of customers. corporation’s ob c. Stability Strategy: These refer to the firm’s actions to make no PORTFOLIO ANALYSIS changes at all in its current activities. c.1. Pause/Proceed-with-Caution It It includes the industries or markets is typically conceived as a temporary in which the firm competes through its strategy to be used until the environment products and business units. becomes more hospitable or to enable a company to consolidate its resources after  CORPORATE PARENTING It is how the management Functional strategy: coordinates activities, transfers resources, a. Marketing Strategy and cultivates capabilities among product It deals with pricing, selling, and distributing lines and business units. a product or service. a.1. Market development strategy. A It is how the management company or business unit can capture a coordinates activities, transfers resources, larger share of an existing market for and cultivates capabilities among product current products through market saturation lines and business units. or wide distribution of product to penetrate the market. In addition, a company may also Examine each business unit in terms of develop new uses and/or markets for its strategic factors. Corporate current products, using this classification of headquarters must establish centers of marketing strategy. excellence across the corporation. A center a.2. Product development strategy. of excellence is an organizational unit that A company or business unit can develop embodies a set of capabilities that has been new products for existing markets or explicitly recognized by the firm as an develop new products for new markets. important source of value creation, with the a.3.Brand extension. A company or intention that these capabilities be business unit may use a successful brand leveraged or disseminated to other parts of name to market other products. the firm a.4. Push strategy. A company or Examine each business for performance business unit may engage in trade improvement. Corporate headquarters promotion to gain shelf space in must consider parenting opportunities for retail outlets. Trade promotion the organization. For example, two (2) includes discounts, in-store special business units might be able to gain an offers, and advertising allowances increase in leverage by combining their sales forces. In another instance, a parent designed to “push” products through company may help in improving the the distribution system. performance of a business unit with poor a.5. Pull strategy. A company or manufacturing and logistics skills. business unit may engage in wide Analyze how well the parent corporation consumer advertising designed to fits with the business unit. build brand awareness so that Corporate headquarters must be aware of shoppers will ask for the products its own strengths and weaknesses in terms and services being offered by the of resources, skills, and capabilities. The company. corporate parent must assess whether it has the characteristics that fit the parenting opportunities in each business unit. b.Financial Strategy It examines the financial implications of PART II-FUNCTIONAL STRATEGY AND corporate and business-level strategic options and identifies the best financial STRATEGIC CHOICE course of action. Functional strategy is an approach in b.1. Equity financing. A corporation achieving corporate and business unit can raise capital by selling company stock objectives and strategies by maximizing to investors. In return for the investment, the resource productivity. It is concerned with shareholders receive ownership interests in developing and nurturing a distinctive the company. competence to provide a company or b.2.Debt financing. A corporation business unit with a competitive advantage. can raise capital by selling company stock to investors. In return for the investment, the Mass customization. In this shareholders receive ownership interests in strategy, people, processes, units, the company. and technology reconfigure themselves to give customers c.Operations Strategy exactly what they want, when they It determines how and where a product or want it. service is to be manufactured or delivered, the level of vertical integration in the Quality. Service-oriented firms must production process, deployment of physical ensure that they deliver error-free services resources, and relationships with suppliers that match customers’ needs based on standard requirements. It may also pertain In the case of manufacturing firms, to the quality of the delivery process which an increase in sales means an increase in establishes a reliable image to the clients. production volume, which dictates the Flexibility and Speed. appropriate strategy that the firm must Service-oriented firms must ensure that employ. Whereas for service-oriented firms, their service design can handle the multiple the level of service can be classified based demands of the clients. They must also on service quality, reasonable price, reliable anticipate unexpected circumstances based delivery, and flexibility of the service design on changing consumer preferences, which may require them to adjust or completely Job shop. In this strategy, small modify their service design. manufacturing system handles customized production using skilled Dependability. Service-oriented firms labor. must be consistent in the value which their Connected line batch flow. In this service provides. They must forecast strategy, each machine functions possible future problems and lay down like a job shop but is positioned in preventive measures that will solve the the same order as the parts are identified problems. processed. It is used when product Cost. Service-oriented firms must components are standardized. maintain reasonable prices for their services Mass-production system. In this by analyzing where their operations costs strategy, a large number of are incurred and cutting down on low-cost, standardized goods and unnecessary expenses. services can be produced.  Topic 7 Part 1: STRATEGY IMPLEMENTATION LEARNING COMPETENCIES: 1. Identify the prerequisites of strategy implementation 2. Apply the concept of offensive and defensive tactics in analyzing business cases HOW CAN WE SUCCESSFULLY IMPLEMENT OUR BUSINESS Developing Programs, Budgets, and STRATEGY? Procedures Strategy implementation is the totality of Programs activities and choices required for the The purpose of a program or a tactic is to execution of a strategic plan. It is the make a strategy action-oriented. In practice, process by which objectives, strategies, and a program is a collection of tactics, and a policies are put into action through the tactic is the individual action taken by the development of programs, tactics, budgets, organization as an element of the effort to and procedures. accomplish a plan. The Pre-requisites Of Strategy OFFENSIVE TACTICS Implementation Frontal Assault Institutionalization-It involves translating It involves matching the competitor in every organizational conduct, mission, vision, business category from price to promotion policies, and strategic plans into general and distribution channel. To be successful, actions which guide the daily activities of an the attacker must have not only superior organization. resources, but also the willingness to persevere. Developing proper organizational climate It involves establishing cooperation, Flanking Maneuver personnel development, degree of It involves attacking a part of the market commitment, determination, and efficiency where the competitor is weak. within an organization. Bypass Attack Formulation of operating plans It involves cutting the market out from under It involves aligning the different activities of the established defender by offering a new an organization to the proposed strategies type of product that makes the competitor’s in order to attain objectives and generate product unnecessary. positive results. Guerilla Marketing Developing proper organizational Guerrilla marketing is an advertising structure strategy that uses unconventional tactics to It involves matching the requirements of the delight and attract customers. It is an strategy to various designations, positions, alternative to and disrupts traditional and roles within an organization. marketing, such as print media, television commercials, billboards, and direct mail. Periodic Review Strategy It involves monitoring the progress of Encirclement implemented strategy and determining It occurs when an attacking company or unit whether the strategy is relevant to the encircles the competitor’s position in terms purpose of the organization. of products or markets. The “encircler” is known to have a greater product variety plan, the line people or staffs of an and/or serves more markets. organization can help by collecting data and using analytical tools. Defensive Tactics In addition, business leaders must develop the substance of the strategic plan. The line Raise structural barriers people understand the business It involves blocking a challenger’s logical environment and the organization’s avenues of attack by offering a full line of capabilities because they are directly products in every market segment. exposed to it. Increase expected retaliation Considerations Of Business Leaders In It involves increasing the perceived threat of Creating A Strong Strategic Plan counterattack. For instance, management Assessment Of External Environment. may strongly defend any erosion of market Business leaders must scrutinize their share by drastically cutting prices or environment and understand it well. They matching a challenger’s promotion through should examine everything from economic a policy of accepting any price-reduction and demographic trends, new technologies, coupons for a competitor’s product. alliances between competitors, the drivers of increasing or decreasing demand for its Lower the inducement for attack products, among others. It involves reducing a challenger’s expectations of future profits in the industry. Understanding Existing Markets Business leaders must be aware of the Budgets needs and buying behaviors of their It is way for a corporation to check the customers. feasibility of its selected strategy by identifying the significant cost which will be Identifying Growth Opportunities incurred during strategy implementation. An Business leaders must assess the needs of ideal strategy might be found to be their organization to gain potential progress completely impractical only after specific and development. They must constantly implementation programs and tactics are identify the need for new products and/or costed in detail. services, marketing channels, and business expansion, among others. Procedures These are often called Standard Operating Recognizing The Competition Procedures (SOPs), which typically detail Business leaders must continuously monitor the various activities that must be carried the emergence of new entrants who have out to complete a corporation’s programs more attractive value propositions for their and tactical plans. Once in place, customers. procedures must be updated to reflect any changes in technology as well as in Assessment Of Business Capabilities strategy. Business leaders must undertake a realistic evaluation of their company’s capabilities to Topic 7 Part 2: Execution - Linking execute a proposed strategy in terms of Strategy, People and Operations people, process, and resources. A strategy defines a business’s direction Creating Strategic Milestones and positions a company to move in that Business leaders must establish a timeline direction. and metrics in measuring the progress of a The strategy process is about linking the strategic plan. people to operations. In building a strategic Incorporating Sustainability those who need it Business leaders must ensure that their company operations exhibit economic stability to ensure the long run continuity of the organization. THE OPERATIONS PROCESS Set targets Business leaders must establish realistic People Linkage To The Strategic Plan goals and objectives for the company to Business leaders must ensure that their reach its ultimate destination. employees and their company goals and objectives are aligned to ensure successful Develop actions plans strategy implementation. Business leaders must propose plans that will enable them to execute strategies to Leadership Pipeline achieve their goal. Business leaders must assess their employees for potentials to become future Create contingency plans managers or executives. Business leaders, together with the line people, must create specific alternative Mentoring Non-performers courses of action for the business to Business leaders must conduct a talent overcome obstacles which may be review to identify the nonperformers in the encountered in reaching goals and organization. In addition, the leaders must objectives. address the gap between performing and non-performing employees through CULTURE AS COMPETITIVE mentoring. ADVANTAGE Define the culture Human Resource Linkage Business leaders must identify the driving Business leaders must integrate the organizational values, beliefs, and practices of their human resource behaviors that will help the company in department to company strategy and serving their customers. operations. Seven HR Practices Align the culture 1, Providing security to employees Business leaders must turn their company 2 Selective hiring: Hiring the right people values into ongoing norms of behavior 3 Self-managed and effective teams within their organization. 4 Fair and performance-based compensation Monitor the culture 5 Training in relevant skills Business leaders must support the business 6 Creating a flat and egalitarian organization environment and solicit feedback from key 7 Making information easily accessible to stakeholders for continual improvement.  Topic 8- CONTEMPORARY THINKING ON STRATEGY-Part 1 LEARNING COMPETENCIES 1. Explain the different contemporary thinking on strategic management A strategy refers to an make up the largest percentage of all-encompassing scheme to the workforce is not conducive to the achieve a fixed set of goals while 5-year plan way of thinking. tactics are the specific practices or Millennials are the generation of the courses of actions that must be slash-career, meaning they don’t employed by the company in line stick with one (1) job and company with strategy implementation. the way older generations used to. This means that organizations must Goal Strategy Tactics consider other ways to ensure business continuity, because gone To bring 25% more Use online display Publish regular blog posts customer traffic to advertising and filled with valuable are the days when a company is a company’s optimize social information. built by keeping the same website in media presence to attract new Purchase banner employees over a long period of 202A advertisements on users. relevant sites. time. Run Facebook campaigns Companies are now shifting their at peak times of target focus in developing teams and audiences. Increase presence on shaping organizational culture. Twitter by retweeting 10 Some smart leaders create strategic tweets and publishing at plans which are bound for a shorter least five (5) original tweets every day. period of time like three (3) to six (6) Monitor competitors’ months. In connection, they build activity and assess what is working well for them. great teams and sustainable culture. Evaluate which of the above is most effective for Strategic Management in a VUCA World the business and strengthen efforts behind them. Volatility It refers to the speed of change in an The Strategic Plan is Dead: Long Live industry, market, or the world in general. It is Strategy associated with fluctuations in demand, Companies often position their turbulence, and short time to markets. The strategies under a 3-year, 5-year, more volatile the world is, the more and and 10-year plans. However, this faster things in the business landscape kind of strategic planning is now changes. considered by many as obsolete and ineffective for some reasons. Uncertainty First, technology has obliterated It refers to the extent to which organizations planning the structure of a business can confidently predict the future. Truly for more than one (1) to two (2) uncertain environments are those that don’t years. This means that things move allow any prediction even on a statistical quickly in the current business basis. The more uncertain the world is, the arena, as proven by failed marketing harder it is to predict the future actions of efforts of some companies who once the market. dominated the market but already declared bankruptcy Second, the fact that millennials now Complexity It refers to the number of factors that organizations need to consider, their variety, TOPIC 8 PART 2: EVALUATION AND and the relationships between them. CONTROL Diverse factors with greater variety and interconnection lead to a more complex business environment. Evaluation and Control Process Ambiguity It refers to the lack of clarity in interpreting the business environment. A situation is ambiguous, for example, when information is incomplete, contradicting, or too inaccurate to draw clear conclusions. Steps On How Organizations Should Position Their Actions In The VUCA World 1. Data collection and analytics Organizations must utilize the concept of foresight in evaluating information relevant to strategic Measuring Performance planning. Foresight is different from the traditional predictive models Performance - end result of activity called forecasting, which is based on Steering controls - measure the forward projection of past variables that influence future experiences. profitability 2. Crafting a strategy Cost per available seat mile Organizations must lay down their (airlines) initiatives based on a chain of goals. Inventory turnover ratio (retail) Managers must avoid positioning the Customer satisfaction company strategy based on false assumptions, inaccurate time frame Types of Controls of implementation, and solution to symptoms and not on the actual 1. Output controls - specify what is to problem itself. be accomplished by focusing on the end result through the use of 3. Bridging the gap objectives Organizations must identify any discrepancies between strategy and 2. Behavior controls - specify how its proposed execution. something is done through policies, rules, standard operating procedures and orders from supervisors 3. Input controls - emphasize resources Traditional Financial Measures  1. Return on investment (ROI) - result and the capital contributed by of dividing net income before taxes shareholders and lenders by the total amount invested in the Measures the stock market's company (typically measured by estimate of the net present value of total assets) a firm's past and expected capital 2. Earnings per share (EPS) - dividing investment projects net earnings by the amount of Balanced Score Card - combines financial common stock measures that tell the results of actions 3. Return on equity (ROE) - involves already taken with operational measures on dividing net income by total equity customer satisfaction, internal processes 4. Operating cash flow - the amount and the corporation's innovation and of money generated by a company improvement activities-the drivers of future before the cost of financing and financial performance taxes, is a broad measure of a company's funds In the balanced scorecard, management 5. Free cash flow - the amount of develops goals or objectives in each of four money a new owner can take out of areas: the firm without harming the Financial: How do we appear to business. shareholders? Nonfinancial Performance Measures Customer: How do customers view Used by Internet Business Ventures us? Internal business perspective: 1. Stickiness - length of Web site visit What must we excel at? 2. Eyeballs - number of people who Innovation and learning: Can we visit a Web site continue to improve and create 3. Mindshare - brand awareness value? Shareholder Value Key performance measures - measures that are essential for Shareholder value - the present achieving a desired strategic option value of the anticipated future streams of cash flows from the Chairman-CEO Feedback Instrument business plus the value of the Questionnaire focuses on four key areas: company if liquidated Economic value added (EVA) 1. Company performance, -measures the difference between 2. Leadership of the organization the pre- strategy and post-strategy 3. Team-building and management values for the business succession -after-tax operating income minus 4. Leadership of external the total annual cost of capital constituencies Market value added (MVA) - Management audits measures the difference between the market value of a corporation Developed to evaluate activities such as corporate social  responsibility, functional areas such 4. Calculate the differences among the as the marketing department, and company's performance divisions such as the international measurements and those of the division competitors and determine why the useful to boards of directors in differences exist evaluating management's handling 5. Develop tactical programs for of various corporate activities closing performance gaps 6. Implement the programs and Strategic Audit compare the results provides a checklist of questions, by Problems in Measuring Performance area or issue, that enables a systematic analysis of various Lack of quantifiable objectives or corporate functions and activities to performance standards be made Inability to use information systems useful as a diagnostic tool to to provide timely and valid pinpoint corporate- wide problem information areas and to highlight organizational Short-Term Orientation strengths and weaknesses Long-term evaluations may not be Responsibility Centers conducted because executives: used to isolate a unit so it can be 1. Don't realize their importance evaluated separately from the rest of 2. Believe that short-term the corporation considerations are more has its own budget and is evaluated important than long-term on its use of budgeted resources considerations headed by the manager responsible 3. Aren't personally evaluated for the center's performance on a long-term basis 1. Standard cost centers 4. Don't have the time to make 2. Revenue centers a long-term analysis 3. Expense centers Goal Displacement 4. Profit centers 5. Investment centers confusion of means with ends and occurs when activities originally Benchmarking - the continual process of intended to help managers attain measuring products, services and practices corporate objectives become ends in against the toughest competitors or those themselves-or are adapted to meet companies recognized as industry leaders ends other than those for which they 1. Identify the area or process to be were intended examined behavior substitution and 2. Find behavioral and output suboptimization measures 1. Behavior substitution - refers to 3. Select an accessible set of the phenomenon of when people competitors of best practices substitute activities that do not lead to goal accomplishment for activities  that do lead to goal accomplishment because the wrong activities are being rewarded 2. Suboptimization - refers to the phenomenon of a unit optimizing its goal accomplishment to the detriment of the organization as a whole Guidelines for Proper Control 1. Controls should involve only the minimum amount of information needed to give a reliable picture of events. 2. Controls should monitor only meaningful activities and results, regardless of measurement difficulty. 3. Controls should be timely so that corrective action can be taken before it is too late. 4. Long-term and short-term goals should be used. 5. Controls should aim at pinpointing exceptions. 6. Emphasize the reward of meeting or exceeding standards rather than punishment for failing to meet standards.