Page 136 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Unit 6: Strategic Planning for Management Control

Characteristics of the organisation where a formal programme is desirable: Notes
1. Top management is convinced that programming is important; otherwise, programming
is likely to be a staff exercise that has little impact on the actual decision making.

2. It is relatively large and complex. In smaller simple organizations, an informal
understanding of the organizations and future directions is adequate for making decisions
about resource allocation, which is the principal purpose of preparing a strategic plan.
3. Considerable uncertainty about the future exists, but the organisation has the flexibility
to adjust to changed circumstances.

Self Assessment

Fill in the blanks:

1. In the ........................................ process, management arrives at the goals of the organizations
and creates the main strategies for achieving the goals.
2. ..................................... is systematic; there is an annual strategy planning process with
prescribed procedures and timetables.
3. An important benefit of preparing a strategic plan is that it facilitates the formation of an
effective ……………….. .

6.2 Analyzing Proposed New Programs

Ideas for new programs can originate anywhere in the organisation with the chief executive,
with the headquarters planning staff or in the various parts of the operating organisation. Some
responsibility centres are more likely source than others.

Example: R&D department is expected to generate ideas for new products or processes,
the marketing department, marketing innovation and the product engineering department for
new equipment and manufacturing method.
Proposals for programs are essentially either reactive or proactive, that is, they arise either as
the reaction to a perceived threat such as rumours of the introduction of a new product by the
competitor or they represent an initiative design to capitalize in a newly perceived opportunity.
Since the company’s success depends on its ability to find out and implement new programs and
because the ideas may come from a wide variety of sources, it is necessary that an atmosphere is
created that such ideas come to light and that they receive appropriate management attention. A
highly structured formal system may create the wrong atmosphere for this purpose and therefore,
it is important that the system should be flexible enough and reactive so that good ideas may not
be killed off at the initial stage before they come to the attention of the decision-makers.
It is also important that, wherever possible, the adoption of a new program be viewed not single
all-or-nothing decision but rather a series of decisions, each involving a small step in testing and
developing the proposed program. Full implementation and its consequent significant
investment should be decided upon if, but only if, the test indicates that the proposal has a good
chance of success. Most new programs involve many successive decisions: agreement that the
initial idea for a product is worth pursuing: then examining its technical feasibility in a laboratory;
then examining production problems and cost considerations in a pilot plant; then testing
consumer acceptance in test markets and only then making a major commitment to full production
and marketing. The system must provide for these successive steps and for a thorough evaluation
of the results of each step as a basis for making the decision on the next step.

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