Page 241 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Management Control Systems

Notes
3. Which of the following is used to measure the quality of customer relations in a life
insurance company?
(a) Repeat business (b) Benefit cost analysis

(c) Complaints (d) Interest rate
4. Which of the following is important to cost strategy?

(a) Quality of raw materials
(b) Price elasticity

(c) Unit cost performance relative to competitors
(d) Benefit cost analysis

5. Which of the following key success variables is derived both from industry
characteristics and competitive strategy?

(a) Quality (b) Inventory
(c) Profit (d) Cost

12.4 Summary

 Management control systems are tools to implement strategies. Strategies differ between
organizations and controls should be tailored to the requirements of specific strategies.
 Strategies describe the general direction in which an organization plans to move to attain
its goals. Every well-managed organization has one or more strategies, although they
may not be stated explicitly.
 At the single business end, the company tends to be functionally organized, with senior
managers responsible for developing the company’s overall strategy to compete in its
chosen industry as well as its functional strategies in such areas as research and
development, manufacturing, and marketing.
 Business unit strategy consists of two interrelated aspects: mission and competitive
advantage.

 A business unit can choose to compete either as a differentiated player or as a low-cost
player. The choice of a differentiation approach, rather than a low-cost approach, increases
uncertainty in a business unit’s task environment for three reasons.

12.5 Keywords

Mission: The mission of a business may be defined as the fundamental unique purpose that sets
it apart from other firms of its type.
Strategies: Strategies describe the general direction in which an organization plans to move to
attain its goals. Every well-managed organization has one or more strategies, although they
may not be stated explicitly.

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