Levers of Control During Strategy Implementation - Research Paper Example

How do the levers of control contribute to strategy implementation? Introduction Lock manufacturing is a labor-intensive industry. More than one hundred process are involved for a lock manufacturing. In China the high class lock market are occupied by the foreign product. Most of the Chinese lock manufacturing companies can product the low- and medium class lock. The lock manufacturing industry is also a competitive and low profit industry for the following reasons. Firstly, Because of the tax policy difference, the companies in the North of China are less competitive than the companies in the south. This result in low profit in this industry. Secondly, the technology requirement for the low class lock is low and lock can be produced by some small companies in town. They have cost advantage in tax and administration. The product can meet the requirement in low class market. Thirdly, the higher steel price compresses the profit space. The case company is located in the North of China. It is a medium size company which has three production lines and can produce about hundred kind of lock. Their products are mainly the door lock and padlock. Their locks are used in civil and industrial areas. They can produce the low- and medium class lock. Between 2003 and 2005, they pay attention to low class door lock because of high demand by the construction company. In these two years, the competition in low class market became fierce They decided to go back the medium market. In 2007, The productivity of medium class lock take 30% percent and the profit take more than 50%. The top management realized they must develop in medium-class market because of high profit ratio. However, their vision and strategy can not be implemented successfully by their current performance and control system. Definition of the Problem During strategy implementation, the strategic uncertainty must be met. These strategy uncertainties drive the new strategy. The company’s current source of strategy uncertainty is stronger competition (Atkinson and Court, 1998). Normally, companies choose one or more performance measurement and control system to monitor the uncertainties interactively. The case companies choose the revenue interactively which is highly responsive to changes in competition. However, the measure of the whole revenue can not meet the requirement of the new strategy as the companies decide to develop their product in the medium product market. The sales and profit of the medium class products are not monitored separately and interactively. Moreover, supplier is an important aspect of strategic uncertainty in competition market. For example, they pay less attention to the raw material previously because the fluctuation in the raw material market is stable. The small fluctuation of profit does not influence their production plan and strategy. One of their strategies is market share. The revenue is a critical performance variable of market share. However, in the last year, the steel price increased by 15%. This change heavily influenced their profit. The company had to change the production plan. The cost of raw material has a big impact on the company’s profit. They need to pay more attention on the raw materials market. In order to occupy the market, they can not transfer the cost of raw materials to sale price fully. Therefore, they should monitor the cost of raw material and provide a subjective incentive to the purchaser. The levers of control (LOA) can not only improve the strategy implementation capacities in the four facets, but also manage the strategic risk which is often ignored. The successful strategy implementation requires controlling the multiple dimensions of strategy reflected in the 4Ps of strategy implementation: perspective, position, plans and goals, patterns of action. Since there are still gray areas in some aspects of strategy implementation like the levers of control, this research will investigate the levers of control of strategy implementation (Bapna et al, 2000). Specifically, the study is set to answer the following questions: 1. How does the use of BSC in diagnostic control system improve the new performance measurement system in strategy implementation? 2. How does the company distribute and communicate their belief through belief control system? 3. What is the importance of intangible assets to customer to the core values and control system belief of the company’s employees? Delimitations of the Study This study has several delimitations. This study is delimited to the investigation of the levers of control of strategy implementation. For this study, primary research and secondary research will be used. The interviews will be used to provide qualitative insights into the data collected. The data will be analysed and compiled for the correlation of the hypothesis. The data will then be presented by means of graphical representations and illustration and the difference would be highlighted. A negative correlation between the variables would suggest that the hypothesis is null. Theoretical framework: Beliefs system: it is used to communicate vision, develop core value and empower and expand search actively. Boundary system: it is used to provide limit of freedom to employees. It is used to mitigate risk and provide stakeholders with assurance that the firm will behave responsibility. Code of conduct is an factors in it. Diagnostic system: it is used to coordinate and monitor the implementation of intended strategy. With the help of performance measurement, such as BSC, it align the long –term goal to the short-term goal. If your want employees to implement strategy, you need to measure the action that lead to its implementation.(Kaplan and Norton, 1996). Interactive control system: it is used to manage strategic uncertainty and organization learning. Porters five force model will used as a tool for the analysis of external factors. Literature Review The boundary control system is linked with belief control system. The latter is used to empower employee to create value and the latter is used to avoid risk. The boundary control system tells employees what not to do. Code of conduct is a example tool in boundary system (Davis and Meyer, 1998). There is problem in their financial and marketing department. The reason is the marketing department can receive money from the customer. In the case company, most of the cash are acquired from the province agency. Though these activities reduce the profit, it plays an important role in reducing the bad debt. In the last year, the bad debt increased a lot because many Korea customers closed their factory in some area suddenly. Some customers pay money to the market department and are not through the agency. This activity results in the increase in bad debt for the company. During strategy implementation, the strategic uncertainty must be met. These strategy uncertainties drive the new strategy. The company’s current source of strategy uncertainty is stronger competition (European Foundation of Quality Management, 1993). Normally, companies choose one or more performance measurement and control system to monitor the uncertainties interactively. The case companies choose the revenue interactively which is highly responsive to changes in competition. However, the measure of the whole revenue can not meet the requirement of the new strategy as the company decides to develop their product in the medium product market. The sales and profit of the medium class products are not monitored separately and interactively. Moreover, supplier is an important aspect of strategic uncertainty in competition market. For example, they pay less attention to the raw material previously because the fluctuation in the raw material market is stable. The small fluctuation of profit does not influence their production plan and strategy. One of their strategies is market share. The revenue is a critical performance variable of market share. However, in the last year, the steel price increased by 15%. This change heavily influenced their profit. The company had to change the production plan. The cost of raw material has a big impact on the company’s profit. They need to pay more attention on the raw materials market. In order to occupy the market, they can not transfer the cost of raw materials to sale price fully. Therefore, they should monitor the cost of raw material and provide a subjective incentive to the purchaser. The levers of control (LOA) can not only improve the strategy implementation capacities in the four facets, but also manage the strategic risk which is often ignored. The successful strategy implementation requires controlling the multiple dimensions of strategy reflected in the 4Ps of strategy implementation (Brown, 1996): perspective, position, plans and goals, patterns of action. Methodology This study will employ qualitative research methods. Qualitative research is the positivist tradition, which draws upon large numbers to represent the populations they wish to study (Mellon 1990). This method use statistics to explain certain facts and to predict probable actions under particular conditions. It is usual for any qualitative research to follow a detailed plan that was established prior to the study (Gliner et al. 2000). Furthermore, qualitative research distinguishes variables in order to be able to assess their interrelationship through different forms of statistical analysis (Bertaux and Thompson 1997). This research will be a qualitative research. Qualitative research can be used to answer the HOW question and is supported by the explanatory approach. Explanatory approach is used to seek an explanation of a situation or problem, to explain pattern relating to phenomena. In this case, the researcher will explain HOW we used the levers of control to improve the strategy implementation. In this research, both case study and desk research strategies are used to answer the research question. In the desk research, through the review of relevant books and journals, the research can develop a general impression about the levers of control, including the concept, the driver to the levers of control, their general contribution to the 4Ps, the performance measurement tools used in the management control system and the interrelationship among them. The explanatory research is used to explain the casual relationship. During the strategy implementation, we met several problem, the employees do not devote themselves to the right things, the unclear boundaries and incentive system, the strategic uncertainty, and the performance measurement. The researcher will explain the contribution of the new control system to the strategy. This is an explanatory study because the researcher wants to explain how LOA framework can be used in the company. Though investigation into the current operating condition, especially in their activities in the various facet of strategy and strategic risk management, the researcher will explain how the management in these aspect be improved by the LOA. Type of Research This study will use the descriptive type of research. To illustrate the descriptive type of research, Creswell (1994) will guide the researcher when he stated: Descriptive method of research is to gather information about the present existing condition. The purpose of employing this method is to describe the nature of a situation, as it exists at the time of the study and to explore the cause/s of particular phenomena. The researcher opted to use this kind of research considering the desire of the researcher to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study. Research Strategy For this research design, the researcher will gather data, collate published studies from different local and foreign universities and articles from social science journals; and make a content analysis of the collected documentary and verbal material. Afterwards, the researcher will summarize all the information, make a conclusion based on the null hypotheses posited and provide insightful recommendations on the effectiveness of the self-organizing behaviour of the organizations. Instrument of the Research: Questionnaire The researcher will utilize a descriptive approach in gathering information on the need to provide an interactive medium that will suit the changing needs and demands of end users. The primary source of data will come from a researcher-made survey questionnaire, which will be given to the respondents. The respondents of this study will be randomly selected managers of the selected company. The secondary sources of data will come from published articles from social science journals, theses and related studies on self-organization, both in a local and in a global perspective. First, a self-administered questionnaire containing 18 to 20 questions and shall be filled out by the respondents. Another set of questionnaires will be prepared for the interview of experts in strategy implementation. Ideally, the respondents will grade each statement in the survey-questionnaire using a Likert scale, with a five-response scale wherein respondents will be given five response choices. The equivalent weights for the answers will be: Range Interpretation 4.50 – 5.00 Strongly Agree 3.50 – 4.00 Agree 2.50 – 3.49 Uncertain 1.50 – 2.49 Disagree 0.00 – 1.49 Strongly Disagree The researcher opted to use the questionnaire as a tool since it is easy to construct having the rules and principles of construction are easy to follow. Moreover, copies of the questionnaire could reach a considerable number of respondents either by mail or by personal distribution. Generally, responses to a questionnaire are objectified and standardized and these make tabulation easy. But more importantly, the respondents’ replies are of their own free will because there is no interviewer to influence them. This is one way to avoid biases, particularly the interviewers’ bias. Secondary Data The secondary sources of data will come from published articles from social science journals, theses and related studies on strategy implementation and lever control. Acquiring secondary data are more convenient to use because they are already condensed and organized. Moreover, analysis and interpretation are done more easily. Primary Data The primary source of data will come from the data acquired from researcher-made questionnaire as well as interviews conducted by the researcher. The primary data frequently gives the detailed definitions of terms and statistical units used in the survey. These are usually broken down into finer classifications. Administration of the Instrument The researcher will exclude the five respondents who will be initially used for the validation of the instrument. The researcher will also tally, score, and tabulate all the responses in the provided interview questions. Moreover, the interview shall be using a structured interview. It shall consist of a list of specific questions and the interviewer will not deviate from the list or inject any extra remarks into the interview process. The interviewer may encourage the interviewee to clarify vague statements or to further elaborate on brief comments. Otherwise, the interviewer attempts to be objective and tries not to influence the interviewer’s statements. The interviewer will not share his or her own beliefs and opinions. The structured interview is mostly a “question and answer” session. Validation of the Instrument The researcher will be using the Likert scale for its survey questionnaire. For validation purposes, the researcher will initially submit a sample of the set of survey questionnaires and after approval; the survey will be conducted to five respondents. After the questions were answered, the researcher will ask the respondents for any suggestions or any necessary corrections to ensure further improvement and validity of the instrument. The researcher will again examine the content of the interview questions to find out the reliability of the instrument. The researchers will exclude irrelevant questions and will change words that would be deemed difficult by the respondents, to much simpler terms. Bibliography Atkinson, R. D. and Court, R. H. 1998. The new economy index: Understanding Americas economic transformation. Progressive Policy Institute, Washington DC. www.neweconomyindex.org Bapna, R., Does, P., and Gupta, A. 2000. A theoretical and empirical investigation of multiitem on-line auctions. Information Technology and Mangement,1, 1–23. Bertaux, Daniel and Paul Thompson. 1997. Pathways to Social Class: A Qualitative Approach to Social Mobility. Oxford: Oxford University. Brown, M. G. 1996. Keeping Score: Using the Right Metrics to Drive World-Class Performance. New York: Quality Recourses. Creswell, J.W. Research Design: Qualitative and Qualitative Approaches. 1994. Thousand Oaks, California: Sage. Davis, S. M. and Meyer, C. 1998. Blur: The Speed of Change in the Connected Economy. Oxford: Capstone Publishing Ltd. Deming, W. E. 1986. Out of the Crisis. Boston, MA: MIT. Eccles, R. G 1991. The performance measurement manifesto. Harvard Business Review, January-February, 131–7 European Foundation of Quality Management 1993. Total Quality Management: The European Model for Self-appraisal. Brussels: EFQM Gliner, Jeffrey A., David I. Macphee, David Macphee, and George A. Morgan. 2000. Research Methods in Applied Settings: An Integrated Approach to Design and Analysis. Mahwah, NJ: Lawrence Erlbaum Associates. Mellon, Constance Ann. 1990. Naturalistic Inquiry for Library Science: Methods and Applications for Research, Evaluation, and Teaching. New York: Greenwood Press. Read More