M5 Part B Strategy, Management control & Performance
Management
Tuesday, 7 April, 2026 5:34 PM
Intro
- Role of strategy in performance management
- How performance management can be seen as important element in management control
- Limitation of traditional accounting performance measure
- Diff models of performance management , including:
1. Business models canvas
2. Balanced scorecard
3. Role of strategy mapping
4. Role of info system in performance management
Performance management & control - their role in strategy
Strategy
- Def: pattern in stream of decision
- Separated intended from realised strategy
- Argue that deliberate strategies provided only partial explanation as some intended strategies were unable to be realised while
other strategies emerged over time
- Common description of intended / deliberate strategy (planned strategy) formulation is to begin with establishing goals & obj
- This is followed by internal appraisal of strengths & weaknesses & external appraisal of opportunities & threats (SWOT analysis)
- Lead to choice from various strategies option of decision
- Exp. Diversification
- Formulation of competitive strategy
- Strategy mist be implemented after it is formulated & that’s why performance management is important
- Ansoff (1988) established hierarchy of objective that were centred on performance measures eg. ROI
- Variation in strategy should be matched with variation in process & system & in structure for org to implement strategies
successfully
- These variation in process & system include variation in performance management
Porter's five forces model
- Analyses industry's specific env:
1. Threat of new entrant to mkt
2. Threat of substitutes
3. Bargaining power of customer
4. Bargaining power of supplier
5. Rivalry (competition) within industry
Porter identify 3 generic strategies for competitive adv:
1. Cost leadership
2. Differentiation
3. Focus
- All strategies should contain goal & org need to introduce system of performance management comprising process for:
1. Measuring
2. Monitoring
3. Reporting
4. Improving performance to ensure goals & strategies r achieved
- Diff strategies require diff approaches to performance management
- Exp.
SMA Page 1
, - Exp.
1. Org face substantial - Measure mkt share
industry competition - Exp. Motor vehicles sales
- Retail supermarket
industries
2. Org face substantial - Measure customer
bargaining power by profitability
customer - Exp. Clothing manufacturer
selling to dept stores eg.
Myer & David Jones in Aus
- Similarly,
1. If org adopt cost leadership - Performance measure that focus
strategy on efficiencies in purchasing &
production to achieve:
1. cost reduction
2. competitive pricing
- Exp. Manufacture of mobile
phones
2. If adopt differentiation / - Performance measures related to:
focus strategy 1. Innovation
2. Product features & benefits
3. Advertising effectiveness
4. Brand reputation
- Particular performance measured adopted by org depend on:
1. Strategy
2. Objective
- This follow from contingency theory
- Contingency theory: org will select appropriate performance measures contingent on factors, including:
1. Its strategy
2. Competitive position
3. Tech
4. Size
- These performance measures will then be used to monitor how well org achieve strategy
Porter's value chain
- Tool to help create & sustain competitive adv through recognising need to add value in each of org's primary activities
- Porter argue that customer r prepared to pay for value created but org need to keep cost of generating this value < premium
customer r willing to pay
- This is margin in value chain
- Def: diff between cost of providing primary & support activities & revenue gained from customer
- Org's value chain is likely to influence performance measure
Exp 5.11 performance measures & value chain - retail store
Value chain & Exp. Of performance measures
1. Primary activities:
i) Inbound logistics : on time deliveries from suppliers
ii) Operation : out of stock product on store shelves
iii) Outbound logistics : queuing time for customer at checkouts
iv) Mkt & sales: store recognition (survey)
v) Service: customer complaints
2. Support activities & Exp. Of performance measures
i) Procurement: days' payables outstanding
SMA Page 2
, i) Procurement: days' payables outstanding
ii) Tech development: computer downtime
iii) HR management : staff turnover
iv) Fin infrastructure: sales per square metre/ floor space
- These performance measures might be developed by identifying ley value-adding activities for retail stores on assumption that
sales revenue & margin r affected by each of these aspects of performance
- Each org will develop performance measures it deem appropriate to achieve its strategic objective
Question 5.6
Solution
SMA Page 3
, Strategy & decision making
Strategy
- Concerned with achieving organisational objective
- Objective r achieved by allocating org resources eg. Property, equip, ppl & finance to activity that r:
1. effective (eg. That generate revenue)
2. cost efficient (cost of activity is lower than revenue generated)
Decision making
- Concerned with making choices from alternative courses of action
- Require understanding of:
1. desired objective
2. Knowledge of alternatives
3. Ability to estimate likely result of each alternative
- Often there will be conflicting objective
- Exp. LT & ST fin objective
- In ST, profit & cash flow must satisfy investor, but not at expense of long-term sustainable profit & CF
Non-financial objective
- Exp. Maintain env & social values
- When non-fin objective is added eg.
1. Mkt share objective /
2. need for innovation, resulting multiple objective will impact on management decision
Alternative course of action
- Maybe imperfectly known as they will require info about:
1. Customer
2. Mkt
3. Suppliers that maybe unknown
- Result of those alternatives r based on predictive model (assumed cause-and-effect relationship) that r also imperfect
Management control
- Element of strategy implementation
- Most common def relate to:
1. Achieving org's strategic goals
2. Influencing behaviour during environmental change
- Focus on obj set during org's strategic planning & budgeting cycle
- But, mkt condition change between these planning & budget cycles as:
1. competitor's strategy & eco condition alter
SMA Page 4
Management
Tuesday, 7 April, 2026 5:34 PM
Intro
- Role of strategy in performance management
- How performance management can be seen as important element in management control
- Limitation of traditional accounting performance measure
- Diff models of performance management , including:
1. Business models canvas
2. Balanced scorecard
3. Role of strategy mapping
4. Role of info system in performance management
Performance management & control - their role in strategy
Strategy
- Def: pattern in stream of decision
- Separated intended from realised strategy
- Argue that deliberate strategies provided only partial explanation as some intended strategies were unable to be realised while
other strategies emerged over time
- Common description of intended / deliberate strategy (planned strategy) formulation is to begin with establishing goals & obj
- This is followed by internal appraisal of strengths & weaknesses & external appraisal of opportunities & threats (SWOT analysis)
- Lead to choice from various strategies option of decision
- Exp. Diversification
- Formulation of competitive strategy
- Strategy mist be implemented after it is formulated & that’s why performance management is important
- Ansoff (1988) established hierarchy of objective that were centred on performance measures eg. ROI
- Variation in strategy should be matched with variation in process & system & in structure for org to implement strategies
successfully
- These variation in process & system include variation in performance management
Porter's five forces model
- Analyses industry's specific env:
1. Threat of new entrant to mkt
2. Threat of substitutes
3. Bargaining power of customer
4. Bargaining power of supplier
5. Rivalry (competition) within industry
Porter identify 3 generic strategies for competitive adv:
1. Cost leadership
2. Differentiation
3. Focus
- All strategies should contain goal & org need to introduce system of performance management comprising process for:
1. Measuring
2. Monitoring
3. Reporting
4. Improving performance to ensure goals & strategies r achieved
- Diff strategies require diff approaches to performance management
- Exp.
SMA Page 1
, - Exp.
1. Org face substantial - Measure mkt share
industry competition - Exp. Motor vehicles sales
- Retail supermarket
industries
2. Org face substantial - Measure customer
bargaining power by profitability
customer - Exp. Clothing manufacturer
selling to dept stores eg.
Myer & David Jones in Aus
- Similarly,
1. If org adopt cost leadership - Performance measure that focus
strategy on efficiencies in purchasing &
production to achieve:
1. cost reduction
2. competitive pricing
- Exp. Manufacture of mobile
phones
2. If adopt differentiation / - Performance measures related to:
focus strategy 1. Innovation
2. Product features & benefits
3. Advertising effectiveness
4. Brand reputation
- Particular performance measured adopted by org depend on:
1. Strategy
2. Objective
- This follow from contingency theory
- Contingency theory: org will select appropriate performance measures contingent on factors, including:
1. Its strategy
2. Competitive position
3. Tech
4. Size
- These performance measures will then be used to monitor how well org achieve strategy
Porter's value chain
- Tool to help create & sustain competitive adv through recognising need to add value in each of org's primary activities
- Porter argue that customer r prepared to pay for value created but org need to keep cost of generating this value < premium
customer r willing to pay
- This is margin in value chain
- Def: diff between cost of providing primary & support activities & revenue gained from customer
- Org's value chain is likely to influence performance measure
Exp 5.11 performance measures & value chain - retail store
Value chain & Exp. Of performance measures
1. Primary activities:
i) Inbound logistics : on time deliveries from suppliers
ii) Operation : out of stock product on store shelves
iii) Outbound logistics : queuing time for customer at checkouts
iv) Mkt & sales: store recognition (survey)
v) Service: customer complaints
2. Support activities & Exp. Of performance measures
i) Procurement: days' payables outstanding
SMA Page 2
, i) Procurement: days' payables outstanding
ii) Tech development: computer downtime
iii) HR management : staff turnover
iv) Fin infrastructure: sales per square metre/ floor space
- These performance measures might be developed by identifying ley value-adding activities for retail stores on assumption that
sales revenue & margin r affected by each of these aspects of performance
- Each org will develop performance measures it deem appropriate to achieve its strategic objective
Question 5.6
Solution
SMA Page 3
, Strategy & decision making
Strategy
- Concerned with achieving organisational objective
- Objective r achieved by allocating org resources eg. Property, equip, ppl & finance to activity that r:
1. effective (eg. That generate revenue)
2. cost efficient (cost of activity is lower than revenue generated)
Decision making
- Concerned with making choices from alternative courses of action
- Require understanding of:
1. desired objective
2. Knowledge of alternatives
3. Ability to estimate likely result of each alternative
- Often there will be conflicting objective
- Exp. LT & ST fin objective
- In ST, profit & cash flow must satisfy investor, but not at expense of long-term sustainable profit & CF
Non-financial objective
- Exp. Maintain env & social values
- When non-fin objective is added eg.
1. Mkt share objective /
2. need for innovation, resulting multiple objective will impact on management decision
Alternative course of action
- Maybe imperfectly known as they will require info about:
1. Customer
2. Mkt
3. Suppliers that maybe unknown
- Result of those alternatives r based on predictive model (assumed cause-and-effect relationship) that r also imperfect
Management control
- Element of strategy implementation
- Most common def relate to:
1. Achieving org's strategic goals
2. Influencing behaviour during environmental change
- Focus on obj set during org's strategic planning & budgeting cycle
- But, mkt condition change between these planning & budget cycles as:
1. competitor's strategy & eco condition alter
SMA Page 4
