Hans B. Thorelli, Robert L. Graves and Lloyd T. Howells, the initial developers of INTOP, put strong emphasis on the “ubiquity of entrepreneurial opportunities and decision situations” that INTOP participants have to cope with. Against this complex background, this paper aims at showing how strategic and operative controlling instruments can be used to structure information and thus to provide support in both strategic and operative decision situations.
The underlying understanding of controlling in this paper is based on Robert J. Mockler’s concept of management control as “a systematic effort by business management to compare performance to predetermined standards, plans or objectives (…)”. According to Mockler, controlling begins with a firm’s plans and expectations, which shape its objectives and standards. These objectives and standards are considered as preconditions for performance measurement.
Given its aim, this paper is split into two parts. Chapter two deals with the strategic dimension of controlling. In 2.1, the structure of the radio industry is analysed using Porter’s five forces. In 2.2, the results of this analysis are used to discuss an INTOP company’s strategic alternatives, following the three generic strategies developed by Porter. 2.3 includes an exemplary operationalization of the strategy of cost leadership using Kaplan and Norton’s Balanced Scorecard. In chapter three, controlling is seen from its operative perspective. In 3.1, it is shown how a multiple-stage margin accounting system can be used to improve decisions concerning product policy. In 3.2, a break-even analysis is used to determine the right timing for the implementation of a regional sales organisation.
In order to provide an in-depth analysis of a specific industry, this paper solely deals with the INTOP radio industry. However, the instruments applied can also be used by firms that are engaged in the vacuum cleaner industry. Since more than one strategy can lay the foundations for success in INTOP, this paper shall not dictate one particular strategy that automatically leads to success. Instead, it provides an overview of alternative strategic approaches each of which can make, if implemented appropriately, INTOP participants succeed. The selection of instruments applied in this paper is not exhaustive. The instruments that are presented were selected because they can be used to handle problems that are of high importance in the specific context of INTOP.
Table of Contents
1. Introduction
2. Application of strategic controlling instruments in the radio industry
2.1 Structural analysis of the radio industry using Porter’s Five Forces
2.2 Discussion of possible strategies using Porter’s generic strategies
2.3 Operationalization of the strategy of cost leadership using Kaplan and Norton’s Balanced Scorecard
3. Application of operative controlling instruments in the radio industry
3.1 Steering of the product policy using a multiple-stage margin accounting system
3.2 Planning of a regional sales organisation using a break-even analysis
4. Conclusion
Appendix I: Calculation of the experience curve effects in subchapter 3.1
Objectives and Topics
This seminar paper explores how both strategic and operative controlling instruments can be utilized to structure information and support decision-making processes within the INTOP business game environment. The primary research aim is to demonstrate the practical application of management control frameworks to improve a firm's performance and strategic alignment.
- Strategic industry analysis using Porter’s Five Forces.
- Application of Porter’s generic strategies to radio production.
- Operationalizing cost leadership via the Balanced Scorecard.
- Optimizing product policy with a multiple-stage margin accounting system.
- Decision-making for sales organization expansion using break-even analysis.
Excerpt from the Book
2.1 Structural analysis of the radio industry using Porter’s Five Forces
Before a strategy can be formulated, the basic characteristics of a firm’s target industry have to be identified as they determine the framework in which a strategy can be developed. As for the INTOP radio industry, the target industry’s basic characteristics correspond to the rules and mechanisms, either predetermined or arisen in the course of the game, that hold true for this industry. INTOP participants have to identify these rules and mechanisms and find ways to take advantage of them. Michael E. Porter’s structural analysis is an instrument that can help them fulfil this task.
Porter identifies five competitive forces that firms in any given industry are exposed to: the threat of new entrants, bargaining power of buyers, the threat of substitute products, bargaining power of suppliers and rivalry among existing firms. These five forces jointly determine the intensity of competition in an industry. The strength of each force depends on an industry’s basic structural characteristics. The threat of new entrants is low if a potential entrant can expect retaliation from established firms and/or if entry barriers are high. An important entry barrier are cost advantages, for example through economies of scale or experience. If economies of scale can be realised and experience kept proprietary, a firm can build up entry barriers. Bargaining power of buyers can pose a threat if a firm cannot differentiate its products from those of competitors and/or if there are individual buyer groups who combine a huge sales volume and/or pose the threat of backward integration.
Summary of Chapters
1. Introduction: This chapter defines the scope of the paper, outlines the controlling concepts of Robert J. Mockler, and establishes the research focus on the INTOP radio industry.
2. Application of strategic controlling instruments in the radio industry: This chapter analyzes the radio industry using strategic frameworks, specifically discussing industry structure, generic strategy alternatives, and the operationalization of cost leadership through the Balanced Scorecard.
3. Application of operative controlling instruments in the radio industry: This chapter focuses on tactical decision-making, demonstrating the use of a multiple-stage margin accounting system for product policy and break-even analysis for regional sales organization planning.
4. Conclusion: This chapter summarizes the importance of using integrated controlling instruments and suggests future research directions, such as the organizational dimension of controlling and the inclusion of opportunity costs in calculation models.
Keywords
INTOP, Strategic Controlling, Operative Controlling, Porter’s Five Forces, Cost Leadership, Balanced Scorecard, Margin Accounting, Break-even Analysis, Decision-making, Radio Industry, Experience Curve, Performance Measurement, Competitive Strategy, Management Control, Sales Organization
Frequently Asked Questions
What is the core purpose of this paper?
The paper aims to show how strategic and operative controlling instruments help INTOP participants structure complex business information to support better decision-making.
What are the primary thematic areas covered?
The core themes include strategic industry analysis, generic business strategies, performance measurement via the Balanced Scorecard, and operative tools like margin accounting and break-even analysis.
What is the main objective or research question?
The objective is to demonstrate how participants can move from intuitive reasoning to a structured, data-driven analysis using specific management controlling instruments.
Which scientific methods are employed?
The paper utilizes descriptive and analytical methods, including Porter’s structural analysis, Kaplan and Norton’s Balanced Scorecard, multiple-stage margin accounting, and break-even calculations.
What topics are discussed in the main section?
The main section covers the analysis of the radio industry, the selection of strategic alternatives, and the practical application of calculations for product policy and sales organization optimization.
Which keywords characterize the work?
Key terms include INTOP, controlling instruments, Porter’s Five Forces, Balanced Scorecard, margin accounting, break-even analysis, and strategic cost leadership.
How is the Balanced Scorecard adapted for the game?
The original Balanced Scorecard is adjusted by eliminating the learning and growth perspective, as INTOP participants cannot actively manage internal employee learning processes.
Why is the break-even analysis critical for sales organizations?
It helps firms solve the trade-off between decreasing variable distribution costs and increasing fixed costs associated with opening regional sales offices, ensuring economically sound expansion.
- Quote paper
- Marvin Mertens (Author), 2013, Controlling instruments in the "INTOP" business game, Munich, GRIN Verlag, https://www.grin.com/document/273721
