Management Control : Linking Strategy with Inter?Organisational Relationships
Abstract: The alignment of strategies and control systems is believed to affect the chances for firms to successfully achieve competitive edge. Contemporary business trends like globalization, vertical disintegration, the reduction in supplier bases, the focusing of operations and outsourcing of non-core activities, have caused companies to rely increasingly on relationships with other firms. These trends strengthen the awareness of the fact that a company’s success is also built upon the contribution from other players in the total supply network. It is recognised that management control systems play an important role in the management of interdependencies between organisations; yet, there has not been much research into strategy and control systems in interorganisational relationships. The relationship between strategy and control systems in purchasing as an interface towards interorganisational relationships has not received attention in the strategy-management control literature either. Moreover, discussions on inter-organisational control seem often to be divorced from the internal process in the companies concerned.In this thesis, an attempt is made to relate strategy with intra- and inter-organisational controls. The overall purpose is to describe and analyse the effects of strategy on those management control systems used within the purchasing function and to control relationships with suppliers, and further, to propose a framework for understanding how strategy impacts purchasing management control systems and the control of inter-organisational relationships. Two research questions are developed for this purpose, i.e. to examine 1) how a business unit strategy affects management control in purchasing, and 2) how a business unit strategy affects the pattern of management control for inter-organisational relationships. The ideas behind the strategy-structure paradigm are thus extended towards understanding the effects of strategy on the use of controls in inter-organisational relationships. The fieldwork is based on twenty nine interviews with employees at two manufacturing and ten supplier companies, and the data was collected during two periods of time, i.e. 2002-2003 and 2006-2007.This thesis began with the assumption that two companies pursue different business strategies which could be classified by using Porter’s (1980) typologies. It was expected that these different strategies would result in the different use of management control systems in purchasing and in controlling relationships with suppliers. The contribution of this thesis is twofold: firstly, it establishes the pattern of the alignment of business strategy, functional strategy, functional control systems and control of interorganisational relationships, and secondly, it suggests the possible directions towards the refinement of this pattern.
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