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Management Control - Papers Summary week 4
- Instelling
- Universiteit Van Amsterdam (UvA)
A detailed summary of all mandatory papers of week 4
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Management Control Papers summary week 4Campbell et al. 2015
This paper investigates the that business strategies can be tested and validated based on
statistical analysis of a firm’s internal performance measures.
Management control theories argue that performance measurement systems consisting of
financial and nonfinancial metrics linked to the firm’s unique strategy via the balance score
card (BSC) should facilitate learning through testing, validating, and revising the
hypothesized relationships that describe the strategy. Therefore, this paper investigated a
convenience store chain called Store24. For the client, the researchers answered the
following central question:
Can business strategies be tested and validated based on statistical analysis of a firm’s
internal performance measures?
In order to test this, the researcher prepared the following hypotheses;
1. Ceteris paribus, strategy inputs are positively related to financial performance.
2. Ceteris paribus, strategy inputs are positively related to strategy-specific customer
outcomes.
3. Ceteris paribus, strategy-specific customer outcomes are positively related to
financial performance.
4. Ceteris paribus, the marginal impact of increases in strategy inputs on strategy-
specific customer outcomes is positively related to the level of internal capabilities.
5. Ceteris paribus, the marginal impact of increases in strategy-specific customer
outcomes on financial performance is positively related to the level of internal
capabilities.
6. Ceteris paribus, internal capabilities are positively related to strategy inputs.
The results of this paper are as follows. The hypothesized link between internal
implementation of the action plans related to the new strategy and financial performance
does not exist. However, it is unclear whether this is because store-level inputs did not affect
customer’s experiences in the store or whether, despite this positive customer experience,
customers did not take actions that increased store profits.
The overall results of H2 & H3 show that H2 is supported and H3 is neglected. Specifically,
the relationship between the way Store24 operationalized the differentiation strategy (input
measure) and the way in which the strategy was viewed by customers (outcome measure) is
correlated. However, the outcomes measures of strategy implementation and financial
performance are negatively correlated. Together, these results imply that although the
strategy was well implemented, Store23 could not convert the positive customer experience
into profits, causing its strategy to fail.
For H4 & H5, the outcome measure negatively impacts profit in stores with low and average
skills. However, these negative impacts seem to be mitigated in stores with high crew skills
where there is a positive relationship between the outcome measure and profit. Overall, the
results suggest problems with the fit of the differentiation strategy with Store24’s.
employee capabilities. Crew skills determine the magnitude of the relationship between
strategy outcomes and financial performance, but the relationship is only greater than 0 for
high levels of crew skills.
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