Competitive forces and the levers of control framework in a manufacturing setting

Abstract

PurposeThe purpose of this article is to explore how the strategic change following a corporate takeover impacted the nature and extent of use of the firm's management control systems (MCS), in particular its performance measurement system (PMS).Design/methodology/approachThis paper uses Michael Porter's theory of competitive advantage and Robert Simons' levers of control framework to illustrate and interpret changes in the PMS within an Australian multinational subsidiary following its takeover by an overseas corporation. To provide empirical evidence on this issue, face‐to‐face interviews and archival data are used.FindingsThe findings reveal that the takeover resulted in changes in the firm's competitive forces (threat of potential entrants, bargaining power of buyers, threat of substitute products or services, bargaining power of suppliers, and rivalry among existing firms), and therefore the firm altered its strategy to change the rules of competition in its favor. Corresponding to the strategic change, the PMS was affected, with specific implications on Simons' four levers of control: interactive, diagnostic, beliefs, and boundary systems.Practical implicationsThe findings suggest that a corporate takeover is an important phase for any organization, as it involves a change in the competitive environment and strategy, and needs to be facilitated by a change in the MCS to create and sustain superior performance.Originality/valueThis case study demonstrates how interactive and beliefs systems work together with diagnostic and boundary systems in the context of change in an organization. Past research devoted to strategic change and MCS has not documented this phenomenon.