DavidFullPPT_ch9

Chapter 9Strategy Review, Evaluation, & Control

Strategic Management: Concepts & Cases10th EditionFred David

PowerPoint Slides byAnthony F. ChelteWestern New England College

Copyright 2005 Prentice Hall

Chapter Outline

The Nature of Strategy EvaluationA Strategy-Evaluation FrameworkThe Balanced Scorecard


Chapter Outline

Published Sources of StrategyEvaluation InformationCharacteristics of an Effective Evaluation SystemContingency Planning


Chapter Outline (contd)

Auditing21st Century Challenges in Strategic Management


Organizations are most vulnerable when they are at the peak of their success --R.T. LenzStrategy Review


-- Strategies become obsolete-- Internal environments are dynamic-- External environments are dynamicStrategy Review, Evaluation & Control


Vital to the organizations well-beingAlert management to potential/actual problems in a timely fashionErroneous strategic decisions can have severe negative impact on organizationsStrategy Evaluation, Review, & ControlStrategy Evaluation


Examine the underlying bases of a firms strategyCompare expected to actual resultsIdentify corrective actions to ensure that performance conforms to plansStrategy Evaluation, Review & Control3 Basic Activities


Complex & sensitive undertaking

Overemphasis can be costly & counterproductiveStrategy Evaluation, Review & ControlStrategy Evaluation


Strategy Evaluation, Review & ControlHave assets increasedIncrease in profitabilityIncrease in salesIncrease in productivityProfit margins, ROI, & EPS ratios increased

Appraisal of Strategic Performance


Strategy Evaluation, Review & Control

ConsonanceConsistencyFeasibilityAdvantageRummelts4 Criteria


Strategy Evaluation, Review & ControlStrategy should not present inconsistent goals & policiesConsistency


Strategy Evaluation, Review & ControlNeed for strategies to examine sets of trendsConsonance


Strategy Evaluation, Review & ControlNeither overtax resources or create unsolvable sub-problemsFeasibility


Strategy Evaluation, Review & ControlCreation or maintenance of competitive advantageAdvantage


Strategy Evaluation, Review & ControlIncrease in environments complexityDifficulty predicting future with accuracyIncreasing number of variablesDifficulties in Strategy Evaluation


Strategy Evaluation, Review & ControlRate of obsolescence of plansDomestic and global eventsDecreasing time span for planning certaintyDifficulties in Strategy Evaluation


Strategy Evaluation, Review & ControlInitiate managerial questioningTrigger review of objectives & valuesStimulate creativity in generating alternativesStrategy Evaluation Should --


Strategy Evaluation, Review & ControlDevelop revised EFE Matrix

Develop revised IFE MatrixReview of underlying bases of strategy --


Strategy Evaluation, Review & ControlCompetitors reaction to strategyCompetitors change in strategyCompetitors changes in strengths & weaknessesReasons for competitors strategic changeReview effectiveness of strategy --


Strategy Evaluation, Review & ControlReasons for competitors successful strategiesCompetitors present market positions & profitabilityPotential for competitor retaliationPotential for cooperation with competitorsReview effectiveness of strategy --


Strategy Evaluation, Review & ControlAre strengths still strengths?Have we added additional strengths?Are weaknesses still weaknesses?Have we developed other weaknesses?Monitor Strengths & Weaknesses; Opportunities & Threats


Strategy Evaluation, Review & ControlAre opportunities still opportunities?Other opportunities develop?Are threats still threatsOther threats emerged?Are we vulnerable to hostile takeover?Monitor Strengths & Weaknesses; Opportunities & Threats


Evaluation FrameworkContinue present courseDifferences?Differences?YesNOYesNO


Strategy Evaluation, Review & ControlCompare expected to actual resultsInvestigate deviations from planEvaluate individual performanceProgress toward stated objectivesMeasuring Organizational Performance


Strategy Evaluation, Review & ControlFinancial RatiosCompare performance over different periodsCompare performance to competitorsCompare performance to industry averagesQuantitative Criteria for Strategy Evaluation


Strategy Evaluation, Review & ControlReturn on investment (ROI)Return on equity (ROE)Profit marginMarket ShareKey Financial Ratios


Strategy Evaluation, Review & ControlDebt to equityEarnings per share (EPS)Sales growthAsset growthKey Financial Ratios


Strategy Evaluation, Review & ControlInternal consistency of strategyConsistency with environmentAppropriateness in view of resourcesQualitative Evaluation of Strategy


Strategy Evaluation, Review & ControlAcceptable degree of riskAppropriate time frameWorkability of the strategyQualitative Evaluation of Strategy


-- Evaluate strategies from 4 perspectives:1. Financial performance2. Customer knowledge3. Internal business processes4. Learning & growthStrategy Evaluation, Review & ControlBalanced Scorecard


Balanced Scorecard

Area of ObjectivesMeasure or TargetTime ExpectationPrimary ResponsibilityCustomers12Managers/Employees12Operations/Processes12Community/Social Responsibility12Business Ethics/Natural Environment12Financial12


Strategy Evaluation, Review & ControlEconomicalMeaningfulGenerates useful informationTimely informationProvides accurate picture of eventsCharacteristics of strategy evaluation


Strategy-Evaluation Assessment Matrix


Strategy Evaluation, Review & Control Alternative plans that can be put into effect if certain key events do not occur as expectedContingency Planning


Strategy Evaluation, Review & ControlFinancial audits determine correspondence between assertions based on strategic plan & established criteria

Environmental audits insure sound and safe practicesAuditing


Strategy Evaluation, Review & ControlProcess is more an art than scienceShould strategies be visible or hidden from stakeholdersShould process be more top-down or bottom up21st Century Challenges in Strategic Management


Key Terms & ConceptsFor Review (Chapter 9)AdvantageContingency PlansAuditingCorporate AgilityFeasibilityConsonanceBalanced Score CardConsistency


Key Terms & ConceptsFor Review (Chapter 9)Management by WanderingAroundRevised EFE MatrixMeasuring Organizational PerformanceRevised IFE MatrixTaking Corrective ActionReviewing UnderlyingBases of StrategyFuture Shock


DavidFullPPT_ch9

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