Ch 11 -1 Copyright © 2011 Pearson Education. Strategic Management: Concepts and Cases Arab World...

Strategic Management: Concepts and CasesArab World EditionFred R. DavidAbbas J. AliAbdulrahman Y. Al-Aali

Chapter 11: Strategy Review, Evaluation and Control


Chapter Outline


• The Nature of Strategy Evaluation

• A Strategy-Evaluation Framework

• The Balanced Scorecard

• Published Sources of Strategy Evaluation Information

• Characteristics of an Effective Evaluation System

• Contingency Planning

• Auditing

• 21st Century Challenges in Strategic Management

• Vital to the organization’s well-being

• Alert management to potential/actual problems in a timely fashion

Strategy Review, Evaluation, and Control

Strategy Evaluation



Source: Adapted from Fred R. David, “How Companies Define Their Mission,” Long Range Planning 22, no. 3 (June 1988) 40.

1. Examine the underlying bases of a firm’s strategy.

2. Compare expected to actual results.

3. Taking corrective actions to ensure that performance

conforms to plans.


Three Basic Activities


• Strategy evaluation can be complex & sensitive undertaking

• Too much emphasis can be costly & counterproductive


Strategy Evaluation


Strategy Review, Evaluation, and ControlAppraisal of Strategic Performance

• In many organizations , strategy evaluation is simply an assessment of the following :-

• How well an organization has performed?

• Have assets increased?

• Is the profitability increased ?

• Is there any increasing in sales?

• Is there any increasing in productivity?

• Is there any increasing in profit margins?

• If the answers are “yes” thus the strategy may be correct ?



Coherence

Consistency

Feasibility

Advantage

Rumelt’s4 Criteria



Consistency:

Strategy should not present inconsistent goals & policies



Coherence:

Coherence refers to the need for strategies to examine sets of trends



Feasibility: The strategy must neither overtax resources or create unsolvable sub-problems



Advantage: A strategy must provide for the creation or maintenance of competitive advantage


Strategy Review, Evaluation, and ControlDifficulties in Strategy Evaluation

1. Increase in environment’s complexity

2. Increasing number of variables

3. Rate of obsolescence of plans

4. Domestic and global events

5. Decreasing time span for planning certainty


A Strategy-Evaluation FrameworkReview of Underlying Bases of Strategy

• Develop revised EFE Matrix

• Develop revised IFE Matrix


Review Effectiveness of Strategy

1. Competitors’ reaction to strategy

2. Competitors’ change in strategy

3. Competitors’ changes in strengths & weaknesses

5. Reasons for competitors’ strategic change

6. Reasons for competitors’ successful strategies

7. Competitors’ present market positions & profitability

8. Potential for competitor retaliation

9. Potential for cooperation with competitors


Monitor Strengths & Weaknesses; Opportunities & Threats

• Are strengths still strengths?

• Have we added additional strengths?

• Are weaknesses still weaknesses?

• Have we developed other weaknesses?

• Are opportunities still opportunities?

• Are there any other opportunities develop?

• Are threats still threats?

• Are there any other threats emerged?


• Compare expected to actual results

• Investigate deviations from plan

• Evaluate individual performance

• Progress toward stated objectives

Measuring Organizational Performance


Quantitative Criteria for Strategy Evaluation

• Financial Ratios

– Compare performance over different periods

– Compare performance to competitors’

– Compare performance to industry averages


Qualitative Evaluation of Strategy

• Internal consistency of strategy

• Consistency with environment

• Acceptable degree of risk

• Appropriate time frame

• Workability of the strategy


• Making changes to competitively reposition a firm for the future

• Keeping organization on track toward achieving stated objectives

Taking Corrective Actions


Balanced Scorecard


Evaluate strategies from 4 perspectives:

1. Financial performance

2. Customer knowledge

3. Internal business processes

4. Learning & growth

Characteristics of Strategy Evaluation

Strategy evaluation must meet several basic

requirements to be effective :

1. Economical

2. Meaningful

3. Generates useful information

4. Provides accurate picture of events

5. Action-oriented


Strategy-Evaluation Assessment Matrix

Continue courseYesNoNo

Corrective actionsNoYesNo

Corrective actionsYesYesNo

Corrective actionsNoNoYes

Corrective actionsYesNoYes

Corrective actionsNoYesYes

Corrective actionsYesYesYes

Corrective actionsNoNoNo

Result

Has the firm progressed

satisfactorily toward achieving

its stated objectives?

Have major changes

occurred in the firm’s external strategic position?

Have major changes

occurred in the firm’s internal strategic position?


computerized Evaluation

Computer networks and the internet help to coordinate SM activities and to ensure that decisions are based on good information

The checkmate strategic planning software is especially good in this regard (www.checkmateplan.com )

Using a combination of intuition and analysis is key to effective strategy evaluation and to successful S.M.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Ch 9-25

Auditing :-

• Auditing is defined by the American Accounting Association (AAA) as : A systematic process of objectively obtaining and evaluating evidence about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria .

• Two important types of auditing :-• Financial audits determine correspondence between

assertions based on strategic plan & established criteria• Environmental audits ensure sound and safe practices


Ch 11 -1 Copyright © 2011 Pearson Education. Strategic Management: Concepts and Cases Arab World...

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