Chapter 09

Fred R. DavidPrentice Hall

Ch 9-1

Chapter 9:Chapter 9:Strategy Review, Evaluation and Strategy Review, Evaluation and

ControlControl

Strategic Management:

Concepts and Cases. 9th edition

Fred R. David

PowerPoint Slides by

Anthony F. Chelte

Western New England College


Ch 9-2

Chapter OutlineChapter Outline

• The Nature of Strategy Evaluation

• A Strategy-Evaluation Framework

• Published Sources of Strategy-Evaluation Information


Ch 9-3


• Characteristics of an Effective Evaluation System

• Contingency Planning

• Auditing


Ch 9-4


• Using Computers to Evaluate Strategy

• Guidelines for Effective Strategic Management


Ch 9-5

Implementing StrategiesImplementing Strategies

Organizations are most vulnerable when they are at the peak of their success.

-- R.T. Lenz


Ch 9-6

Systematic Review, Evaluation & Control –Systematic Review, Evaluation & Control –

– Strategies become obsoleteStrategies become obsolete– Internal environments are dynamicInternal environments are dynamic– External environments are dynamicExternal environments are dynamic

Strategy Review, Evaluation & Strategy Review, Evaluation & ControlControl


Ch 9-7

• Strategy evaluation is vital to the organization’s well-being

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

• Erroneous strategic decisions can have severe negative impact on organizations

Strategy EvaluationStrategy Evaluation


Ch 9-8

3 Basic Activities –

1. Examining the underlying bases of a firms’ strategy

2. Comparing expected to actual results

3. Corrective actions to ensure performance conforms to plans



Ch 9-9

Strategy evaluation –Strategy evaluation –

– Complex and sensitive undertaking

– Overemphasis can be costly and counterproductive



Ch 9-10

In many organizations, evaluation is an In many organizations, evaluation is an appraisal of performance –appraisal of performance –

• Have assets increased?• Increase in profitability?• Increase in sales?• Increase in productivity?• Profit margins, ROI and EPS ratios increased?



Ch 9-11

Four Criteria (Richard Rummelt):

• Consistency• Consonance• Feasibility• Advantage



Ch 9-12

Consistency

– Strategy should not present inconsistent goals and policies.

• Conflict and interdepartmental bickering symptomatic of managerial disorder and strategic inconsistency

Rummelt’s CriteriaRummelt’s Criteria


Ch 9-13

Consonance

– Need for strategies to examine sets of trends

• Adaptive response to external environment• Trends are results of interactions among other

trends



Ch 9-14

Feasibility

– Neither overtax resources or create unsolvable subproblems

• Organizations must demonstrate the abilities, competencies, skills and talents to carry out a given strategy



Ch 9-15

Advantage

– Creation or maintenance of competitive advantage

• Superiority in resources, skills, or position



Ch 9-16

Difficulty in strategy evaluation –

1. Increase in environment’s complexity

2. Difficulty predicting future with accuracy

3. Increasing number of variables



Ch 9-17

Difficulty in strategy evaluation –

4. Rate of obsolescence of plans

5. Domestic and global events

6. Decreasing time span for planning certainty



Ch 9-18

Strategy evaluation should –

– Initiative managerial questioning– Trigger review of objectives and

values– Stimulate creativity in generating

alternatives

Process of Strategy EvaluationProcess of Strategy Evaluation


Ch 9-19

Review of underlying bases of strategy –

– Develop revised EFE Matrix

– Develop revised IFE Matrix

Reviewing Bases of StrategyReviewing Bases of Strategy


Ch 9-20

Review effectiveness of strategy –

1. Competitors’ reaction to strategy

2. Competitors’ change in strategy

3. Competitors’ changes in strengths and weaknesses

4. Reasons for competitors’ strategic change



Ch 9-21

Review effectiveness of strategy –

5. Reasons for competitors’ successful strategies

6. Competitors’ present market positions and profitability

7. Potential for competitor retaliation8. Potential for cooperation with competitors



Ch 9-22

Monitor Threats and Opportunities and Weaknesses and Strengths

• Are our internal strengths still strengths?• Have we added additional strengths?• Are our weaknesses still weaknesses?• Have we other internal weaknesses?



Ch 9-23

Monitor Threats and Opportunities and Weaknesses and Strengths

• Are opportunities still opportunities?• Other external opportunities?• Are threats still threats?• Are there other threats?• Are we vulnerable to a hostile takeover?



Ch 9-24

Evaluation FrameworkEvaluation FrameworkI. Review Underlying Bases

Continue present course

II. Measure Firm Performance

III.Take

Corrective Actions

Differences?

Differences?

Yes

NO

Yes

NO


Ch 9-25

• Comparing expected to actual results

• Investigating deviations from plan

• Evaluating individual performance

• Progress toward stated objectives

Measuring Organizational Measuring Organizational PerformancePerformance


Ch 9-26

Quantitative criteria for strategy evaluation –

– Financial Ratios:• Compare performance over different periods• Compare performance to competitors• Compare performance to industry averages



Ch 9-27

Key Financial Ratios –

– Return on investment– Return on equity– Profit margin– Market share



Ch 9-28

Key Financial Ratios –

– Debt to equity– Earnings per share– Sales growth– Asset growth



Ch 9-29

Qualitative evaluation of strategy -

– Internal consistency of strategy– Consistency of strategy with environment– Strategy appropriate in view of resources– Acceptable degree of risk– Appropriate time frame– Workability of the strategy



Ch 9-30

Basic requirements for effective strategy evaluation –

– Economical– Meaningful– Generate useful information– Timely information– Provide a true picture of what is happening

Characteristics of EvaluationCharacteristics of Evaluation


Ch 9-31

Strategy-Evaluation Assessment MatrixStrategy-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?


Ch 9-32

Premise of sound strategic management –

– Planning to deal with unfavorable and favorable events before they occur.

Contingency PlanningContingency Planning


Ch 9-33

Contingency Planning –

– Alternative plans that can be put into effect if certain key events do not occur as expected

Contingency PlanningContingency Planning


Ch 9-34

• Financial audits to determine correspondence between assertions based on strategic plans and established criteria

• Environmental audits to insure sound and safe practices

AuditingAuditing


Ch 9-35

Key TermsKey Terms

• Advantage• Auditing• Consistency• Consonance• Contingency Plans• Corporate Agility• Feasibility


Ch 9-36

Key TermsKey Terms

• Future Shock• Management by Wandering Around• Measuring Organizational Performance• Planning Process Audit (PPA)• Reviewing the Underlying Bases of an

Organization’s Strategy


Ch 9-37

Key TermsKey Terms

• Revised EFE Matrix• Revised IFE Matrix• Taking Corrective Actions

Chapter 09

Documents

Transcript of Chapter 09