STRATEGY EVALUATION, ANALYSIS AND CONTROL

Strategy Review
Strategy become obsolete

Strategy Evaluation
It alerts the management to
potential or actual problems in a
timely fashion.
Erroneous strategic decisions can
have severe negative impact on
organizations
3 Basic Activities

1. Examining the underlying bases of

firms’ strategy
2. Comparing to expected from actual
results
3. Corrective action
4 Criteria in Evaluating Strategy

Consistency
 Strategy should not present inconsistent goals and
policies
Consonance
 Need for strategists to examine sets of trends

Feasibility
 Neither overtax resources or create unsolvable sub-
problems
Advantage
 Creation or maintenance of competitive advantage
Difficulty in Strategy Evaluation

 A dramatic increase in the environment’s complexity

 Difficulty in predicting the future with accuracy

 Increasing number of variables

 Rapid rate of obsolescence of even the best plans

 Increase in the number of both domestic and

international events affecting organization
Process of Strategy Evaluation
 Initiate managerial questioning

 Trigger review of objectives and values

 Stimulates creativity in generating

alternatives
Review of Effectiveness of Strategy
 competitors reaction to strategy
 competitor’s change in strategy
 competitor’s change strengths and weaknesses
 Reasons for competitor’s strategic change
 Reasons for competitor’s successful
strategy
 competitor’s with present market positions and profitability
 Potential for competitor retaliation
 Potential for cooperation with competitors
External opportunities and threats; and internal
strengths and weaknesses

 Are our internal strengths still strengths?

 Have we added internal strengths? If so, what are
they?
 Are our internal weaknesses still weaknesses?
 Do we have now other internal weaknesses? If so,
what are they?
 Are our external opportunities still opportunities?
 Are there now other external opportunities? If so,
what are they?
 Are our external threats still threats?
 Are there now other external threats?
 Are we vulnerable to hostile takeover?
 EVALUATION FRAMEWORK
Review Underlying Bases

Differences? →Yes
↓
No

Measure firm performance Take corrective actions

↓
Differences? →Yes

No
↓
Continue present course
Quantitative Criteria for Strategy Evaluation

Key Financial Ratios

 Return of Investment
 Return of Equity
 Profit Margin
 Market Share
 Debt to equity
 Earnings per share
 Sales per growth
 Asset growth
Qualitative Evaluation 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
Basic Requirements for effective strategy

 Economical

 Meaningful

 Generate useful information

 Timely information

 Provide a true picture of what is happening

Contingency Planning

alternative plans that can be put into

effect if certain key events do not
occur as expected.
Six Steps of an Effective Contingency Planning

1. Identify both beneficial and unfavorable events

2. Specify trigger points

3. Assess the impact of each contingent event

4. Develop contingency plans

5. Assess the counter impact of each contingency plans

6. Determine warning signals for key contingent event

Auditing

Financial audit is used to determine correspondence

between assertion based on strategic plans established
criteria.

 Independent auditors

 Government Auditors

 Internal Auditors
Thank you! Have a GREAT day! =)