Chapter 9

Strategy Review, Evaluation, and Control

Strategic Management:
Concepts & Cases
13th Edition
Fred David

Copyright 2011 Pearson

Ch 9 -1

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Ch 9 -2

Strategy Review, Evaluation,

and Control

The best formulated and best implemented strategies

become obsolete as a firms external and internal
environments change. Therefore, it is essential for
strategists to systematically review, evaluate, and control
the execution of strategies.

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Ch 9 -3

Strategy Review, Evaluation, and

Control
Strategy Evaluation is vital to an organizations well
being. Timely evaluations can alert management to
potential or actual problems before a situation
becomes critical.
Strategy Evaluation includes three basic activities:
(1) Examining the underlying bases of a firms
strategy.
(2) Comparing expected results to actual results.
(3) Taking corrective actions to ensure that
performance conforms to plans.
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Ch 9 -4

Strategy Review, Evaluation, and

Control
Strategy Evaluation

Adequate and timely feedback is the

cornerstone of effective Strategy Evaluation.
Strategy Evaluation is important because
organizations face dynamic environments in
which key external and internal factors can
change quickly and dramatically.
Strategy Evaluation is essential to ensure that
the stated objectives of an organization are
being achieved.
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Ch 9 -5

Strategy Review, Evaluation,

and Control
Consistency

Rumelts
4 Criteria

Consonance
Feasibility
Advantage
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Ch 9 -6

Strategy Review, Evaluation,

and Control

Consistency

Strategy should not present inconsistent

goals and policies

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Ch 9 -7

Strategy Review, Evaluation,

and Control

Consonance

Need for strategists to examine sets of

trends, as well as individual trends

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Ch 9 -8

Strategy Review, Evaluation,

and Control

Feasibility

Neither overtax resources nor create

unsolvable subproblems

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Ch 9 -9

Strategy Review, Evaluation,

and Control

Advantage

Creation or maintenance of competitive

advantage

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Ch 9 -10

Strategy Review, Evaluation,

and Control
Strategy Evaluation Should

Initiate managerial questioning of expectations and

assumptions
Trigger a review of objectives & values
Stimulate creativity in generating alternative strategies
and formulating criteria for evaluation
Be performed on a continuing basis, rather than at the
end of specified periods of time or just after problems
occur.
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Ch 9 -11

Strategy Review, Evaluation,

and Control
Review of Underlying Bases of Strategy

Develop revised IFE Matrix

Develop revised EFE Matrix

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Ch 9 -12

Strategy Review, Evaluation,

and Control
Monitor Strengths & Weaknesses;
Opportunities & Threats

Are our strengths still strengths?

Has our organization added additional strengths?
Are our weaknesses still weaknesses?
Has our organization developed other
weaknesses?

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Ch 9 -13

Strategy Review, Evaluation,

and Control
Monitor Strengths & Weaknesses;
Opportunities & Threats

Are our opportunities still opportunities?

Have other opportunities developed?
Are our threats still threats?
Have other threats emerged?

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Ch 9 -14

Strategy Evaluation Framework

Table 9-3 summarizes strategy evaluation

activities in terms of key questions that should
be addressed, alternative answers to those
questions, and appropriate actions for managers
to take. Note that corrective actions are needed
except when (1) external and internal factors
have not changed significantly and (2) the firm is
making satisfactory progress toward achieving
its objectives.
Relationships among strategy evaluation
activities are illustrated in Figure 9-2.
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Ch 9 -15

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Ch 9 -16

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Ch 9 -17

Strategy Review, Evaluation,

and Control
Measuring Organizational Performance

Compare expected to actual results

Investigate deviations from plan
Evaluate individual performance
Examine progress toward stated objectives

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Ch 9 -18

Strategy Review, Evaluation,

and Control
Quantitative Criteria for Strategy Evaluation
Strategists use financial ratios to:

Compare a firms performance over different time

periods
Compare a firms performance to competitors
performance
Compare a firms performance to industry averages

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Ch 9 -19

Strategy Review, Evaluation, and Control

Some key financial ratios that are useful for evaluating strategies
are:

Return on
investment (ROI)
Return on equity
(ROE)
Profit margin
Market share

Debt to equity
Earnings per share
(EPS)
Sales growth
Asset growth

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Ch 9 -20

Taking Corrective Action

Taking corrective action is the final strategy

evaluation activity. It requires making changes to
competitively reposition a firm for the future.
Examples of changes that may be needed are
altering an organizations structure, replacing one or
more key employees, selling a division, devising
new policies, issuing stock to raise capital,
allocating resources differently, or revising the firms
mission.
Taking corrective action is necessary to keep an
organization on track toward achieving its
objectives.

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Ch 9 -21

Strategy Review, Evaluation, and

Control
The Balanced Scorecard is a strategy evaluation
tool. It uses both quantitative and qualitative
measures to evaluate strategies.
A Balanced Scorecard analysis requires firms to
answer these questions:
1. How well is the firm continually improving and
creating value along measures such as innovation,
technological leadership, product quality,
operational process efficiencies, etc.?
2. How well is the firm sustaining or improving upon
its core competencies and competitive advantages?
3. How satisfied are the firms customers?
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Ch 9 -22

The Balanced Scorecard

An example of a Balanced Scorecard

appears in Table 9-6. Note that in this
example the firm examines six key issues in
evaluating its strategies: (1) customers, (2)
managers/employees, (3)
operations/processes, (4) community/social
responsibility, (5) business ethics/natural
environment, and (6) financial.
The basic form of a Balanced Scorecard may
differ for different organizations.
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Ch 9 -23

Table 9-6

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Ch 9 -24