Chapt9 Review and Control2

Chapter 9
Strategy Review, Evaluation, and Control
Strategic Management:
Concepts & Cases
12th Edition
Fred David
Copyright © 2009 Pearson Education, Inc. Ch 9-1

Publishing as Prentice Hall
Strategy Evaluation
“Organizations are most vulnerable when

they are at the peak of their success.”
– R. T. Lenz

Strategy Review, Evaluation,
and Control
– Strategies become obsolete

– Internal environments are dynamic
– External environments are dynamic

and Control
Strategy Evaluation
 Vital to the organization’s well-being

 Alert management to potential/actual problems
in a timely fashion
 Erroneous/mistaken strategic decisions can
have severe negative impact on organizations

and Control
Three Basic Activities
1. Examine the underlying bases of a firm’s

strategy.
2. Compare expected to actual results.
3. Identify corrective actions to ensure that
performance conforms to plans.

and Control
Strategy Evaluation
 Complex & sensitive undertaking
 Overemphasis can be costly &

counterproductive

and Control
Appraisal of Strategic Performance
 Have assets increased?

 Increase in profitability?
 Increase in sales?
 Increase in productivity?
 Profit margins, ROI, and EPS ratios
increased?

Strategy Review, Evaluation, and
Control: Evaluation Criteria
Consistency
Rumelt’s Consonance
4 Criteria
Feasibility
Advantage

Consistency
A strategy should not present inconsistent
goals and policies
• If managerial problems continue despite changes in
personnel and are issue based, then strategies may be
inconsistent.
• If success for one department means failure for another

department, then strategies may be inconsistent.
• If policy problems/issues continue to be brought to the

top for resolution, then strategies may be inconsistent.
Consonance
Strategists need to examine sets of trends as well
as individual trends in evaluating strategies.
• Strategy must represent an adaptive response to the
external environment and critical changes occurring
within it.
• Most trends are the result of interactions among other

trends.
• Difficult in matching key internal and external factors in

formulation of strategy.
Feasibility
Strategy must neither overtax available resources
nor create unsolvable subproblems.
• Can the strategy be attempted within the physical,

human and financial resources of the enterprise?
• Limitation on strategic choice imposed by individual and

organizational capabilities must be considered.
• Important to examine whether in the past the
organization has demonstrated the capabilities, abilities,
competencies, skills, and talents to carry out strategy.
and Control
Advantage
 Creation or maintenance of competitive

advantage

and Control
Difficulties in Strategy Evaluation
1. Increase in environment’s complexity

2. Difficulty predicting future with accuracy
3. Increasing number of variables

and Control
Difficulties in Strategy Evaluation
4. Rate of obsolescence of plans

5. Domestic and global events
6. Decreasing time span for planning certainty

and Control
Strategy Evaluation Should –
 Initiate managerial questioning

 Trigger review of objectives & values
 Stimulate creativity in generating
alternatives

and Control
Review of Underlying Bases of Strategy –
 Develop revised EFE Matrix
 Develop revised IFE Matrix

and Control
Review Effectiveness of Strategy –
1. Competitors’ reaction to strategy

2. Competitors’ change in strategy
3. Competitors’ changes in strengths &
weaknesses
4. Reasons for competitors’ strategic change

and Control
Review Effectiveness of Strategy –
5. Reasons for competitors’ successful

strategies
6. Competitors’ present market positions &
profitability
7. Potential for competitor retaliation
8. Potential for cooperation with competitors

and Control
Monitor Strengths & Weaknesses;
Opportunities & Threats
 Are strengths still strengths?

 Have we added additional strengths?
 Are weaknesses still weaknesses?
 Have we developed other weaknesses?

and Control
Monitor Strengths & Weaknesses;
Opportunities & Threats
 Are opportunities still opportunities?
 Other opportunities develop?
 Are threats still threats?
 Other threats emerged?
 Are we vulnerable to hostile takeover?

and Control
Measuring Organizational Performance
 Compare expected to actual results

 Investigate deviations from plan
 Evaluate individual performance
 Progress toward stated objectives

and Control
Quantitative Criteria for Strategy Evaluation
 Financial Ratios
 Compare performance over different periods
 Compare performance to competitors’
 Compare performance to industry averages

and Control
Key Financial Ratios
 Return on investment (ROI)

 Return on equity (ROE)
 Profit margin
 Market share

and Control
Qualitative Evaluation of Strategy
 Internal consistency of strategy

 Consistency with environment
 Appropriateness in view of resources

and Control
Qualitative Evaluation of Strategy
 Acceptable degree of risk

 Appropriate time frame
 Workability of the strategy

and Control
Balanced Scorecard
– Evaluate strategies from 4 perspectives:

1. Financial performance
2. Customer knowledge
3. Internal business processes
4. Learning & growth

and Control
Characteristics of Strategy Evaluation
 Economical
 Meaningful
 Generates useful information
 Timely information
 Provides accurate picture of events

Strategy-Evaluation Assessment Matrix
Have major Have major
changes changes
occurred in occurred in Has the firm
the firm’s the firm’s progressed
internal external satisfactorily toward
strategic strategic achieving its stated
position? position? objectives? Result
No No No Corrective actions
Yes Yes Yes Corrective actions
Yes Yes No Corrective actions
Yes No Yes Corrective actions
Yes No No Corrective actions
No Yes Yes Corrective actions
No Yes No Corrective actions
No No Yes Continue course

and Control
Contingency Planning
Alternative plans that can be put into effect if

certain key events do not occur as expected

and Control
21st Century Challenges in
Strategic Management
 Process is more an “art” than “science”

 Should strategies be visible or hidden from
stakeholders?
 Should process be more top-down or
bottom-up?

Review
 Why has strategy evaluation become so

important in business today?
 Answer: Strategy evaluation is critically important
today because internal and external factors often
change quickly and dramatically. Key factors need
to be monitored during strategy-evaluation
activities. For example, technology is shortening
the product life cycle in nearly all industries. The
low value of the dollar is opening up many foreign
markets to American exports and is fostering
foreign acquisition of U.S. assets and companies.

Review
 As owner of a local, independent supermarket,

explain how you would evaluate the firm’s
strategy.
 Answer: For small businesses such as a local
supermarket, strategy evaluation is less formal
than in large organizations. However, both
qualitative and quantitative criteria should be used
to evaluate the small supermarket’s strategies,
because large supermarket stores that offer one-
stop shopping for virtually everything are
proliferating across the country.

Review
 Under what conditions are corrective

actions not required in the strategy-
evaluation process?
 Answer: The only time corrective actions
would not be required in strategy evaluation
is when major changes have not occurred
in the firm’s internal or external strategic
position and the firm is progressing
satisfactorily towards achieving its stated
objectives.
Review
 Identify the types of organizations that

may need to evaluate strategy more
frequently than others. Justify your
choices.
 Answer: Organizations that compete in
more turbulent industries may need to
evaluate strategies more often than others.
Several examples of turbulent industries are
the computer industry, the communications
industry, and the aerospace industry.

Chapt9 Review and Control2

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Chapt9 Review and Control2

Încărcat de

Drepturi de autor:

Formate disponibile

Chapter 9

Strategy Review, Evaluation, and Control

Copyright © 2009 Pearson Education, Inc. Ch 9-1

“Organizations are most vulnerable when

Copyright © 2009 Pearson Education, Inc. Ch 9-2

– Strategies become obsolete

Copyright © 2009 Pearson Education, Inc. Ch 9-3

 Vital to the organization’s well-being

Copyright © 2009 Pearson Education, Inc. Ch 9-4

1. Examine the underlying bases of a firm’s

Copyright © 2009 Pearson Education, Inc. Ch 9-5

 Complex & sensitive undertaking

 Overemphasis can be costly &

Copyright © 2009 Pearson Education, Inc. Ch 9-6

 Have assets increased?

Copyright © 2009 Pearson Education, Inc. Ch 9-7

Copyright © 2009 Pearson Education, Inc. Ch 9-8

• If success for one department means failure for another

• If policy problems/issues continue to be brought to the

• Most trends are the result of interactions among other

• Difficult in matching key internal and external factors in

• Can the strategy be attempted within the physical,

• Limitation on strategic choice imposed by individual and

 Creation or maintenance of competitive

Copyright © 2009 Pearson Education, Inc. Ch 9-12

Difficulties in Strategy Evaluation

1. Increase in environment’s complexity

Copyright © 2009 Pearson Education, Inc. Ch 9-13

Difficulties in Strategy Evaluation

4. Rate of obsolescence of plans

Copyright © 2009 Pearson Education, Inc. Ch 9-14

Strategy Evaluation Should –

 Initiate managerial questioning

Copyright © 2009 Pearson Education, Inc. Ch 9-15

Review of Underlying Bases of Strategy –

 Develop revised EFE Matrix

 Develop revised IFE Matrix

Copyright © 2009 Pearson Education, Inc. Ch 9-16

Review Effectiveness of Strategy –

1. Competitors’ reaction to strategy

Copyright © 2009 Pearson Education, Inc. Ch 9-17

Review Effectiveness of Strategy –

5. Reasons for competitors’ successful

Copyright © 2009 Pearson Education, Inc. Ch 9-18

 Are strengths still strengths?

Copyright © 2009 Pearson Education, Inc. Ch 9-19

Copyright © 2009 Pearson Education, Inc. Ch 9-20

Measuring Organizational Performance

 Compare expected to actual results

Copyright © 2009 Pearson Education, Inc. Ch 9-23

Quantitative Criteria for Strategy Evaluation

Copyright © 2009 Pearson Education, Inc. Ch 9-24

Key Financial Ratios

 Return on investment (ROI)

Copyright © 2009 Pearson Education, Inc. Ch 9-25

Qualitative Evaluation of Strategy

 Internal consistency of strategy

Copyright © 2009 Pearson Education, Inc. Ch 9-26

Qualitative Evaluation of Strategy

 Acceptable degree of risk

Copyright © 2009 Pearson Education, Inc. Ch 9-27

– Evaluate strategies from 4 perspectives:

Copyright © 2009 Pearson Education, Inc. Ch 9-28