Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 9 -1 Chapter 9 Strategy Review, Evaluation, and Control Strategic Management: Concepts & Cases 13 th Edition Fred David
Dec 19, 2015
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 9 -1
Chapter 9Strategy Review, Evaluation, and Control
Strategic Management: Concepts & Cases
13th Edition
Fred David
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 9 -3
The best formulated and best implemented strategies become obsolete as a firm’s external and internal environments change. Therefore, it is essential for strategists to systematically review, evaluate, and control the execution of strategies.
Strategy Review, Evaluation, and Control
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Ch 9 -4
Strategy Review, Evaluation, and Control Strategy Evaluation is vital to an organization’s 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 firm’s 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 -5
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 -6
Strategy Review, Evaluation, and Control
Consonance
Consistency
Feasibility
Advantage
Rumelt’s4 Criteria
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Ch 9 -7
Strategy Review, Evaluation, and Control
Strategy should not present inconsistent goals and policies
Consistency
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Ch 9 -8
Strategy Review, Evaluation, and Control
Need for strategists to examine sets of trends, as well as individual trends
Consonance
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Ch 9 -9
Strategy Review, Evaluation, and Control
Neither overtax resources nor create unsolvable subproblems
Feasibility
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Ch 9 -10
Strategy Review, Evaluation, and Control
Creation or maintenance of competitive advantage
Advantage
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Ch 9 -11
Strategy Review, Evaluation, and Control
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.
Strategy Evaluation Should –
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Ch 9 -12
Strategy Review, Evaluation, and Control
Develop revised IFE Matrix
Develop revised EFE Matrix
Review of Underlying Bases of Strategy –
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Ch 9 -13
Strategy Review, Evaluation, and Control
Are our strengths still strengths? Has our organization added additional strengths? Are our weaknesses still weaknesses? Has our organization developed other
weaknesses?
Monitor Strengths & Weaknesses; Opportunities & Threats
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Ch 9 -14
Strategy Review, Evaluation, and Control
Are our opportunities still opportunities? Have other opportunities developed? Are our threats still threats? Have other threats emerged?
Monitor Strengths & Weaknesses; Opportunities & Threats
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Ch 9 -15
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 -18
Strategy Review, Evaluation, and Control
Compare expected to actual results Investigate deviations from plan Evaluate individual performance Examine progress toward stated objectives
Measuring Organizational Performance
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Ch 9 -19
Strategy Review, Evaluation, and Control
Strategists use financial ratios to: Compare a firm’s performance over different time
periods Compare a firm’s performance to competitors’
performance Compare a firm’s performance to industry averages
Quantitative Criteria for Strategy Evaluation
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Ch 9 -20
Strategy Review, Evaluation, and Control
Return on investment (ROI)
Return on equity (ROE)
Profit margin Market share
Debt to equity Earnings per share
(EPS) Sales growth Asset growth
Some key financial ratios that are useful for evaluating strategies are:
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Ch 9 -21
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 organization’s structure, replacing one or more key employees, selling a division, devising new policies, issuing stock to raise capital, allocating resources differently, or revising the firm’s mission.
Taking corrective action is necessary to keep an organization on track toward achieving its objectives.
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Ch 9 -22
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 firm’s customers?
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Ch 9 -23
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.