Chapter 9:

Strategy Review, Evaluation and

Control
Strategic Management: Concepts and Cases

Course coordinator
Prof. Begum Khaleda Khanam
Ch

9-1

Chapter Outline
The Nature of Strategy Evaluation
A Strategy-Evaluation Framework
Published Sources of Strategy-Evaluation
Information
Characteristics of an Effective Evaluation System
Contingency Planning
Guidelines for Effective Strategic Management

Ch

9-2

Implementing Strategies

Organizations are most vulnerable

when they are at the peak of their
success.
-- R.T. Lenz

Ch

9-3

Strategy Review, Evaluation & Control

Systematic Review, Evaluation &
Control
Strategies become obsolete
Internal environments are dynamic
External environments are dynamic

Ch

9-4

Strategy Evaluation
Strategy evaluation is vital to the
organizations well-being
Alert management to potential or actual
problems in a timely fashion
Erroneous strategic decisions can have
severe negative impact on organizations
Ch

9-5

Strategy Evaluation
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

9-6

Strategy Evaluation
In many organizations, evaluation is an
appraisal of performance

Have assets increased?

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

Ch

9-7

Strategy Evaluation
Difficulty in strategy evaluation
1.
2.
3.
4.
5.
6.

Increase in environments complexity

Difficulty predicting future with accuracy
Increasing number of variables
Rate of obsolescence of plans
Domestic and global events
Decreasing time span for planning certainty

Ch

9-8

Process of Strategy Evaluation

Strategy evaluation should
Initiative managerial questioning
Trigger review of objectives and
values
Stimulate creativity in
generating alternatives
Ch

9-9

Evaluation Framework

Differences?

Yes

NO

Differences?

Yes

NO
Continue present course

Ch

9-10

Measuring Organizational
Performance

Comparing expected to actual

results
Investigating deviations from plan
Evaluating individual performance
Progress toward stated objectives
Ch

9-11

Measuring Organizational
Performance

Quantitative criteria for strategy evaluation

Financial Ratios:

Compare performance over different periods

Compare performance to competitors
Compare performance to industry averages

Ch

9-12

Measuring Organizational
Performance
Key Financial Ratios
Return on investment
Return on equity
Profit margin
Market share
Debt to equity
Earnings per share
Sales growth
Asset growth
Ch

9-13

Measuring Organizational
Performance
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

9-14

Characteristics of Evaluation
Basic requirements for effective strategy
evaluation

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

9-15

Contingency Planning
Premise of sound strategic management
Alternative plans that can be put into effect
if certain key events do not occur as
expected
Planning to deal with unfavorable and
favorable events before they occur.

Ch

9-16