BIB3204/IBM3203 International Management S2/2023

Outline
BIB3204/IBM3203
International Management—
Week 12
Dr. Nichanan Sakolvieng

Department of International Business Management

Nichanan Sakolvieng, PhD

IBM3203/3713 International Management

Outline I. Organisational Performance

• Assess the performance outcomes of different strategies in terms of direct economic
• Ch. 12: Evaluating Strategies
outcomes and overall organisational effectiveness.
• Criteria and techniques that can be used to evaluate
Economic performance
organisational performance and strategic options.
• Direct measures of success in terms of
economic outcomes--three main dimensions:
• Performance in product markets (e.g. sales
Figure 12.1: growth or market share)
Evaluating strategies
• Accounting measures of profitability (e.g.
profit margin or return on capital
employed)
• Financial market measures (e.g. share
price).
• These measures may seem objective but need
to be carefully interpreted.
Nichanan Sakolvieng, PhD
BIB3204/IBM3203 International Management
Organisational Effectiveness
• A broader set of performance criteria reflecting
internal operational efficiency or measures
relevant to a wider range of stakeholders.
• Balanced scorecard--considers 4
perspectives, i.e. the customer, internal
business, innovation and learning, and
financial perspectives.
• Triple bottom line—pays explicit attention to
CSR and the environment; has 3 dimensions,
i.e. economic, social, and environmental
measures.
• Overall effectiveness depends on both
economic and broader factors that support L-T
prosperity of the orgn.

Nichanan Sakolvieng, PhD

BIB3204/IBM3203 International Management S2/2023

I. Organisational Performance (Cont.) I. Organisational Performance (Cont.)

• Gap Analysis Figure 12.2: Gap analysis
• Performance Comparisons
• compares achieved or
• Performance is measured in relation to: projected performance with
• Organisational targets. Management will typically set targets for desired performance.
sales growth or profitability. • Helps to identify shortfalls in
• Trends over time. Is performance improving or declining over a performance.
significant period of time (but be aware of cycles)? • The size of the ‘gap’ provides a
• Comparable organisations. Typically firms can benchmark guide to the extent to which
strategy needs to be changed
themselves against key competitors.
– a very large gap may
suggest transformational
change is needed.

Nichanan Sakolvieng, PhD Nichanan Sakolvieng, PhD

BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management

I. Organisational Performance (Cont.) II. Criteria and Techniques of Evaluation

• Complexities of Performance Analysis Table 12.1: The SAFe
criteria and techniques
of evaluation
• Performance measures can be contradictory, e.g. sales growth can be
achieved by cutting profit margins.
• Three sources of possible complexity:
• Organisations can manipulate outcomes in order to meet key performance
criteria.
• Organisations can legitimately manage performance perceptions and
expectations.
• The importance of particular measures can change over time.

Nichanan Sakolvieng, PhD Nichanan Sakolvieng, PhD

BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management

Nichanan Sakolvieng, PhD

BIB3204/IBM3203 International Management S2/2023

II. Criteria and Techniques of Evaluation (Cont.) II. Criteria and Techniques of Evaluation (Cont.)

Table 12.2: Suitability of

Suitability strategic options in
relation to strategic
• Assessing whether a proposed strategy addresses the key issues position
relating to the opportunities and threats an organisation faces.
• It is concerned with the overall rationale of the strategy:
• Does it exploit the opportunities in the environment and avoid the
threats?
• Does it capitalise on the organisation’s strengths and avoid or
remedy the weaknesses?

Nichanan Sakolvieng, PhD

BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management NICHANAN SAKOVIENG, PHD

II. Criteria and Techniques of Evaluation (Cont.) II. Criteria and Techniques of Evaluation (Cont.)

Table 12.3: Some

examples of Suitability – screening techniques:
suitability
• Ranking
• Screening through scenarios
• Screening for bases of competitive advantage – using the VRIO
criteria
• Decision trees

Nichanan Sakolvieng, PhD

BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management

Nichanan Sakolvieng, PhD

BIB3204/IBM3203 International Management S2/2023

II. Criteria and Techniques of Evaluation (Cont.)

Acceptability
• is concerned with whether the expected performance outcomes of
a proposed strategy meet the expectations of stakeholders.
• There are three important aspects to acceptability:
1. Risk
2. Return
3. Stakeholder reactions.

Source: Whittington, R., Regner P., Angwin, D., Johnson. G. & Scholes, K. (2020). Exploring Strategy: Text and Cases. 12th Edition. Pearson.

Nichanan Sakolvieng, PhD Nichanan Sakolvieng, PhD

BIB3204/IBM3203 International Management BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management

II. Criteria and Techniques of Evaluation (Cont.) II. Criteria and Techniques of Evaluation (Cont.)

Acceptability Acceptability
1. Risk--the extent to which strategic outcomes are unpredictable, 2. Returns--a measure of the financial effectiveness of a strategy.
especially with regard to negative outcomes. • Different approaches to assessing return:
• Risk can be assessed using: • Financial analysis—Return on capital employed (ROCE), payback
• Sensitivity analysis—assessing the extent to which the success of a period, discounted cash flow
preferred strategy is dependent on the key assumptions which underlie • Shareholder value analysis—which proposed strategies would
that strategy, i.e. what-if analysis. increase shareholder value—total shareholder return, economic
• Financial risk—assessing the possibility that the organisation may not be value added (EVA)
able to meet the key financial obligations necessary for survival; use ratios • Cost–benefit analysis—a money value should be put on all the costs
e.g. gearing (leverage) and liquidity
and benefits of a strategy, including tangible and intangible returns
• Break-even analysis—assessing the risks associated with different price to people and organisation.
and cost structures of strategies.
Nichanan Sakolvieng, PhD Nichanan Sakolvieng, PhD
BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management

Nichanan Sakolvieng, PhD

BIB3204/IBM3203 International Management S2/2023

II. Criteria and Techniques of Evaluation (Cont.) II. Criteria and Techniques of Evaluation (Cont.)

Feasibility
Acceptability
• whether a strategy could work in practice, i.e. whether an organisation
3. Reaction of stakeholders
has the capabilities to deliver a strategy.
• Stakeholder mapping (power/interest matrix) can be used to:
• Two key questions:
• understand the political context of strategies
• Do the resources and competences currently exist to implement
• understand the political agenda the strategy effectively?
• gauge the likely reaction of stakeholders to specific strategies. • If not, can they be obtained?
• If key stakeholders find a strategy to be unacceptable, then it is • Focus on three areas:
likely to fail.
• Finance
• People and their skills
• Resource integration
Nichanan Sakolvieng, PhD Nichanan Sakolvieng, PhD
BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management

II. Criteria and Techniques of Evaluation (Cont.) II. Criteria and Techniques of Evaluation (Cont.)

Feasibility
Table 12.6: Financial
strategy and the
1. Financial feasibility business life cycle

• funding and cash flows

• need to identify:
• the cash required for a strategy
• the cash generated by following the strategy
• the timing of any new funding requirements

Nichanan Sakolvieng, PhD Nichanan Sakolvieng, PhD

BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management

Nichanan Sakolvieng, PhD

BIB3204/IBM3203 International Management S2/2023

II. Criteria and Techniques of Evaluation (Cont.) II. Criteria and Techniques of Evaluation (Cont.)

Feasibility
Feasibility
3. Integrating resources
2. People and skills—three questions arise:
• The success of a strategy depends on the management of many
• Do people in the organisation currently have the competences to resource areas, for example:
deliver a proposed strategy?
• people
• Are the systems to support those people fit for the strategy?
• finance
• If not, can the competences be obtained or developed?
• physical resources
• information technology
• resources provided by suppliers and partners.
• It is essential to integrate resources – inside the organisation and in the
wider value system.
Nichanan Sakolvieng, PhD Nichanan Sakolvieng, PhD
BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management

II. Criteria and Techniques of Evaluation (Cont.) Conclusions

• Four qualifications of evaluation criteria:
• Be aware of conflicting conclusions and the need for
management judgement.
• Consistency between the different elements of a strategy is
essential.
• The implementation and development of strategies might
reveal unanticipated problems.
• Strategy development in practice isn’t always a logical or
even rational process.

Nichanan Sakolvieng, PhD Nichanan Sakolvieng, PhD

BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management BIB3204/IBM3203
NICHANAN SAKOVIENG, PHD
International Management

Nichanan Sakolvieng, PhD