STRATEGY EVALUATION, ANALYSIS AND CONTROL Strategy Review Strategy become obsolete Strategy Evaluation It alerts the

management to potential or actual problems in a timely fashion. Erroneous strategic decisions can have severe negative impact on organizations

3 Basic Activities



Examining the underlying bases of firms’ strategy Comparing to expected from actual results Corrective action

4 Criteria in Evaluating Strategy
Consistency  Strategy should not present inconsistent goals and policies Consonance  Need for strategists to examine sets of trends Feasibility  Neither overtax resources or create unsolvable subproblems Advantage  Creation or maintenance of competitive advantage

Difficulty in Strategy Evaluation

    

A dramatic increase in the environment’s complexity Difficulty in predicting the future with accuracy Increasing number of variables Rapid rate of obsolescence of even the best plans Increase in the number of both domestic and international events affecting organization

Process of Strategy Evaluation

Initiate managerial questioning Trigger review of objectives and values Stimulates creativity in generating alternatives

Review of Effectiveness of Strategy
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competitors reaction to strategy competitor’s change in strategy competitor’s change strengths and weaknesses Reasons for competitor’s strategic change Reasons for competitor’s successful strategy competitor’s with present market positions and profitability Potential for competitor retaliation Potential for cooperation with competitors

External opportunities and threats; and internal strengths and weaknesses

        

Are our internal strengths still strengths? Have we added internal strengths? If so, what are they? Are our internal weaknesses still weaknesses? Do we have now other internal weaknesses? If so, what are they? Are our external opportunities still opportunities? Are there now other external opportunities? If so, what are they? Are our external threats still threats? Are there now other external threats? Are we vulnerable to hostile takeover?

Review Underlying Bases Differences? →Yes ↓ No Measure firm performance Differences? →Yes No ↓ Continue present course

Take corrective actions

Quantitative Criteria for Strategy Evaluation Key Financial Ratios
       

Return of Investment Return of Equity Profit Margin Market Share Debt to equity Earnings per share Sales per growth Asset growth

Qualitative Evaluation 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

Basic Requirements for effective strategy

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

Contingency Planning

alternative plans that can be put into effect if certain key events do not occur as expected.

Six Steps of an Effective Contingency Planning
1. 2. 3. 4. 5. 6.

Identify both beneficial and unfavorable events Specify trigger points Assess the impact of each contingent event Develop contingency plans Assess the counter impact of each contingency plans Determine warning signals for key contingent event

Financial audit is used to determine correspondence between assertion based on strategic plans established criteria. Independent auditors Government Auditors Internal Auditors

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