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Chapter 9

Strategy Review,
Evaluation, and
Control

Why
evaluate?

3 Basic Activities of Strategy


Evaluation
1.Examining the underlying bases
of a firms strategy,
2.Comparing expected results
with actual results.
3.Taking corrective actions to
ensure that performance
conforms to the plan

STRATEGY
EVALUATION
-objectives are essential to
ensure that stated being
achieved
-an appraisal of how well and
organization has performed.
-complex & sensitive
undertaking
overemphasis can be costly &
counterproductive

Importance of Strategy Evaluation

Vital to the organizations well-being


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

FOUR CRITERIA USED


IN EVALUATING
STRATEGIES:

consistency

feasibility

consonance

advantage

Consistency
(Three Guidelines)
If managerial problems continue despite
changes in personnel and if they tend to be
issue-based rather than people-based, then
strategies may be inconsistent.
If success for one organizational department
means, or is interpreted to mean, failure for
another department, then strategies may be
inconsistent.
If policy problems and issues continue to be
brought to the top for resolution, then
strategies may be inconsistent.

Consonance
refers to the need for strategists to
examine sets of trends, as well as
individual trends, in evaluating
strategies.
A strategy must represent an
adaptive response to the external
environment and to the critical
changes occurring within it.

Feasibility
can the strategy be attempted
within the physical, human, and
financial resources of the enterprise?
The financial resources of a business
are the easiest to quantify and are
normally the first limitation against
which strategy is evaluated

Advantage
A strategy must provide for the
creation and/or maintenance of a
competitive advantage in a selected
area of activity.
Competitive advantages normally are
the result of superiority in one of
three areas: (1) resources, (2) skills,
or (3) position.

STRATEGY EVALUATION HAS


THREE BASIC ACTIVITIES

1. Examine the
underlying
bases of a firms
strategy.
2. Compare
expected to
actual results.
3. Identify
corrective
actions to
ensure that
performance

y
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Rea
o
i
t
a
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a
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y
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e
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t
l
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c
is diffi
1.Increase in the
environments
complexity
2.Increasing difficulty in
predicting the future with
accuracy
3.The increasing number
of variables

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h
w
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s
n
Rea
o
i
t
a
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l
a
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e
y
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e
strat 4. iffi
lt
u
c
The
rapid
rate
of
d
is

obsolescence of even the


best plans
5. The increase in number of
both domestic and world
events affecting
organizations
6. The decreasing time span
for which planning can be
done with the degree of

The
Process of
Evaluating
Strategies

Strategy evaluation should:


>initiate managerial
questioning and expectations
>trigger a review of objectives
and values
>simulate creativity in
generating alternatives and
formulating criteria of
evaluation

Strategy evaluation should:


>initiate managerial
questioning and expectations
>trigger a review of objectives
and values
>simulate creativity in
generating alternatives and
formulating criteria of
evaluation

Reviewing Bases of
Strategy

IFE
Matri
x

EFE
Matri
x

IFE
Matr
-should focus on changes in
ix
the organizations
management, marketing,
finance accounting,
production operations, R&D,

EFE
Matr
-should indicate how
ix

effectively a firms strategies


have been in response to key
opportunities and threats

Review Effectiveness of
1. Competitors
reaction to
Strategy
strategy
2. Competitors change in
strategy
3. Competitors changes in
strengths & weaknesses
4. Reasons for competitors
strategic change

Review
Effectiveness of
5. Reasons for competitors
Strategy
successful strategies
6. Competitors present
market positions &
profitability
7. Potential for competitor
retaliation
8. Potential for cooperation
with competitors

MONITOR STRENGHTS,
WEAKNESSES;
OPPORTUNITIES AND
Are strengths still
THREATS
strengths?

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

Monitor
SWOT

Are opportunities still


opportunities?
Other opportunities
develop?
Are threats still threats?
Other threats emerged?
Are we vulnerable to
hostile takeover?

MEASURING
ORGANIZATIONAL
PERFORMANCE
This activity includes :
Comparing expected to
actual results
Investigating deviations
from plan
Evaluating individual
performance
Examining progress
toward stated objectives

Quantitative
Criteria for
Strategy
Financial
Evaluation
Ratios

Compare performance
over different periods
Compare performance to
competitors
Compare performance to
industry averages

Key Financial
Ratios
Return on investment
(ROI)
Return on equity (ROE)
Profit margin
Market share
Debt to equity
Earnings per share
Sales growth
Asset growth

Qualitative
Criteria for
Strategy
Evaluation

Internal consistency of
strategy
Consistency with
environment
Appropriateness in view of
resources
Acceptable degree of risk
Appropriate time frame

TAKING
CORRECTIVE
ACTIONS
the
final
strategyevaluation
activity
that
requires making changes to
reposition
a
form
competitively for the future

TRATEGY EVALUATION
ASSESSMENT MATRIX
-summarizes
strategy
evaluation
activities in terms of key
questions that should be
addressed
,
alternative
answers to those questions
and appropriate actions for

E
C
N
BALA
D
A
C
E
R
SCO
-process
RDthat allows firm to

evaluate from four perspective:


financial performance, customer
knowledge, internal business
processes and learning and growth

Five key issues:


Customers
Managers/ Employees
Operations/ Processes
Business ethics/ Natural
environment
Financial

CHARACTERISTICS OF AN
EFFECTIVE EVALUATION
SYSTEM
1.Strategy-evaluation
must be

economical.
2.Strategy-evaluation activities
should also be meaningful.
3.Strategy-evaluation activities
should provide timely
information.
4.Strategy evaluation should be
designed to provide a true
picture of what is happening.
5.Strategy-evaluation process

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

AUDITING
Financial audits determine
correspondence between
assertions based on strategic
plan & established criteria.
Environmental audits ensure
sound and safe practices

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 topdown or bottom-up?

THANK
YOU!