Chapter 9

Strategy Review, Evaluation, and Control

Strategic Management:
Concepts & Cases
13th Edition
Fred David

Copyright © 2011 Pearson Ch 9 -1

Copyright © 2011 Pearson Ch 9 -2
Strategy Review, Evaluation,
and Control

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.

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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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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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Strategy Review, Evaluation,
and Control
Consistency

Rumelt’s Consonance
4 Criteria
Feasibility

Advantage

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Strategy Review, Evaluation,
and Control

Consistency

 Strategy should not present inconsistent

goals and policies

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Strategy Review, Evaluation,
and Control

Consonance

 Need for strategists to examine sets of

trends, as well as individual trends

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Strategy Review, Evaluation,
and Control

Feasibility

 Neither overtax resources nor create

unsolvable subproblems

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Strategy Review, Evaluation,
and Control

Advantage

 Creation or maintenance of competitive

advantage

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Strategy Review, Evaluation,
and Control

Strategy Evaluation Should –

 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.

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Strategy Review, Evaluation,
and Control

Review of Underlying Bases of Strategy –

 Develop revised IFE Matrix

 Develop revised EFE Matrix

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Strategy Review, Evaluation,
and Control
Monitor Strengths & Weaknesses;
Opportunities & Threats

 Are our strengths still strengths?

 Has our organization added additional strengths?
 Are our weaknesses still weaknesses?
 Has our organization developed other
weaknesses?

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Strategy Review, Evaluation,
and Control
Monitor Strengths & Weaknesses;
Opportunities & Threats
 Are our opportunities still opportunities?
 Have other opportunities developed?
 Are our threats still threats?
 Have other threats emerged?

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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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Strategy Review, Evaluation,
and Control

Measuring Organizational Performance

 Compare expected to actual results

 Investigate deviations from plan
 Evaluate individual performance
 Examine progress toward stated objectives

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Strategy Review, Evaluation,
and Control

Quantitative Criteria for Strategy Evaluation

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

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Strategy Review, Evaluation, and Control
Some key financial ratios that are useful for evaluating strategies
are:
 Return on  Debt to equity
investment (ROI)  Earnings per share
 Return on equity (EPS)
(ROE)  Sales growth
 Profit margin  Asset growth
 Market share

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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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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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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.
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 Table 9-6

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