Chapter 9:

Strategy Review, Evaluation and

Control

Strategic Management:
Concepts and Cases. 9th edition
Fred R. David

PowerPoint Slides by
Anthony F. Chelte
Western New England College
Ch 9-1
Fred R. David
Prentice Hall
 Implementing Strategies

Organizations are most vulnerable when

they are at the peak of their success.

-- R.T. Lenz

Ch 9-2
Fred R. David
Prentice Hall
Strategy Review, Evaluation &
Control

Systematic Review, Evaluation & Control –

– Strategies become obsolete

– Internal environments are dynamic
– External environments are dynamic

Ch 9-3
Fred R. David
Prentice Hall
 Strategy Evaluation

• Strategy evaluation is vital to the organization’s

well-being

• Alert management to potential or actual

problems in a timely fashion

• Erroneous strategic decisions can have severe

negative impact on organizations
Ch 9-4
Fred R. David
Prentice Hall
 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 9-5
Fred R. David
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 Strategy Evaluation

Strategy evaluation –

– Complex and sensitive undertaking

– Overemphasis can be costly and

counterproductive

Ch 9-6
Fred R. David
Prentice Hall
 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
Fred R. David
Prentice Hall
 Strategy Evaluation

Four Criteria (Richard Rummelt):

• Consistency
• Consonance
• Feasibility
• Advantage

Ch 9-8
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 Rummelt’s Criteria

Consistency

– Strategy should not present inconsistent

goals and policies.

• Conflict and interdepartmental bickering

symptomatic of managerial disorder and strategic
inconsistency

Ch 9-9
Fred R. David
Prentice Hall
 Rummelt’s Criteria

Consonance

– Need for strategies to examine sets of

trends

• Adaptive response to external environment

• Trends are results of interactions among other
trends

Ch 9-10
Fred R. David
Prentice Hall
 Rummelt’s Criteria

Feasibility

– Neither overtax resources or create

unsolvable subproblems

• Organizations must demonstrate the abilities,

competencies, skills and talents to carry out a
given strategy

Ch 9-11
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Prentice Hall
 Rummelt’s Criteria

Advantage

– Creation or maintenance of competitive

advantage

• Superiority in resources, skills, or position

Ch 9-12
Fred R. David
Prentice Hall
 Strategy Evaluation

Difficulty in strategy evaluation –

1. Increase in environment’s complexity

2. Difficulty predicting future with accuracy
3. Increasing number of variables

Ch 9-13
Fred R. David
Prentice Hall
 Strategy Evaluation

Difficulty in strategy evaluation –

4. Rate of obsolescence of plans

5. Domestic and global events
6. Decreasing time span for planning
certainty
Ch 9-14
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 Process of Strategy Evaluation

Strategy evaluation should –

– Initiative managerial questioning

– Trigger review of objectives and
values
– Stimulate creativity in generating
alternatives

Ch 9-15
Fred R. David
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 Reviewing Bases of Strategy

Review of underlying bases of strategy –

– Develop revised EFE Matrix

– Develop revised IFE Matrix

Ch 9-16
Fred R. David
Prentice Hall
 Reviewing Bases of Strategy

Review effectiveness of strategy –

1. Competitors’ reaction to strategy

2. Competitors’ change in strategy
3. Competitors’ changes in strengths and
weaknesses
4. Reasons for competitors’ strategic change

Ch 9-17
Fred R. David
Prentice Hall
 Reviewing Bases of Strategy

Review effectiveness of strategy –

5. Reasons for competitors’ successful

strategies
6. Competitors’ present market positions and
profitability
7. Potential for competitor retaliation
8. Potential for cooperation with competitors

Ch 9-18
Fred R. David
Prentice Hall
 Reviewing Bases of Strategy

Monitor Threats and Opportunities and

Weaknesses and Strengths

• Are our internal strengths still strengths?

• Have we added additional strengths?
• Are our weaknesses still weaknesses?
• Have we other internal weaknesses?

Ch 9-19
Fred R. David
Prentice Hall
 Reviewing Bases of Strategy

Monitor Threats and Opportunities and

Weaknesses and Strengths

• Are opportunities still opportunities?

• Other external opportunities?
• Are threats still threats?
• Are there other threats?
• Are we vulnerable to a hostile takeover?

Ch 9-20
Fred R. David
Prentice Hall
 Evaluation Framework
I. Review Underlying Bases

Differences? Yes

NO III.
Take
II. Measure Firm Performance Corrective
Actions
Differences? Yes

NO

Continue present course Ch 9-21

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 Measuring Organizational
Performance

• Comparing expected to actual results

• Investigating deviations from plan
• Evaluating individual performance
• Progress toward stated objectives

Ch 9-22
Fred R. David
Prentice Hall
 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 9-23
Fred R. David
Prentice Hall
 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 9-24
Fred R. David
Prentice Hall
 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 9-25
Fred R. David
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 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 9-26
Fred R. David
Prentice Hall
 Strategy-Evaluation Assessment Matrix
Have major Have major
changes changes
occurred in occurred in Has the firm
the firm’s the firm’s progressed
internal external satisfactorily toward
strategic strategic achieving its stated
position? position? objectives? Result
No No No Corrective actions
Yes Yes Yes Corrective actions
Yes Yes No Corrective actions
Yes No Yes Corrective actions
Yes No No Corrective actions
No Yes Yes Corrective actions
No Yes No Corrective actions
No No Yes Continue course
Ch 9-27
Fred R. David
Prentice Hall
 Contingency Planning

Premise of sound strategic management –

– Planning to deal with unfavorable and

favorable events before they occur.

Ch 9-28
Fred R. David
Prentice Hall
 Contingency Planning

Contingency Planning –

– Alternative plans that can be put into effect if

certain key events do not occur as expected

Ch 9-29
Fred R. David
Prentice Hall
 Auditing

• Financial audits to determine

correspondence between assertions
based on strategic plans and established
criteria

• Environmental audits to insure sound

and safe practices

Ch 9-30
Fred R. David
Prentice Hall