Chapter 8

Strategy Review, Evaluation, and

Control

Ch 9 -1
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.

Ch 9 -2
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.

Ch 9 -3
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.

Ch 9 -4
Strategy Review, Evaluation,
and Control
Consistency

Rumelt’s Consonance
4 Criteria
Feasibility

Advantage

Ch 9 -5
Strategy Review, Evaluation,
and Control

Consistency

 Strategy should not present inconsistent

goals and policies

Ch 9 -6
Strategy Review, Evaluation,
and Control

Consonance

 Need for strategists to examine sets of

trends, as well as individual trends

Ch 9 -7
Strategy Review, Evaluation,
and Control

Feasibility

 Neither overtax resources nor create

unsolvable subproblems

Ch 9 -8
Strategy Review, Evaluation,
and Control

Advantage

 Creation or maintenance of competitive

advantage

Ch 9 -9
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.

Ch 9 -10
Strategy Review, Evaluation,
and Control

Review of Underlying Bases of Strategy –

 Develop revised IFE Matrix

 Develop revised EFE Matrix

Ch 9 -11
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?

Ch 9 -12
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?

Ch 9 -13
Strategy Evaluation Framework
 Table below 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 table 9-3.

Ch 9 -14
Ch 9 -15
Ch 9 -16
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

Ch 9 -17
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

Ch 9 -18
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

Ch 9 -19
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.

Ch 9 -20