Ch 9 -1 Module 9 Strategy Review, Evaluation, and Control.
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Transcript of Ch 9 -1 Module 9 Strategy Review, Evaluation, and Control.
Ch 9 -3
“Organizations are most vulnerable when they are at the peak of their success.”
– R. T. Lenz
Strategy Evaluation
Ch 9 -4
– Strategies become obsolete
– Internal environments are dynamic
– External environments are dynamic
Strategy Review, Evaluation, and Control
Ch 9 -5
Vital to the organization’s well-being Alert management to potential/actual problems
in a timely fashion Erroneous strategic decisions can have severe
negative impact on organizations
Strategy Review, Evaluation, and Control
Strategy Evaluation
Ch 9 -6
1. Examine the underlying bases of a firm’s strategy
2. Compare expected to actual results3. Take corrective actions to ensure that
performance conforms to plans
Strategy Review, Evaluation, and Control
Three Basic Activities
Ch 9 -7
Complex & sensitive undertaking
Overemphasis can be expensive & counterproductive
Strategy Review, Evaluation, and Control
Strategy Evaluation
Ch 9 -8
Strategy Review, Evaluation, and Control
Increase in assets? Increase in profitability? Increase in sales? Increase in productivity? Increases in profit margins, ROI, and EPS
ratios?
Appraisal of Strategic Performance
Ch 9 -9
Strategy Review, Evaluation, and Control
Consonance
Consistency
Feasibility
Advantage
Rumelt’s4 Criteria
Ch 9 -10
Strategy Review, Evaluation, and Control
Strategy should not present inconsistent goals and policies
Consistency
Ch 9 -11
Strategy Review, Evaluation, and Control
Consonance
Consistency
Feasibility
Advantage
Rumelt’s4 Criteria
Ch 9 -12
Strategy Review, Evaluation, and Control
Need for strategists to examine sets of trends, as well as individual trends
Consonance
Ch 9 -13
Strategy Review, Evaluation, and Control
Consonance
Consistency
Feasibility
Advantage
Rumelt’s4 Criteria
Ch 9 -14
Strategy Review, Evaluation, and Control
Neither overtax resources nor create unsolvable subproblems
Feasibility
Ch 9 -15
Strategy Review, Evaluation, and Control
Consonance
Consistency
Feasibility
Advantage
Rumelt’s4 Criteria
Ch 9 -16
Strategy Review, Evaluation, and Control
Creation or maintenance of competitive advantage
Advantage
Ch 9 -17
Strategy Review, Evaluation, and Control
1. Increase in environment’s complexity
2. Difficulty predicting future with accuracy
3. Increasing number of variables
Difficulties in Strategy Evaluation
Ch 9 -18
Strategy Review, Evaluation, and Control
4. Rate of obsolescence of plans
5. Domestic and global events
6. Decreasing time span for planning certainty
Difficulties in Strategy Evaluation
Ch 9 -19
Strategy Review, Evaluation, and Control
Initiate managerial questioning of expectations and assumptions
Trigger a review of objectives & values Stimulate creativity in generating
alternatives and formulating criteria for evaluation
Strategy Evaluation Should –
Ch 9 -20
Strategy Review, Evaluation, and Control
Develop revised IFE Matrix
Develop revised EFE Matrix
Review of Underlying Bases of Strategy –
Ch 9 -21
Strategy Review, Evaluation, and Control
1. Competitors’ reaction to strategy
2. Competitors’ change in strategy
3. Competitors’ changes in strengths & weaknesses
4. Reasons for competitors’ strategic change
Review Effectiveness of Strategy –
Ch 9 -22
Strategy Review, Evaluation, and Control
5. Reasons for competitors’ successful strategies
6. Competitors’ satisfaction with present market positions & profitability
7. Potential for competitor retaliation
8. Potential for cooperation with competitors
Review Effectiveness of Strategy –
Ch 9 -23
Strategy Review, Evaluation, and Control
Are strengths still strengths? Have we added additional strengths? Are weaknesses still weaknesses? Have we developed other weaknesses?
Monitor Strengths & Weaknesses; Opportunities & Threats
Ch 9 -24
Strategy Review, Evaluation, and Control
Are opportunities still opportunities? Other opportunities develop? Are threats still threats? Other threats emerged? Are we vulnerable to hostile takeover?
Monitor Strengths & Weaknesses; Opportunities & Threats
Ch 9 -27
Strategy Review, Evaluation, and Control
Compare expected to actual results Investigate deviations from plan Evaluate individual performance Examine progress toward stated objectives
Measuring Organizational Performance
Ch 9 -28
Strategy Review, Evaluation, and Control
Financial Ratios Compare performance over different periods Compare performance to competitors’ Compare performance to industry averages
Quantitative Criteria for Strategy Evaluation
Ch 9 -29
Strategy Review, Evaluation, and Control
Return on investment (ROI)
Return on equity (ROE)
Profit margin Market share
Debt to equity Earnings per
share (EPS) Sales growth Asset growth
Key Financial Ratios
Ch 9 -30
Strategy Review, Evaluation, and Control
Human Resource Factors Marketing Finance/Accounting R&D Management Information Systems
Qualitative Evaluation of Strategy
Ch 9 -32
Strategy Review, Evaluation, and Control
Evaluate strategies from 4 perspectives:
1. Financial performance
2. Customer knowledge
3. Internal business processes
4. Learning & growth
Balanced Scorecard
Ch 9 -34
Strategy Review, Evaluation, and Control
Economical Meaningful Generates useful information Timely information Provides accurate picture of events
Characteristics of an Effective Evaluation System
Ch 9 -35
Strategy Review, Evaluation, and Control
Alternative plans that can be put into effect if
certain key events do not occur as expected
Contingency Planning
Ch 9 -36
Strategy Review, Evaluation, and Control
A systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria, and communicating the results to interested users
Auditing