copyright © 2011 pearson education, inc. publishing as prentice hall ch 9 -1 chapter 9 strategy...

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 9 -1

Chapter 9Strategy Review, Evaluation, and Control

Strategic Management: Concepts & Cases

13th Edition

Fred David


Ch 9 -2


Ch 9 -3

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.

Strategy Review, Evaluation, and Control


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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 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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Consonance

Consistency

Feasibility

Advantage

Rumelt’s4 Criteria


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Strategy should not present inconsistent goals and policies

Consistency


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Need for strategists to examine sets of trends, as well as individual trends

Consonance


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Neither overtax resources nor create unsolvable subproblems

Feasibility


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Creation or maintenance of competitive advantage

Advantage


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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.

Strategy Evaluation Should –


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Develop revised IFE Matrix

Develop revised EFE Matrix

Review of Underlying Bases of Strategy –


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

weaknesses?

Monitor Strengths & Weaknesses; Opportunities & Threats


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Are our opportunities still opportunities? Have other opportunities developed? Are our threats still threats? Have other threats emerged?

Monitor Strengths & Weaknesses; Opportunities & Threats


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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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Compare expected to actual results Investigate deviations from plan Evaluate individual performance Examine progress toward stated objectives

Measuring Organizational Performance


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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

Quantitative Criteria for Strategy Evaluation


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Return on investment (ROI)

Return on equity (ROE)

Profit margin Market share

Debt to equity Earnings per share

(EPS) Sales growth Asset growth

Some key financial ratios that are useful for evaluating strategies are:


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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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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

copyright © 2011 pearson education, inc. publishing as prentice hall ch 9 -1 chapter 9 strategy...

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