strategy review, evaluation, and control
DESCRIPTION
TRANSCRIPT
Copyright 2005 Prentice Hall Ch 9-1
Chapter 9Strategy Review, Evaluation, & Control
Strategic Management: Concepts & Cases
10th EditionFred David
PowerPoint Slides by
Anthony F. Chelte
Western New England College
Copyright 2005 Prentice Hall Ch 9-2
Chapter Outline
The Nature of Strategy Evaluation
A Strategy-Evaluation Framework
The Balanced Scorecard
Copyright 2005 Prentice Hall Ch 9-3
Chapter Outline
Published Sources of StrategyEvaluation Information
Characteristics of an Effective Evaluation System
Contingency Planning
Copyright 2005 Prentice Hall Ch 9-4
Chapter Outline (cont’d)
Auditing
21st Century Challenges in Strategic Management
Copyright 2005 Prentice Hall Ch 9-5
Organizations are most vulnerable when they are at the peak of their success --
R.T. Lenz
Strategy Review
Copyright 2005 Prentice Hall Ch 9-6
-- Strategies become obsolete
-- Internal environments are dynamic
-- External environments are dynamic
Strategy Review, Evaluation & Control
Copyright 2005 Prentice Hall Ch 9-7
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 Evaluation, Review, & Control
Strategy Evaluation
Copyright 2005 Prentice Hall Ch 9-8
1. Examine the underlying bases of a firm’s strategy
2. Compare expected to actual results3. Identify corrective actions to ensure that
performance conforms to plans
Strategy Evaluation, Review & Control
3 Basic Activities
Copyright 2005 Prentice Hall Ch 9-9
Complex & sensitive undertaking
Overemphasis can be costly & counterproductive
Strategy Evaluation, Review & Control
Strategy Evaluation
Copyright 2005 Prentice Hall Ch 9-10
Strategy Evaluation, Review & Control
Have assets increased Increase in profitability Increase in sales Increase in productivity Profit margins, ROI, & EPS ratios increased
Appraisal of Strategic Performance
Copyright 2005 Prentice Hall Ch 9-11
Strategy Evaluation, Review & Control
Consonance
Consistency
Feasibility
Advantage
Rummelt’s4 Criteria
Copyright 2005 Prentice Hall Ch 9-12
Strategy Evaluation, Review & Control
Strategy should not present inconsistent goals & policies
Consistency
Copyright 2005 Prentice Hall Ch 9-13
Strategy Evaluation, Review & Control
Consonance
Consistency
Feasibility
Advantage
Rummelt’s4 Criteria
Copyright 2005 Prentice Hall Ch 9-14
Strategy Evaluation, Review & Control
Need for strategies to examine sets of trends
Consonance
Copyright 2005 Prentice Hall Ch 9-15
Strategy Evaluation, Review & Control
Consonance
Consistency
Feasibility
Advantage
Rummelt’s4 Criteria
Copyright 2005 Prentice Hall Ch 9-16
Strategy Evaluation, Review & Control
Neither overtax resources or create unsolvable sub-problems
Feasibility
Copyright 2005 Prentice Hall Ch 9-17
Strategy Evaluation, Review & Control
Consonance
Consistency
Feasibility
Advantage
Rummelt’s4 Criteria
Copyright 2005 Prentice Hall Ch 9-18
Strategy Evaluation, Review & Control
Creation or maintenance of competitive advantage
Advantage
Copyright 2005 Prentice Hall Ch 9-19
Strategy Evaluation, Review & Control
1. Increase in environment’s complexity
2. Difficulty predicting future with accuracy
3. Increasing number of variables
Difficulties in Strategy Evaluation
Copyright 2005 Prentice Hall Ch 9-20
Strategy Evaluation, Review & Control
4. Rate of obsolescence of plans
5. Domestic and global events
6. Decreasing time span for planning certainty
Difficulties in Strategy Evaluation
Copyright 2005 Prentice Hall Ch 9-21
Strategy Evaluation, Review & Control
Initiate managerial questioning Trigger review of objectives & values Stimulate creativity in generating
alternatives
Strategy Evaluation Should --
Copyright 2005 Prentice Hall Ch 9-22
Strategy Evaluation, Review & Control
Develop revised EFE Matrix
Develop revised IFE Matrix
Review of underlying bases of strategy --
Copyright 2005 Prentice Hall Ch 9-23
Strategy Evaluation, Review & 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 --
Copyright 2005 Prentice Hall Ch 9-24
Strategy Evaluation, Review & Control
5. Reasons for competitors’ successful strategies
6. Competitors’ present market positions & profitability
7. Potential for competitor retaliation
8. Potential for cooperation with competitors
Review effectiveness of strategy --
Copyright 2005 Prentice Hall Ch 9-25
Strategy Evaluation, Review & Control
Are strengths still strengths? Have we added additional strengths? Are weaknesses still weaknesses? Have we developed other weaknesses?
Monitor Strengths & Weaknesses; Opportunities & Threats
Copyright 2005 Prentice Hall Ch 9-26
Strategy Evaluation, Review & 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
Copyright 2005 Prentice Hall Ch 9-27
Evaluation FrameworkI. Review Underlying Bases
Continue present course
II. Measure Firm Performance
III.Take
Corrective Actions
Differences?
Differences?
Yes
NO
Yes
NO
Copyright 2005 Prentice Hall Ch 9-28
Strategy Evaluation, Review & Control
Compare expected to actual results Investigate deviations from plan Evaluate individual performance Progress toward stated objectives
Measuring Organizational Performance
Copyright 2005 Prentice Hall Ch 9-29
Strategy Evaluation, Review & Control
Financial Ratios Compare performance over different periods Compare performance to competitors Compare performance to industry averages
Quantitative Criteria for Strategy Evaluation
Copyright 2005 Prentice Hall Ch 9-30
Strategy Evaluation, Review & Control
Return on investment (ROI) Return on equity (ROE) Profit margin Market Share
Key Financial Ratios
Copyright 2005 Prentice Hall Ch 9-31
Strategy Evaluation, Review & Control
Debt to equity Earnings per share (EPS) Sales growth Asset growth
Key Financial Ratios
Copyright 2005 Prentice Hall Ch 9-32
Strategy Evaluation, Review & Control
Internal consistency of strategy Consistency with environment Appropriateness in view of resources
Qualitative Evaluation of Strategy
Copyright 2005 Prentice Hall Ch 9-33
Strategy Evaluation, Review & Control
Acceptable degree of risk Appropriate time frame Workability of the strategy
Qualitative Evaluation of Strategy
Copyright 2005 Prentice Hall Ch 9-34
Strategy Evaluation, Review & Control
-- Evaluate strategies from 4 perspectives:
1. Financial performance
2. Customer knowledge
3. Internal business processes
4. Learning & growth
Balanced Scorecard
Copyright 2005 Prentice Hall Ch 9-35
Balanced Scorecard
Area of Objectives Measure or Target Time Expectation Primary Responsibility
Customers
1
2
Managers/Employees
1
2
Operations/Processes
1
2
Community/Social Responsibility
1
2
Business Ethics/Natural Environment
1
2
Financial
1
2
Copyright 2005 Prentice Hall Ch 9-36
Strategy Evaluation, Review & Control
Economical Meaningful Generates useful information Timely information Provides accurate picture of events
Characteristics of strategy evaluation
Copyright 2005 Prentice Hall Ch 9-37
Strategy-Evaluation Assessment Matrix
Continue courseYesNoNo
Corrective actionsNoYesNo
Corrective actionsYesYesNo
Corrective actionsNoNoYes
Corrective actionsYesNoYes
Corrective actionsNoYesYes
Corrective actionsYesYesYes
Corrective actionsNoNoNo
Result
Has the firm progressed
satisfactorily toward achieving its stated
objectives?
Have major changes
occurred in the firm’s external
strategic position?
Have major changes
occurred in the firm’s internal
strategic position?
Copyright 2005 Prentice Hall Ch 9-38
Strategy Evaluation, Review & Control
Alternative plans that can be put into effect if certain key events do not occur as expected
Contingency Planning
Copyright 2005 Prentice Hall Ch 9-39
Strategy Evaluation, Review & Control
Financial audits determine correspondence between assertions based on strategic plan & established criteria
Environmental audits insure sound and safe practices
Auditing
Copyright 2005 Prentice Hall Ch 9-40
Strategy Evaluation, Review & Control
Process is more an “art” than “science” Should strategies be visible or hidden from
stakeholders Should process be more top-down or bottom
up
21st Century Challenges in Strategic Management
Copyright 2005 Prentice Hall Ch 9-41
Key Terms & Concepts
For Review (Chapter 9)
Advantage
Contingency PlansAuditing
Corporate Agility
Feasibility
Consonance
Balanced Score Card
Consistency
Copyright 2005 Prentice Hall Ch 9-42
Key Terms & Concepts
For Review (Chapter 9)
Management by WanderingAround
Revised EFE Matrix
Measuring Organizational Performance
Revised IFE Matrix
Taking Corrective Action
Reviewing UnderlyingBases of Strategy
Future Shock