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 Chapter Outline The Nature of Strategy Evaluation A Strategy-Evaluation Framework Published Sources of Strategy-Evaluation Information Chapter Outline Characteristics of an Effective Evaluation System Contingency Planning Auditing Chapter Outline Using Computers to Evaluate Strategy Guidelines for Effective Strategic Management Implementing Strategies

Organizations are most vulnerable when they are at the peak of their success. -- R.T. Lenz Systematic Review, Evaluation & Control Strategies become obsolete Internal environments are dynamic External environments are dynamic Strategy evaluation is vital to the organizations well-being Alert management to potential or actual problems in a timely fashion

Erroneous strategic decisions can have severe negative impact on organizations 3 Basic Activities Examining the underlying bases of a firms strategy Comparing expected to actual results Corrective actions to ensure performance conforms to plans Strategy evaluation Complex and sensitive undertaking

Overemphasis can be costly and counterproductive 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? Four Criteria (Richard Rummelt):

 Consistency Consonance Feasibility Advantage Consistency Strategy should not present inconsistent goals and policies.

Conflict and interdepartmental bickering symptomatic of managerial disorder and strategic inconsistency Consonance Need for strategies to examine sets of trends

Adaptive response to external environment Trends are results of interactions among other trends Feasibility Neither overtax resources or create unsolvable subproblems

Organizations must demonstrate the abilities, competencies, skills and talents t o carry out a given strategy Advantage Creation or maintenance of competitive advantage

Superiority in resources, skills, or position Difficulty in strategy evaluation Increase in environments complexity Difficulty predicting future with accuracy Increasing number of variables Difficulty in strategy evaluation Rate of obsolescence of plans Domestic and global events Decreasing time span for planning certainty Strategy evaluation should Review Initiative managerial questioning Trigger review of objectives and values Stimulate creativity in generating alternatives of underlying bases of strategy Develop revised EFE Matrix Develop revised IFE Matrix

Review effectiveness of strategy Competitors reaction to strategy Competitors change in strategy Competitors changes in strengths and weaknesses 4. Reasons for competitors strategic change Review effectiveness of strategy Reasons for competitors successful strategies Competitors present market positions and profitability Potential for competitor retaliation Potential for cooperation with competitors

Monitor Threats and Opportunities and Weaknesses and Strengths Monitor Are our Have we Are our Have we Threats internal strengths still strengths? added additional strengths? weaknesses still weaknesses? other internal weaknesses? 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? Comparing expected to actual results Investigating deviations from plan Evaluating individual performance Progress toward stated objectives Quantitative criteria for strategy evaluation Financial Ratios: Compare performance over different periods Compare performance to competitors Compare performance to industry averages Key Financial Ratios Return Return Profit Market on investment on equity margin share

Key Financial Ratios Debt to equity Earnings per share Sales growth Asset growth

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

Basic requirements for effective strategy evaluation Premise Economical Meaningful Generate useful information Timely information Provide a true picture of what is happening of sound strategic management

Planning to deal with unfavorable and favorable events before they occur. Contingency Planning Alternative plans that can be put into effect if certain key events do not occur as expected

 Financial audits to determine correspondence between assertions based on strateg ic plans and established criteria Environmental audits to insure sound and safe practices Key Terms Advantage Auditing Consistency Consonance Contingency Plans Corporate Agility Feasibility Key Terms Future Shock Management by Wandering Around Measuring Organizational Performance Planning Process Audit (PPA) Reviewing the Underlying Bases of an Organizations Strategy Key Terms Revised EFE Matrix Revised IFE Matrix Taking Corrective Actions