CHAPTER 9

STRATEGY REVIEW, EVALUATION,

AND CONTROL

9-1

Chapter Objectives
1.
2.
3.
4.
5.
6.

Nature Of Strategy Evaluation

Strategy-evaluation Framework
Balanced Scorecard
Characteristics of an Effective Evaluation
System
Contingency Planning
Auditing

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9.1

NATURE OF STRATEGY EVALUATION

Strategy evaluation is vital to an organizations well-being;

timely evaluations can alert management to problems or
potential problems before a situation becomes critical.
Strategy evaluation includes three basic activities:

a.

Examining the underlying bases of A firms strategy.

b.

Comparing expected results with actual results.

c.

Taking corrective actions to ensure that performance

conforms to plans.
9-3

Cont.
It is impossible to demonstrate conclusively that a
particular strategy is optimal, but it can be evaluated for
critical flaws. As described in Table 9-1, there are four
criteria to use in evaluating a strategy:
1.

Consistency

2. Consonance
3. Feasibility
4. Competitive Advantage
9-4

Process of Evaluating Strategies

Strategy evaluation is necessary for all sizes and kinds of

organizations. Strategy evaluation should initiate managerial
questioning of expectations and assumptions, trigger a review
of objectives and values, and stimulate creativity in generating
alternatives and formulating criteria of evaluation.
Evaluating strategies on a continuous rather than a periodic
basis allows benchmarks of progress to be established and
more effectively monitored.
Managers and employees of the firm should continually be
aware of progress being made toward achieving the firms
objectives. As critical success factors change, organizational
members should be involved in determining appropriate
corrective actions.
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9.2 STRATEGY-EVALUATION FRAMEWORK

Reviewing Bases of Strategy that addresses such questions as the
following:
1. How have competitors reacted to our strategies?
2. How have competitors strategies changed?
3. Have major competitors strengths and weaknesses changed?
4. Why are competitors making certain strategic changes?
5. Why are some competitors strategies more successful than
others?
6. How satisfied are our competitors with their present market
positions and profitability?
7. How far can our major competitors be pushed before
retaliating?
8. How could we more effectively cooperate with our competitors?
9-6

Cont.

Numerous external and internal factors can prevent

firms from achieving long-term and annual objectives.
External

opportunities

and

threats

and

internal

strengths and weaknesses that represent the bases of

current strategies should continually be monitored for
change. Here are some key questions to address in

evaluating strategies:

9-7

Key Questions to Address in Evaluating Strategies

1. Are our internal strengths still strengths?

2. Have we added other internal strengths? If so, what are
3.
4.
5.
6.
7.
8.
9.

they?
Are our internal weaknesses still weaknesses?
Do we now have other internal weaknesses? If so, what
are they?
Are our external opportunities still opportunities?
Are there now other external opportunities? If so, what are
they?
Are our external threats still threats?
Are there now other external threats? If so, what are they?
Are we vulnerable to a hostile takeover?
9-8

Measuring Organizational Performance

It involves comparing expected results to actual results,
investigating deviations from plans, evaluating individual
performance, and examining progress being made toward
meeting stated objectives. Both long-term and annual
objectives are commonly used in this process.
Strategists use common quantitative criteria to make three
critical comparisons:
1. Comparing the firms performance over different time
periods.
2. Comparing the firms performance to competitors.
3. Comparing the firms performance to industry averages.
9-9

Problems with Quantitative

Criteria
Most quantitative criteria are geared to
annual objectives rather than long-term
objectives
Different accounting methods can provide
different results on many quantitative
criteria
Intuitive judgments are almost always
involved in deriving quantitative criteria
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

9-10

Corrective Actions

9-11

9.3 Balanced Scorecard

The balanced scorecard allows firms to evaluate strategies
from four perspectives: financial performance, customer
knowledge, internal business processes, and learning and
growth. The balanced scorecard analysis requires that
firms seek answers to the following questions:
How well is the firm continually improving and
creating value along measures such as innovation,
technological leadership, product quality, operational
process efficiencies, etc.?
How well is the firm sustaining and even improving
upon its core competencies and competitive
advantages?
How satisfied are the firms customers?
9-12

9.4 Characteristics of an Effective

Evaluation System
Strategy evaluation must meet several basic requirements to be
effective.
1. Strategy-evaluation activities must be economical; too much
information can be just as bad as too little information. Strategyevaluation activities should also be meaningful; they should
specifically relate to a firms objectives.
2. Strategy-evaluation activities should provide timely information;
on occasion and in some areas, managers may need
information daily.
3. Strategy evaluation should be designed to provide a true picture
of what is happening.
4. The strategy-evaluation process should not dominate decisions;
it should foster mutual understanding, trust, and common
sense.
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9.5 Contingency Planning

Contingency plans can be defined as
alternative plans that can be put into
effect if certain key events do not occur
as expected.
A basic premise of good strategic
management is that firms plan ways to
deal with unfavorable and favorable
events before they occur.
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9.6 Auditing
Auditing is defined 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.

9-15

Cont.

Auditors examine the financial statement of firms to

determine whether they have been prepared according
to generally accepted accounting principles (GAAP)
and whether they fairly represent the activities of the
firm.
Independent auditors use a set of standards called
generally accepted accounting standards (GAAS).

9-16

Twenty-First-Century Challenges
in Strategic Management
Deciding whether the process should be
more an art or a science
Deciding whether strategies should be
visible or hidden from stakeholders
Deciding whether the process should be
more top-down or bottom-up in their firm

9-17

Thanks
9-18