Chapter 9

Strategy Review, Evaluation, & Control

Strategic Management:
Concepts & Cases
10th Edition
Fred David
PowerPoint Slides by
Anthony F. Chelte
Western New England College

Copyright 2005 Prentice Hall

Ch 9-1

Chapter Outline
The Nature of Strategy Evaluation

A Strategy-Evaluation Framework

The Balanced Scorecard

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Ch 9-2

Chapter Outline
Published Sources of Strategy
Evaluation Information
Characteristics of an Effective
Evaluation System
Contingency Planning

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Ch 9-3

Chapter Outline (contd)

Auditing

21st Century Challenges in

Strategic Management

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Ch 9-4

Strategy Review

Organizations are most vulnerable when

they are at the peak of their success -R.T. Lenz

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Ch 9-5

Strategy Review, Evaluation &

Control

-- Strategies become obsolete

-- Internal environments are dynamic
-- External environments are dynamic

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Ch 9-6

Strategy Evaluation, Review,

& Control
Strategy Evaluation

Vital to the organizations well-being

Alert management to potential/actual problems
in a timely fashion
Erroneous strategic decisions can have severe
negative impact on organizations

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Ch 9-7

Strategy Evaluation, Review &

Control
3 Basic Activities
1.
2.
3.

Examine the underlying bases of a firms

strategy
Compare expected to actual results
Identify corrective actions to ensure that
performance conforms to plans

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Ch 9-8

Strategy Evaluation, Review &

Control
Strategy Evaluation

Complex & sensitive undertaking

Overemphasis can be costly &

counterproductive

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Ch 9-9

Strategy Evaluation, Review &

Control
Appraisal of Strategic Performance

Have assets increased

Increase in profitability
Increase in sales
Increase in productivity
Profit margins, ROI, & EPS ratios increased

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Ch 9-10

Strategy Evaluation, Review &

Control
Consistency

Rummelts
4 Criteria

Consonance
Feasibility
Advantage

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Ch 9-11

Strategy Evaluation, Review &

Control
Consistency

Strategy should not present inconsistent

goals & policies

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Ch 9-12

Strategy Evaluation, Review &

Control
Consistency

Rummelts
4 Criteria

Consonance
Feasibility
Advantage

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Ch 9-13

Strategy Evaluation, Review &

Control
Consonance

Need for strategies to examine sets of trends

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Ch 9-14

Strategy Evaluation, Review &

Control
Consistency

Rummelts
4 Criteria

Consonance
Feasibility
Advantage

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Ch 9-15

Strategy Evaluation, Review &

Control
Feasibility

Neither overtax resources or create

unsolvable sub-problems

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Ch 9-16

Strategy Evaluation, Review &

Control
Consistency

Rummelts
4 Criteria

Consonance
Feasibility
Advantage

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Ch 9-17

Strategy Evaluation, Review &

Control
Advantage

Creation or maintenance of competitive

advantage

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Ch 9-18

Strategy Evaluation, Review &

Control
Difficulties in Strategy Evaluation
1.
2.
3.

Increase in environments complexity

Difficulty predicting future with accuracy
Increasing number of variables

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Ch 9-19

Strategy Evaluation, Review &

Control
Difficulties in Strategy Evaluation
4.
5.
6.

Rate of obsolescence of plans

Domestic and global events
Decreasing time span for planning certainty

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Ch 9-20

Strategy Evaluation, Review &

Control
Strategy Evaluation Should -

Initiate managerial questioning

Trigger review of objectives & values
Stimulate creativity in generating
alternatives

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Ch 9-21

Strategy Evaluation, Review &

Control
Review of underlying bases of strategy -

Develop revised EFE Matrix

Develop revised IFE Matrix

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Ch 9-22

Strategy Evaluation, Review &

Control
Review effectiveness of strategy -1.
2.
3.

4.

Competitors reaction to strategy

Competitors change in strategy
Competitors changes in strengths &
weaknesses
Reasons for competitors strategic change

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Ch 9-23

Strategy Evaluation, Review &

Control
Review effectiveness of strategy -5.

6.

7.
8.

Reasons for competitors successful

strategies
Competitors present market positions &
profitability
Potential for competitor retaliation
Potential for cooperation with competitors
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Ch 9-24

Strategy Evaluation, Review &

Control
Monitor Strengths & Weaknesses;
Opportunities & Threats

Are strengths still strengths?

Have we added additional strengths?
Are weaknesses still weaknesses?
Have we developed other weaknesses?

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Ch 9-25

Strategy Evaluation, Review &

Control
Monitor Strengths & Weaknesses;
Opportunities & Threats

Are opportunities still opportunities?

Other opportunities develop?
Are threats still threats
Other threats emerged?
Are we vulnerable to hostile takeover?
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Ch 9-26

Evaluation Framework

I. Review Underlying Bases

Differences?

Yes

NO
II. Measure Firm Performance
Differences?

III.
Take
Corrective
Actions

Yes

NO
Continue present
course
Copyright

2005 Prentice Hall

Ch 9-27

Strategy Evaluation, Review &

Control
Measuring Organizational Performance

Compare expected to actual results

Investigate deviations from plan
Evaluate individual performance
Progress toward stated objectives

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Ch 9-28

Strategy Evaluation, Review &

Control
Quantitative Criteria for Strategy Evaluation

Financial Ratios

Compare performance over different periods

Compare performance to competitors
Compare performance to industry averages

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Ch 9-29

Strategy Evaluation, Review &

Control
Key Financial Ratios

Return on investment (ROI)

Return on equity (ROE)
Profit margin
Market Share

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Ch 9-30

Strategy Evaluation, Review &

Control
Key Financial Ratios

Debt to equity
Earnings per share (EPS)
Sales growth
Asset growth

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Ch 9-31

Strategy Evaluation, Review &

Control
Qualitative Evaluation of Strategy

Internal consistency of strategy

Consistency with environment
Appropriateness in view of resources

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Ch 9-32

Strategy Evaluation, Review &

Control
Qualitative Evaluation of Strategy

Acceptable degree of risk

Appropriate time frame
Workability of the strategy

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Ch 9-33

Strategy Evaluation, Review &

Control
Balanced Scorecard

-- Evaluate strategies from 4 perspectives:

1. Financial performance
2. Customer knowledge
3. Internal business processes
4. Learning & growth
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Ch 9-34

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

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Ch 9-35

Strategy Evaluation, Review &

Control
Characteristics of strategy evaluation

Economical
Meaningful
Generates useful information
Timely information
Provides accurate picture of events
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Ch 9-36

Strategy-Evaluation Assessment Matrix

Have major
changes
occurred in the
firms internal
strategic
position?

Have major
changes
occurred in the
firms external
strategic
position?

No

No

No

Corrective actions

Yes

Yes

Yes

Corrective actions

Yes

Yes

No

Corrective actions

Yes

No

Yes

Corrective actions

Yes

No

No

Corrective actions

No

Yes

Yes

Corrective actions

No

Yes

No

Corrective actions

No

No

Yes

Continue course

Has the firm

progressed
satisfactorily toward
achieving its stated
objectives?

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Result

Ch 9-37

Strategy Evaluation, Review &

Control
Contingency Planning

Alternative plans that can be put into effect if

certain key events do not occur as expected

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Ch 9-38

Strategy Evaluation, Review &

Control
Auditing

Financial audits determine correspondence

between assertions based on strategic plan
& established criteria

Environmental audits insure sound and safe

practices
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Ch 9-39

Strategy Evaluation, Review & Control

21st Century Challenges in
Strategic Management

Process is more an art than science

Should strategies be visible or hidden from
stakeholders
Should process be more top-down or bottom
up

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Ch 9-40

For Review (Chapter 9)

Key Terms & Concepts
Advantage

Consonance

Auditing

Contingency Plans

Balanced Score Card

Corporate Agility

Consistency

Feasibility

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Ch 9-41

For Review (Chapter 9)

Key Terms & Concepts
Future Shock

Revised EFE Matrix

Management by Wandering
Around

Revised IFE Matrix

Measuring
Organizational Performance

Taking Corrective Action

Reviewing Underlying
Bases of Strategy

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Ch 9-42