Implementing Strategies

Organizations are most vulnerable when

they are at the peak of their success.

-- R.T. Lenz

Ch 9-1
Fred R. David
Prentice Hall
Strategy Review, Evaluation &
Control

Systematic Review, Evaluation & Control

Strategies become obsolete

Internal environments are dynamic
External environments are dynamic

Ch 9-2
Fred R. David
Prentice Hall
 Strategy Evaluation

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
Ch 9-3
Fred R. David
Prentice Hall
 Strategy Evaluation

3 Basic Activities

1. Examining the underlying bases of a firms

strategy
2. Comparing expected to actual results
3. Corrective actions to ensure performance
conforms to plans

Ch 9-4
Fred R. David
Prentice Hall
 Strategy Evaluation

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?

Ch 9-5
Fred R. David
Prentice Hall
 Strategy Evaluation

Difficulty in strategy evaluation

1. Increase in environments complexity

2. Difficulty predicting future with accuracy
3. Increasing number of variables

Ch 9-6
Fred R. David
Prentice Hall
 Strategy Evaluation

Difficulty in strategy evaluation

4. Rate of obsolescence of plans

5. Domestic and global events
6. Decreasing time span for planning
certainty
Ch 9-7
Fred R. David
Prentice Hall
 Process of Strategy Evaluation

Strategy evaluation should

Initiate managerial questioning

Trigger review of objectives and
values
Stimulate creativity in generating
alternatives

Ch 9-8
Fred R. David
Prentice Hall
 Evaluation Framework
I. Review Underlying Bases

Differences? Yes

NO III.
Take
II. Measure Firm Performance Corrective
Actions
Differences? Yes

NO

Continue present course Ch 9-9

Fred R. David
Prentice Hall
 Reviewing Bases of Strategy

Review of underlying bases of strategy

Develop revised EFE Matrix

Develop revised IFE Matrix

Ch 9-10
Fred R. David
Prentice Hall
 Reviewing Bases of Strategy

Review effectiveness of strategy

1. Competitors reaction to strategy

2. Competitors change in strategy
3. Competitors changes in strengths and
weaknesses
4. Reasons for competitors strategic change

Ch 9-11
Fred R. David
Prentice Hall
 Reviewing Bases of Strategy

Review effectiveness of strategy

5. Reasons for competitors successful

strategies
6. Competitors present market positions and
profitability
7. Potential for competitor retaliation
8. Potential for cooperation with competitors

Ch 9-12
Fred R. David
Prentice Hall
 Reviewing Bases of Strategy

Monitor Threats and Opportunities and

Weaknesses and Strengths

Are our internal strengths still strengths?

Have we added additional strengths?
Are our weaknesses still weaknesses?
Have we other internal weaknesses?

Ch 9-13
Fred R. David
Prentice Hall
 Reviewing Bases of Strategy

Monitor Threats 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?

Ch 9-14
Fred R. David
Prentice Hall
 Evaluation Framework
I. Review Underlying Bases

Differences? Yes

NO III.
Take
II. Measure Firm Performance Corrective
Actions
Differences? Yes

NO

Continue present course Ch 9-15

Fred R. David
Prentice Hall
 Measuring Organizational
Performance

Comparing expected to actual results

Investigating deviations from plan
Evaluating individual performance
Progress toward stated objectives

Ch 9-16
Fred R. David
Prentice Hall
 Measuring Organizational
Performance

Quantitative criteria for strategy evaluation

Financial Ratios:
Compare performance over different periods
Compare performance to competitors
Compare performance to industry averages

Ch 9-17
Fred R. David
Prentice Hall
 Measuring Organizational
Performance

Key Financial Ratios

Return on investment
Return on equity
Profit margin
Market share

Ch 9-18
Fred R. David
Prentice Hall
 Measuring Organizational
Performance

Key Financial Ratios

Debt to equity
Earnings per share
Sales growth
Asset growth

Ch 9-19
Fred R. David
Prentice Hall
 Measuring Organizational
Performance

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

Ch 9-20
Fred R. David
Prentice Hall
 Evaluation Framework
I. Review Underlying Bases

Differences? Yes

NO III.
Take
II. Measure Firm Performance Corrective
Actions
Differences? Yes

NO

Continue present course Ch 9-21

Fred R. David
Prentice Hall
 Characteristics of Evaluation

Basic requirements for effective strategy

evaluation

Economical
Meaningful
Generate useful information
Timely information
Provide a true picture of what is happening

Ch 9-22
Fred R. David
Prentice Hall
 Contingency Planning

Premise of sound strategic management

Planning to deal with unfavorable and

favorable events before they occur.

Ch 9-23
Fred R. David
Prentice Hall
 Contingency Planning

Contingency Plans

Alternative plans that can be put into effect if

certain key events do not occur as expected

Ch 9-24
Fred R. David
Prentice Hall
 Auditing

Financial audits to determine

correspondence between assertions
based on strategic plans and established
criteria

Environmental audits to insure sound

and safe practices

Ch 9-25
Fred R. David
Prentice Hall