Strategy Review, Evaluation, and Control

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  • 1. Chapter 9 Strategy Review, Evaluation, & Control
    • Strategic Management: Concepts & Cases
    • 10 th Edition
    • Fred David PowerPoint Slides by
    • Anthony F. Chelte
    • Western New England College
  • 2. Chapter Outline The Nature of Strategy Evaluation A Strategy-Evaluation Framework The Balanced Scorecard
  • 3. Chapter Outline Published Sources of Strategy Evaluation Information Characteristics of an Effective Evaluation System Contingency Planning
  • 4. Chapter Outline ( cont’d ) Auditing 21 st Century Challenges in Strategic Management
  • 5.
    • Organizations are most vulnerable when they are at the peak of their success --
    • R.T. Lenz
    Strategy Review
  • 6.
    • -- Strategies become obsolete
    • -- Internal environments are dynamic
    • -- External environments are dynamic
    Strategy Review, Evaluation & Control
  • 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
  • 8.
    • Examine the underlying bases of a firm’s strategy
    • Compare expected to actual results
    • Identify corrective actions to ensure that performance conforms to plans
    Strategy Evaluation, Review & Control 3 Basic Activities
  • 9.
    • Complex & sensitive undertaking
    • Overemphasis can be costly & counterproductive
    Strategy Evaluation, Review & Control Strategy Evaluation
  • 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
  • 11. Strategy Evaluation, Review & Control Consonance Consistency Feasibility Advantage Rummelt’s 4 Criteria
  • 12. Strategy Evaluation, Review & Control
    • Strategy should not present inconsistent goals & policies
    Consistency
  • 13. Strategy Evaluation, Review & Control Consonance Consistency Feasibility Advantage Rummelt’s 4 Criteria
  • 14. Strategy Evaluation, Review & Control
    • Need for strategies to examine sets of trends
    Consonance
  • 15. Strategy Evaluation, Review & Control Consonance Consistency Feasibility Advantage Rummelt’s 4 Criteria
  • 16. Strategy Evaluation, Review & Control
    • Neither overtax resources or create unsolvable sub-problems
    Feasibility
  • 17. Strategy Evaluation, Review & Control Consonance Consistency Feasibility Advantage Rummelt’s 4 Criteria
  • 18. Strategy Evaluation, Review & Control
    • Creation or maintenance of competitive advantage
    Advantage
  • 19. Strategy Evaluation, Review & Control
    • Increase in environment’s complexity
    • Difficulty predicting future with accuracy
    • Increasing number of variables
    Difficulties in Strategy Evaluation
  • 20. Strategy Evaluation, Review & Control
    • Rate of obsolescence of plans
    • Domestic and global events
    • Decreasing time span for planning certainty
    Difficulties in Strategy Evaluation
  • 21. Strategy Evaluation, Review & Control
    • Initiate managerial questioning
    • Trigger review of objectives & values
    • Stimulate creativity in generating alternatives
    Strategy Evaluation Should --
  • 22. Strategy Evaluation, Review & Control
    • Develop revised EFE Matrix
    • Develop revised IFE Matrix
    Review of underlying bases of strategy --
  • 23. Strategy Evaluation, Review & Control
    • Competitors’ reaction to strategy
    • Competitors’ change in strategy
    • Competitors’ changes in strengths & weaknesses
    • Reasons for competitors’ strategic change
    Review effectiveness of strategy --
  • 24. Strategy Evaluation, Review & Control
    • Reasons for competitors’ successful strategies
    • Competitors’ present market positions & profitability
    • Potential for competitor retaliation
    • Potential for cooperation with competitors
    Review effectiveness of strategy --
  • 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
  • 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
  • 27. Evaluation Framework Continue present course Differences? Differences? Yes NO Yes NO I. Review Underlying Bases II. Measure Firm Performance III. Take Corrective Actions
  • 28. Strategy Evaluation, Review & Control
    • Compare expected to actual results
    • Investigate deviations from plan
    • Evaluate individual performance
    • Progress toward stated objectives
    Measuring Organizational Performance
  • 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
  • 30. Strategy Evaluation, Review & Control
    • Return on investment (ROI)
    • Return on equity (ROE)
    • Profit margin
    • Market Share
    Key Financial Ratios
  • 31. Strategy Evaluation, Review & Control
    • Debt to equity
    • Earnings per share (EPS)
    • Sales growth
    • Asset growth
    Key Financial Ratios
  • 32. Strategy Evaluation, Review & Control
    • Internal consistency of strategy
    • Consistency with environment
    • Appropriateness in view of resources
    Qualitative Evaluation of Strategy
  • 33. Strategy Evaluation, Review & Control
    • Acceptable degree of risk
    • Appropriate time frame
    • Workability of the strategy
    Qualitative Evaluation of Strategy
  • 34.
    • -- Evaluate strategies from 4 perspectives:
    • 1. Financial performance
    • 2. Customer knowledge
    • 3. Internal business processes
    • 4. Learning & growth
    Strategy Evaluation, Review & Control Balanced Scorecard
  • 35. Balanced Scorecard       2       1       Financial       2       1       Business Ethics/Natural Environment       2       1       Community/Social Responsibility       2       1       Operations/Processes       2       1       Managers/Employees       2       1       Customers Primary Responsibility Time Expectation Measure or Target Area of Objectives
  • 36. Strategy Evaluation, Review & Control
    • Economical
    • Meaningful
    • Generates useful information
    • Timely information
    • Provides accurate picture of events
    Characteristics of strategy evaluation
  • 37. Strategy-Evaluation Assessment Matrix Continue course Yes No No Corrective actions No Yes No Corrective actions Yes Yes No Corrective actions No No Yes Corrective actions Yes No Yes Corrective actions No Yes Yes Corrective actions Yes Yes Yes Corrective actions No No No 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?
  • 38. Strategy Evaluation, Review & Control
    • Alternative plans that can be put into effect if certain key events do not occur as expected
    Contingency Planning
  • 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
  • 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
    21 st Century Challenges in Strategic Management
  • 41.
    • Key Terms & Concepts
    For Review (Chapter 9) Advantage Contingency Plans Auditing Corporate Agility Feasibility Consonance Balanced Score Card Consistency
  • 42.
    • Key Terms & Concepts
    For Review (Chapter 9) Management by Wandering Around Revised EFE Matrix Measuring Organizational Performance Revised IFE Matrix Taking Corrective Action Reviewing Underlying Bases of Strategy Future Shock