Unit 1 3 strategy evaluation

11
Strategy Review,Strategy Review,
Evaluation, & ControlEvaluation, & Control
[ADDIE- Assesment, Design,[ADDIE- Assesment, Design,
Development, Initiation,Development, Initiation,
Evaluation]Evaluation]
[PESTEL -Political, Economical,[PESTEL -Political, Economical,
Social, Technological,Social, Technological,
Environmental, Legal]Environmental, Legal]

22
Strategy ReviewStrategy Review
Strategy Evaluation—the 3 BasicsStrategy Evaluation—the 3 Basics
• Examining the underlying basis of theExamining the underlying basis of the
firm’s strategyfirm’s strategy
• Comparing actual to expected resultsComparing actual to expected results
• Taking corrective action to addressTaking corrective action to address
performance gapsperformance gaps

33
Effective Strategy EvaluationEffective Strategy Evaluation
• Adequate and timely feedbackAdequate and timely feedback
The cornerstone of effectiveThe cornerstone of effective
evaluationevaluation

44
Strategy EvaluationStrategy Evaluation
• Must haveMust have bothboth
Short- & long-term focusShort- & long-term focus

55
Four CriteriaFour Criteria (Richard Rumelt):(Richard Rumelt):
• ConsistencyConsistency
• ConsonanceConsonance
• FeasibilityFeasibility
• AdvantageAdvantage

66
ConsistencyConsistency
• If policy problems/issues continue to be brought to the
top for resolution, then strategies may be inconsistent.
• If success for one department means failure for another
department, then strategies may be inconsistent.
• If managerial problems continue despite changes in
personnel and are issue based, then strategies may be
inconsistent.
A strategy should not present inconsistent
goals and policies

77
ConsonanceConsonance
• Difficult in matching key internal and external factors in
formulation of strategy.
• Most trends are the result of interactions among other
trends.
• Strategy must represent an adaptive response to the
external environment and critical changes occurring
within it.
Strategists need to examine sets of trends as well
as individual trends in evaluating strategies.

88
FeasibilityFeasibility
• Important to examine whether in the past the organization
has demonstrated the capabilities, abilities,
competencies, skills, and talents to carry out strategy.
• Limitation on strategic choice imposed by individual and
organizational capabilities must be considered.
• Can the strategy be attempted within the physical, human
and financial resources of the enterprise?
Strategy must neither overtax available resources
nor create unsolvable subproblems.

99
• Increase in environment’s
complexity
• Difficulty in predicting the
future with accuracy
• Increasing number of
variables
Contemporary
Strategy
Evaluation
Difficulties

1010
• Rate of obsolescence of even
the best plans
• Increase in domestic and
world events
• Decreasing time span for
which planning can be done
with any certainty
Contemporary
Strategy
Evaluation
Difficulties

1111
Process of Evaluating Strategies:Process of Evaluating Strategies:
• Should initiate managerial questioningShould initiate managerial questioning
of expectations and assumptionsof expectations and assumptions
• Should trigger a review of objectivesShould trigger a review of objectives
and valuesand values
• Should stimulate creativity in generatingShould stimulate creativity in generating
alternatives and criteria of evaluationalternatives and criteria of evaluation

1212
Evaluation FrameworkEvaluation Framework
I. Review Underlying Bases
Continue present course
II. Measure Firm Performance
III.
Take
Corrective
Actions
Differences?
Differences?
Yes
NO
Yes
NO

1313
I.I. Review Bases of StrategyReview Bases of Strategy
• Develop a Revised External FactorDevelop a Revised External Factor
Evaluation Matrix:Evaluation Matrix:
• How have competitors reacted to our strategies?How have competitors reacted to our strategies?
• How have competitors’ strategies changed?How have competitors’ strategies changed?
• Have major competitors’ strengths andHave major competitors’ strengths and
weaknesses changed?weaknesses changed?

1414
• Why are competitors making certainWhy are competitors making certain
strategic changes?strategic changes?
• Why are some competitors’ strategiesWhy are some competitors’ strategies
more successful than others?more successful than others?
• How satisfied are our competitors withHow satisfied are our competitors with
their present market positions andtheir present market positions and
profitability?profitability?

1515
• How far can our major competitors beHow far can our major competitors be
pushed before retaliating?pushed before retaliating?
• How could we more effectivelyHow could we more effectively
cooperate with our competitors?cooperate with our competitors?

1616
Key Questions in Evaluating Strategy:Key Questions in Evaluating Strategy:
• Are our internal strengths still strengths?Are our internal strengths still strengths?
• Have we added other internal strengths?Have we added other internal strengths?
• Are our internal weaknesses stillAre our internal weaknesses still
weaknesses?weaknesses?

1717
• Do we now have other internalDo we now have other internal
weaknesses?weaknesses?
• Are our external opportunities stillAre our external opportunities still
opportunities?opportunities?
• Are there now external opportunities?Are there now external opportunities?

1818
• Are our external threats still threats?Are our external threats still threats?
• Are there now other external threats?Are there now other external threats?
• Are we vulnerable to a hostileAre we vulnerable to a hostile
takeover?takeover?

1919
II.II. Measure PerformanceMeasure Performance
• Compare the firm’s performanceCompare the firm’s performance
over different time periods.over different time periods.
• Compare the firm’s performance toCompare the firm’s performance to
competitors.competitors.
• Compare the firm’s performance toCompare the firm’s performance to
industry averages.industry averages.

2020
Quantitative Analysis:Quantitative Analysis:
 Return on investmentReturn on investment
 Return on equityReturn on equity
 Profit marginProfit margin
 Market shareMarket share
 Debt to equityDebt to equity
 Earnings per shareEarnings per share
 Sales growthSales growth
 Asset growthAsset growth

2121
Qualitative Analysis:Qualitative Analysis:
 Is the strategy internally consistent?Is the strategy internally consistent?
 Is the strategy consistent with theIs the strategy consistent with the
environment?environment?
 Is the strategy appropriate in view ofIs the strategy appropriate in view of
available resources?available resources?
 Does the strategy involve anDoes the strategy involve an
acceptable degree of risk?acceptable degree of risk?

2222
Qualitative Analysis:Qualitative Analysis:
 Does the strategy have an appropriateDoes the strategy have an appropriate
time framework?time framework?
 Is the strategy workable?Is the strategy workable?

2323
III.III. Take Corrective ActionTake Corrective Action
Making changes to reposition a firmMaking changes to reposition a firm
competitively for the futurecompetitively for the future

2424
Strategy-Evaluation Assessment MatrixStrategy-Evaluation Assessment Matrix
Continue courseYesNoNo
Corrective actionsNoYesNo
Corrective actionsYesYesNo
Corrective actionsNoNoYes
Corrective actionsYesNoYes
Corrective actionsNoYesYes
Corrective actionsYesYesYes
Corrective actionsNoNoNo
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?

2525
Characteristics of an effectiveCharacteristics of an effective
systemsystem
• Evaluation activities must beEvaluation activities must be
economical.economical.
• Evaluation activities must beEvaluation activities must be
meaningful.meaningful.

2626
systemsystem
• Evaluation activities must provide timelyEvaluation activities must provide timely
information.information.
• Evaluation system should be designedEvaluation system should be designed
to provide a true picture of what isto provide a true picture of what is
happening.happening.

2727
systemsystem
• Information derived from evaluationInformation derived from evaluation
process should facilitate action.process should facilitate action.
• Evaluation process should notEvaluation process should not
dominate decisions.dominate decisions.

2828
Contingency PlanningContingency Planning
• Identify both beneficial and unfavorableIdentify both beneficial and unfavorable
events that could possibly derail theevents that could possibly derail the
strategy or strategies.strategy or strategies.
• Specify trigger points. Calculate aboutSpecify trigger points. Calculate about
when contingent events are likely towhen contingent events are likely to
occur.occur.

2929
• Assess the impact of each contingentAssess the impact of each contingent
event. Estimate the potential benefit orevent. Estimate the potential benefit or
harm of each contingent event.harm of each contingent event.
• Develop contingency plans. Insure thatDevelop contingency plans. Insure that
they are compatible with currentthey are compatible with current
strategy and are economically feasible.strategy and are economically feasible.

3030
• Assess the counterimpact of eachAssess the counterimpact of each
contingency plan. This quantifies thecontingency plan. This quantifies the
potential value of each plan.potential value of each plan.
• Determine early warning signals for keyDetermine early warning signals for key
contingent events.contingent events.
• Develop advance action plans to takeDevelop advance action plans to take
advantage of available lead time.advantage of available lead time.

3131
AuditingAuditing
• Financial audits to determineFinancial audits to determine
correspondence between assertionscorrespondence between assertions
based on strategic plans andbased on strategic plans and
established criteriaestablished criteria
• Environmental audits to insure soundEnvironmental audits to insure sound
and safe practicesand safe practices

Strategy Review-Strategy Review- Alternate StrategyAlternate Strategy
3232
Strategy Marketing
Products
and line
Plans
Manufacturin
g Plans
HR Plans Financial
Plans
Time
Factor
Retrench
ment
Identify
Product line
for divestment
(low sales or
Margin)
Identify Plans to
close on basis
of capacity
utilization
Reduce
Personnel on
basis of future
need and
seniority
Eliminate/
reduce
dividend/
Manage Cash
Flow
Sell Plants
and reduce
personnel in
01 year
Stability Push high
margin
products in the
line
Defer Plant and
Equipment
investment of
high ticket
Invest in Trg to
improve skill
sets
Develop Good
Banking
Relations
Maintain
steady
dividend and
Balance Sheet
Continue for
three years
unless
trends show
high
opportunity
Expansion Extend and
improve
Product lines;
volume is
more critical
Expand Plant
Capacity to
support new
Products as
necessary
Hire additional
sales, R&D
and
Production
people
Increase debt-
equity ration
by one third
Map impact of
dividend policy
Evaluate
Market
share and
financial
condition

Unit 1 3 strategy evaluation

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Unit 1 3 strategy evaluation

Similar to Unit 1 3 strategy evaluation (20)

Recently uploaded

Recently uploaded (20)

Unit 1 3 strategy evaluation