David ch9 revised


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David ch9 revised

  1. 1. Chapter 9Strategy Review, Evaluation, & ControlPresented by:Almond RayBaldovinoDarryl AgustinElizalde M. HerreraMMT Batch 22
  2. 2. Strategic Management Process Model
  3. 3. -- Strategies become obsolete-- Internal environments are dynamic-- External environments are dynamicStrategy Review, Evaluation &Control-- It is essential therefore that strategistssystematically review, evaluate, and control theexecution of strategy
  4. 4.  Vital to the organization’s well-being Alert management to potential/actual problems in atimely fashion Erroneous strategic decisions can have severenegative impact on organizations Complex and sensitive undertaking Overemphasis can be costly & counterproductive Too much time spent measuring performance ratherthan in action and doingStrategy Evaluation, Review,& ControlUnderstanding strategy evaluation
  5. 5. 1. Examine the underlying bases of a firm’sstrategy2. Compare expected to actual results3. Identify corrective actions to ensure thatperformance conforms to plansStrategy Evaluation, Review &ControlThree Basic Activities
  6. 6. Strategy Evaluation, Review &Control Have the firm’s assets increased? Has there been an increase in profitability? Has there been an increase in sales? Has there been an increase in productivity? Have profit margins, ROI, and EPS ratiosincreased?Strategy evaluation is often an appraisal ofperformance. Strategists ask questions like:
  7. 7. Strategy Evaluation, Review & Control Increase in environment’s complexity Difficulty predicting future with accuracy Increasing number of variables Rate of obsolescence of plans Domestic and global events Decreasing time span for planning certaintyDifficulties in Strategy Evaluation
  8. 8. Strategy Evaluation, Review &ControlConsonanceFeasibilityAdvantageRummelt’s4 Criteria forStrategyevaluationConsistency
  9. 9. Strategy Evaluation, Review & Control ConsistencyStrategy should not present inconsistent goals and policies. There isinconsistency when: Persistence of issues-based (not personality-based) conflicts Success for one department means failure for another Policy problems are frequently referred to the top for resolution ConsonanceNeed for strategies to examine sets of trends rather than a single trend Need a holistic view (internal and external environments) FeasibilityNeither overtax resources or create unsolvable sub-problems Can it be done with the given or available resources? AdvantageCreation or maintenance of competitive advantage If it doesnt create a competitive advantage then what’s the point?
  10. 10. Strategy Evaluation, Review &Control Initiate managerial questioning Trigger review of objectives and values Stimulate creativity in generatingalternativesStrategy Evaluation Should --
  11. 11. Strategy Evaluation, Review &Control Develop a revised EFE Matrix What changed in the external environment? Develop a revised IFE Matrix What internal changes occurred in theorganization ?Review of underlying bases of strategy --
  12. 12. Strategy Evaluation, Review &Control1. Competitors’ reaction to strategy2. Competitors’ change in strategy3. Competitors’ changes in strengths & weaknesses4. Reasons for competitors’ strategic change5. Reasons for competitors’ successful strategies6. Competitors’ present market positions & profitability7. Potential for competitor retaliation8. Potential for cooperation with competitorsReview effectiveness of strategy --
  13. 13. 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
  14. 14. Strategy Evaluation, Review &Control Are opportunities still opportunities? Have other opportunities developed? Are threats still threats? Have other threats emerged? Are we vulnerable to hostile takeover?Monitor Strengths & Weaknesses;Opportunities & Threats
  15. 15. Evaluation FrameworkReview Underlying BasesRevised IFE and EFEContinue present courseMeasure Firm PerformanceRatios and stated objectivesTakeCorrectiveActionsDifferences?Differences?YesNOYesNO
  16. 16. Strategy Evaluation, Review &Control Compare expected to actual results Investigate deviations from plan Evaluate individual performance Progress toward stated objectivesMeasuring Organizational Performance
  17. 17. Strategy Evaluation, Review &Control Financial Ratios Compare performance over different periods Compare performance to competitors Compare performance to industry averagesQuantitative Criteria for Strategy Evaluation
  18. 18. Strategy Evaluation, Review &Control Return on investment (ROI) Return on equity (ROE) Profit margin Market Share Debt to equity Earnings per share (EPS) Sales growth Asset growthTypical financial ratios used in strategyevaluation
  19. 19. Strategy Evaluation, Review &Control Internal consistency of strategy Consistency with environment Appropriateness in view of resources Acceptable degree of risk Appropriate time frame Workability of the strategyQualitative Evaluation of Strategy
  20. 20. Strategy Evaluation, Review &Control-- Evaluate strategies from 4 perspectives:1. Financial performance2. Customer knowledge3. Internal business processes4. Learning & growthBalanced Scorecard
  21. 21. Balanced ScorecardArea of Objectives Measure or Target Time Expectation Primary ResponsibilityCustomers12Managers/Employees12Operations/Processes12Community/Social Responsibility12Business Ethics/Natural Environment12Financial12
  22. 22. Strategy Evaluation, Review &Control Economical Meaningful Generates useful information Timely information Provides accurate picture of eventsCharacteristics of strategy evaluation
  23. 23. Strategy-Evaluation Assessment MatrixContinue courseYesNoNoCorrective actionsNoYesNoCorrective actionsYesYesNoCorrective actionsNoNoYesCorrective actionsYesNoYesCorrective actionsNoYesYesCorrective actionsYesYesYesCorrective actionsNoNoNoResultHas the firmprogressedsatisfactorily towardachieving its statedobjectives?Have majorchangesoccurred in thefirm’s externalstrategicposition?Have majorchangesoccurred in thefirm’s internalstrategicposition?
  24. 24. Strategy Evaluation, Review &ControlContingency Planning: Alternative plans thatcan be put into effect if certain key events donot occur as expectedSome examples of situations requiring contingency planning: If a major competitor withdraws from particular markets asintelligence reports indicate, what actions should the firm take? If our sales objectives are not reached, what actions should firmtake to avoid losses? If demand for new product exceeds plans, what actions should firmtake to meet higher demand? If a new technological development makes new product obsoletesooner than expected, what actions should firm take?
  25. 25. Strategy Evaluation, Review &Control Financial audits determine correspondencebetween assertions based on strategic plan andestablished criteria Required for publicly traded companies Environmental audits insure sound and safepracticesAuditing
  26. 26. Strategy Evaluation, Review & Control Is the process of strategic management more an“art” than “science” or vice versa? (Your text says itis more science than art) Should strategies be visible or hidden fromstakeholders? (Your text says that they shouldhidden only when secrecy gives some competitiveadvantage) Should process be more top-down or bottom up(Current research suggests bottom-up)21stCentury Challenges inStrategic Management