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Strategy Review, Evaluation, and Control
The document discusses strategy review, evaluation, and control. It provides an overview of the strategic management model and covers key aspects of strategy evaluation including reviewing the underlying bases of strategy, measuring firm performance, and taking corrective actions if needed. The document also discusses characteristics of an effective evaluation system and the importance of contingency planning and auditing in the evaluation process.
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Similar to Strategy Review, Evaluation, and Control
Strategy Review, Evaluation, and Control
- 1. © 2001 PrenticeHall Ch. 9-1 Strategic Management Concepts & Cases 8th edition Fred R. David Chapter 9: Strategy Review, Evaluation, & Control PowerPoint Slides By: Anthony F. Chelte Western New England College
- 2. Comprehensive Strategic MMaannaaggeemmeennttMMooddeell © 2001 Prentice Hall Strategy Review, Evaluation, & Control Chapter 9 Ch. 9-2 Vision & Mission Statements Chapter 2 External Audit Chapter 3 Strategies In Action Chapter 5 Internal Audit Chapter 4 Strategy Analysis & Choice Chapter 6 Implement Strategies: Management Issues Chapter 7 Implement Strategies: Marketing, Fin/Acct, R&D, CIS Chapter 8
- 3. © 2001 PrenticeHall Ch. 9-3 SSttrraatteeggyy RReevviieeww “Complicated controls do not work. They confuse. They misdirect attention from what is to be controlled to the mechanics and methodology of the control.” —Seymour Tilles—
- 4. © 2001 PrenticeHall Ch. 9-4 SSttrraatteeggyy RReevviieeww “Organizations are most vulnerable when they are at the peak of their success.” —R.T. Lenz—
- 5. © 2001 PrenticeHall Ch. 9-5 SSttrraatteeggyy RReevviieeww “While strategy is a word that is usually associated with the future, its link to the past is no less central. Life is lived forward but understood backward. Managers may live strategy in the future, but they understand it through the past.” —Henry Mintzberg—
- 6. © 2001 PrenticeHall Ch. 9-6 SSttrraatteeggyy RReevviieeww The firm’s internal and external environments are dynamic. Therefore, the best conceived and implemented strategies become obsolete!
- 7. © 2001 PrenticeHall Ch. 9-7 SSttrraatteeggyy RReevviieeww Strategy Evaluation—the 3 Basics • Examining the underlying basis of the firm’s strategy • Comparing actual to expected results • Taking corrective action to address performance gaps
- 8. SSttrraatteeggyy RReevviieeww EffectiveStrategy Evaluation • Adequate and timely feedback The cornerstone of effective evaluation © 2001 Prentice Hall Ch. 9-8
- 9. © 2001 PrenticeHall Ch. 9-9 SSttrraatteeggyy RReevviieeww Strategy Evaluation • Must have both Short- & long-term focus
- 10. © 2001 PrenticeHall Ch. 9-10 SSttrraatteeggyy RReevviieeww Four Criteria (Richard Rumelt): • Consistency • Consonance • Feasibility • Advantage
- 11. A strategy shouldnot present inconsistent goals and policies • If managerial problems continue despite changes in personnel and are issue based, then strategies may be inconsistent. • If success for one department means failure for another department, then strategies may be inconsistent. © 2001 Prentice Hall Ch. 9-11 CCoonnssiisstteennccyy • If policy problems/issues continue to be brought to the top for resolution, then strategies may be inconsistent.
- 12. Strategists need toexamine sets of trends as well as individual trends in evaluating strategies. • Strategy must represent an adaptive response to the external environment and critical changes occurring within it. • Most trends are the result of interactions among other © 2001 Prentice Hall Ch. 9-12 CCoonnssoonnaannccee trends. • Difficult in matching key internal and external factors in formulation of strategy.
- 13. Strategy must neitherovertax available resources nor create unsolvable subproblems. • Can the strategy be attempted within the physical, human and financial resources of the enterprise? • Limitation on strategic choice imposed by individual and organizational capabilities must be considered. © 2001 Prentice Hall Ch. 9-13 FFeeaassiibbiilliittyy • Important to examine whether in the past the organization has demonstrated the capabilities, abilities, competencies, skills, and talents to carry out strategy.
- 14. © 2001 PrenticeHall Ch. 9-14 SSttrraatteeggyy RReevviieeww • Increase in environment’s complexity • Difficulty in predicting the future with accuracy • Increasing number of variables Contemporary Strategy Evaluation Difficulties
- 15. © 2001 PrenticeHall Ch. 9-15 SSttrraatteeggyy RReevviieeww • 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
- 16. © 2001 PrenticeHall Ch. 9-16 SSttrraatteeggyy RReevviieeww Process of Evaluating Strategies: • Should initiate managerial questioning of expectations and assumptions • Should trigger a review of objectives and values • Should stimulate creativity in generating alternatives and criteria of evaluation
- 17. I. Review UnderlyingBases FFrraammeewwoorrkk II. Measure Firm Performance © 2001 Prentice Hall EEvvaalluuaattiioonn Ch. 9-17 Continue present course III. Take Corrective Actions Differences? Differences? Yes NO Yes NO
- 18. © 2001 PrenticeHall Ch. 9-18 II.. RReevviieeww BBaasseess ooff SSttrraatteeggyy • Develop a Revised EFE Matrix: • How have competitors reacted to our strategies? • How have competitors’ strategies changed? • Have major competitors’ strengths and weaknesses changed?
- 19. © 2001 PrenticeHall Ch. 9-19 II.. RReevviieeww BBaasseess ooff SSttrraatteeggyy • Why are competitors making certain strategic changes? • Why are some competitors’ strategies more successful than others? • How satisfied are our competitors with their present market positions and profitability?
- 20. © 2001 PrenticeHall Ch. 9-20 II.. RReevviieeww BBaasseess ooff SSttrraatteeggyy • How far can our major competitors be pushed before retaliating? • How could we more effectively cooperate with our competitors?
- 21. © 2001 PrenticeHall Ch. 9-21 II.. RReevviieeww BBaasseess ooff SSttrraatteeggyy Key Questions in Evaluating Strategy: • Are our internal strengths still strengths? • Have we added other internal strengths? • Are our internal weaknesses still weaknesses?
- 22. © 2001 PrenticeHall Ch. 9-22 II.. RReevviieeww BBaasseess ooff SSttrraatteeggyy • Do we now have other internal weaknesses? • Are our external opportunities still opportunities? • Are there now external opportunities?
- 23. © 2001 PrenticeHall Ch. 9-23 II.. RReevviieeww BBaasseess ooff SSttrraatteeggyy • Are our external threats still threats? • Are there now other external threats? • Are we vulnerable to a hostile takeover?
- 24. IIII.. MMeeaassuurree PPeerrffoorrmmaannccee • Compare the firm’s performance over different time periods. • Compare the firm’s performance to competitors. • Compare the firm’s performance to industry averages. © 2001 Prentice Hall Ch. 9-24
- 25. IIII.. MMeeaassuurree PPeerrffoorrmmaannccee © 2001 Prentice Hall Ch. 9-25 Quantitative Analysis: Return on investment Return on equity Profit margin Market share Debt to equity Earnings per share Sales growth Asset growth
- 26. IIII.. MMeeaassuurree PPeerrffoorrmmaannccee © 2001 Prentice Hall Ch. 9-26 Qualitative Analysis: Is the strategy internally consistent? Is the strategy consistent with the environment? Is the strategy appropriate in view of available resources? Does the strategy involve an acceptable degree of risk?
- 27. IIII.. MMeeaassuurree PPeerrffoorrmmaannccee © 2001 Prentice Hall Ch. 9-27 Qualitative Analysis: Does the strategy have an appropriate time framework? Is the strategy workable?
- 28. IIIIII.. TTaakkee CCoorrrreeccttiivveeAAccttiioonn Making changes to reposition a firm competitively for the future © 2001 Prentice Hall Ch. 9-28
- 29. Strategy-Evaluation AAsssseessssmmeenntt MMaattrriixx Result 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 © 2001 Prentice Hall Ch. 9-29 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?
- 30. © 2001 PrenticeHall Ch. 9-30 SSttrraatteeggyy RReevviieeww Characteristics of an effective system • Evaluation activities must be economical. • Evaluation activities must be meaningful.
- 31. © 2001 PrenticeHall Ch. 9-31 SSttrraatteeggyy RReevviieeww Characteristics of an effective system • Evaluation activities must provide timely information. • Evaluation system should be designed to provide a true picture of what is happening.
- 32. © 2001 PrenticeHall Ch. 9-32 SSttrraatteeggyy RReevviieeww Characteristics of an effective system • Information derived from evaluation process should facilitate action. • Evaluation process should not dominate decisions.
- 33. © 2001 PrenticeHall Ch. 9-33 SSttrraatteeggyy RReevviieeww Contingency Planning • Identify both beneficial and unfavorable events that could possibly derail the strategy or strategies. • Specify trigger points. Calculate about when contingent events are likely to occur.
- 34. © 2001 PrenticeHall Ch. 9-34 SSttrraatteeggyy RReevviieeww Contingency Planning • Assess the impact of each contingent event. Estimate the potential benefit or harm of each contingent event. • Develop contingency plans. Insure that they are compatible with current strategy and are economically feasible.
- 35. © 2001 PrenticeHall Ch. 9-35 SSttrraatteeggyy RReevviieeww Contingency Planning • Assess the counterimpact of each contingency plan. This quantifies the potential value of each plan. • Determine early warning signals for key contingent events. • Develop advance action plans to take advantage of available lead time.
- 36. © 2001 PrenticeHall Ch. 9-36 SSttrraatteeggyy RReevviieeww Auditing • Financial audits to determine correspondence between assertions based on strategic plans and established criteria • Environmental audits to insure sound and safe practices
- 37. KKeeyy TTeerrmmss &CCoonncceeppttss © 2001 Prentice Hall Ch. 9-37 • Advantage • Auditing • Consistency • Consonance • Contingency plans • Corporate agility • Feasibility • Future shock • MBWA • Measuring organizational performance • Planning process audit • Reviewing the underlying bases of an organization’s strategy • Revised EFE matrix
- 38. KKeeyy TTeerrmmss &CCoonncceeppttss © 2001 Prentice Hall Ch. 9-38 • Revised IFE matrix • Taking corrective actions