9- strategy review, evaluation and control chapter 9.pptx

8/21/2019 9- Strategy Review, Evaluation and Control chapter 9.pptx

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CHAPTER 9

STRATEGY REVIEW, EVALUATION,

AND CONTROL

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Chapter Objectives

1. Nature Of Strategy Evaluation2. Strategy-evaluation Framework

3. Balanced Scorecard4. Characteristics of an Effective EvaluationSystem

5. Contingency Planning6. Auditing

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9.1 NATURE OF STRATEGY EVALUATION

Strategy evaluation is vital to an organizationswell-being;

timely evaluations can alert management to problems or

potential problems before a situation becomes critical.Strategy evaluation includes three basic activities:

a. Examining the underlying bases of A firmsstrategy.

b. Comparing expected results with actual results.

c. Taking corrective actions to ensure that performance

conforms to plans.

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Cont.

It is impossible to demonstrate conclusively that a

particular strategy is optimal, but it can be evaluated for

critical flaws. As described in Table 9-1, there are fourcriteria to use in evaluating a strategy:

1. Consistency

2. Consonance

3. Feasibility

4. Competitive Advantage

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Process of Evaluating Strategies

Strategy evaluation is necessary for all sizes and kinds of

organizations. Strategy evaluation should initiate managerial

questioning of expectations and assumptions, trigger a review

of objectives and values, and stimulate creativity in generatingalternatives and formulating criteria of evaluation.

Evaluating strategies on a continuous rather than a periodic

basis allows benchmarks of progress to be established and

more effectively monitored.

Managers and employees of the firm should continually beaware of progress being made toward achieving the firms

objectives. As critical success factors change, organizational

members should be involved in determining appropriate

corrective actions.9-5


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9.2 STRATEGY-EVALUATION FRAMEWORK

Reviewing Bases of Strategy that addresses such questions as the

following:

1. How have competitors reacted to our strategies?

2. How have competitors strategies changed?

3. Have major competitors strengths and weaknesses changed?

4. Why are competitors making certain strategic changes?

5. Why are some competitors strategies more successful than

others?

6. How satisfied are our competitors with their present marketpositions and profitability?

7. How far can our major competitors be pushed before

retaliating?

8. How could we more effectively cooperate with our competitors?

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Cont.

Numerous external and internal factors can prevent

firms from achieving long-term and annual objectives.

External opportunities and threats and internalstrengths and weaknesses that represent the bases of

current strategies should continually be monitored for

change. Here are some key questions to address in

evaluating strategies:

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Key Questions to Address in Evaluating Strategies

1. Are our internal strengths still strengths?2. Have we added other internal strengths? If so, what are

they?

3. Are our internal weaknesses still weaknesses?

4. Do we now have other internal weaknesses? If so, whatare they?

5. Are our external opportunities still opportunities?6. Are there now other external opportunities? If so, what are

they?

7. Are our external threats still threats?8. Are there now other external threats? If so, what are they?9. Are we vulnerable to a hostile takeover?

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Measuring Organizational Performance

It involves comparing expected results to actual results,

investigating deviations from plans, evaluating individual

performance, and examining progress being made toward

meeting stated objectives. Both long-term and annual

objectives are commonly used in this process.Strategists use common quantitative criteria to make three

critical comparisons:

1. Comparing the firms performance over different time

periods.2. Comparing the firmsperformance to competitors.3. Comparing the firmsperformance to industry averages.

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Problems with Quantitative

Criteria

Most quantitative criteria are geared to

annual objectives rather than long-term

objectives

Different accounting methods can provide

different resultson many quantitative

criteria

Intuitive judgments are almost always

involved in derivingquantitative criteria

9-10Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall


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Corrective Actions

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9.3 Balanced Scorecard

The balanced scorecard allows firms to evaluate strategies

from four perspectives: financial performance, customer

knowledge, internal business processes, and learning and

growth. The balanced scorecard analysis requires that

firms seek answers to the following questions: How well is the firm continually improving and

creating value along measures such as innovation,

technological leadership, product quality, operational

process efficiencies, etc.? How well is the firm sustaining and even improving

upon its core competencies and competitive

advantages?

How satisfied are the firmscustomers? 9-12


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9.4 Characteristics of an Effective

Evaluation System

Strategy evaluation must meet several basic requirements to be

effective.

1. Strategy-evaluation activities must be economical; too much

information can be just as bad as too little information. Strategy-

evaluation activities should also be meaningful; they shouldspecifically relate to a firmsobjectives.

2. Strategy-evaluation activities should provide timely information;

on occasion and in some areas, managers may need

information daily.

3. Strategy evaluation should be designed to provide a true pictureof what is happening.

4. The strategy-evaluation process should not dominate decisions;

it should foster mutual understanding, trust, and common

sense.

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9.5 Contingency Planning

Contingency plans can be defined as

alternative plans that can be put into

effect if certain key events do not occur

as expected.

A basic premise of good strategic

management is that firms plan ways to

deal with unfavorable and favorable

events before they occur.

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9.6 Auditing

Auditing is defined a systematic process of objectively

obtaining and evaluating evidence regarding assertions

about economic actions and events to ascertain thedegree of correspondence between these assertions

and established criteria, and communicating the results

to interested users.

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Cont.

Auditors examine the financial statement of firms to

determine whether they have been prepared according

to generally accepted accounting principles (GAAP)

and whether they fairly represent the activities of the

firm.

Independent auditors use a set of standards called

generally accepted accounting standards (GAAS).

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Twenty-First-Century Challenges

in Strategic Management

Deciding whether the process should be

more an art or a science

Deciding whether strategies should bevisible or hidden from stakeholders

Deciding whether the process should be

more top-down or bottom-up in their firm

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9- strategy review, evaluation and control chapter 9.pptx

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