strategy review, evaluation, and control
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For educational purpose onlyTRANSCRIPT
© 2001 Prentice HallCh. 9-1
Strategic ManagementConcepts & Cases
8th edition
Fred R. David
Chapter 9:Strategy Review,
Evaluation, & ControlPowerPoint Slides By:
Anthony F. Chelte
Western New England College
© 2001 Prentice HallCh. 9-2
Comprehensive Strategic Management ModelComprehensive Strategic Management Model
Strategy Review,
Evaluation,&
Control
Chapter 9
Vision &
Mission Statements
Chapter 2
ExternalAudit
Chapter 3
InternalAudit
Chapter 4
Strategies In
Action
Chapter 5
Strategy Analysis
&Choice
Chapter 6
Implement Strategies:
ManagementIssues
Chapter 7
ImplementStrategies:Marketing,Fin/Acct,R&D, CIS
Chapter 8
© 2001 Prentice HallCh. 9-3
Strategy ReviewStrategy Review
“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—
© 2001 Prentice HallCh. 9-4
Strategy ReviewStrategy Review
“Organizations are most vulnerable when they are at the peak of their success.”
—R.T. Lenz—
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“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—
© 2001 Prentice HallCh. 9-6
Strategy ReviewStrategy Review
The firm’s internal and external environments are dynamic.
Therefore, the best conceived and implemented strategies become
obsolete!
© 2001 Prentice HallCh. 9-7
Strategy ReviewStrategy Review
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
© 2001 Prentice HallCh. 9-8
Strategy ReviewStrategy Review
Effective Strategy Evaluation
• Adequate and timely feedbackThe cornerstone of effective evaluation
© 2001 Prentice HallCh. 9-9
Strategy ReviewStrategy Review
Strategy Evaluation
• Must have bothShort- & long-term focus
© 2001 Prentice HallCh. 9-10
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Four Criteria (Richard Rumelt):
• Consistency• Consonance• Feasibility• Advantage
© 2001 Prentice HallCh. 9-11
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
© 2001 Prentice HallCh. 9-12
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.
© 2001 Prentice HallCh. 9-13
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.
© 2001 Prentice HallCh. 9-14
Strategy ReviewStrategy Review
• Increase in environment’s complexity
• Difficulty in predicting the future with accuracy
• Increasing number of variables
Contemporary Strategy
EvaluationDifficulties
© 2001 Prentice HallCh. 9-15
Strategy ReviewStrategy Review
• 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
EvaluationDifficulties
© 2001 Prentice HallCh. 9-16
Strategy ReviewStrategy Review
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
© 2001 Prentice HallCh. 9-17
Evaluation Evaluation FrameworkFrameworkI. Review Underlying Bases
Continue present course
II. Measure Firm PerformanceIII.
Take Corrective Actions
Differences?
Differences?
Yes
NO
Yes
NO
© 2001 Prentice HallCh. 9-18
I. I. Review Bases of Review Bases of StrategyStrategy
• Develop a Revised EFE Matrix:
• How have competitors reacted to our strategies?
• How have competitors’ strategies changed?
• Have major competitors’ strengths and weaknesses changed?
© 2001 Prentice HallCh. 9-19
I. I. Review Bases of Review Bases of StrategyStrategy
• 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?
© 2001 Prentice HallCh. 9-20
I. I. Review Bases of Review Bases of StrategyStrategy
• How far can our major competitors be pushed before retaliating?
• How could we more effectively cooperate with our competitors?
© 2001 Prentice HallCh. 9-21
I. I. Review Bases of Review Bases of StrategyStrategy
Key Questions in Evaluating Strategy:
• Are our internal strengths still strengths?
• Have we added other internal strengths?
• Are our internal weaknesses still weaknesses?
© 2001 Prentice HallCh. 9-22
I. I. Review Bases of Review Bases of StrategyStrategy
• Do we now have other internal weaknesses?
• Are our external opportunities still opportunities?
• Are there now external opportunities?
© 2001 Prentice HallCh. 9-23
I. I. Review Bases of Review Bases of StrategyStrategy
• Are our external threats still threats?
• Are there now other external threats?
• Are we vulnerable to a hostile takeover?
© 2001 Prentice HallCh. 9-24
II. II. Measure PerformanceMeasure Performance
• 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 HallCh. 9-25
II. II. Measure PerformanceMeasure Performance
Quantitative Analysis:
Return on investment Return on equity Profit margin Market share Debt to equity Earnings per share Sales growth Asset growth
© 2001 Prentice HallCh. 9-26
II. II. Measure PerformanceMeasure Performance
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?
© 2001 Prentice HallCh. 9-27
II. II. Measure PerformanceMeasure Performance
Qualitative Analysis:
Does the strategy have an appropriate time framework?
Is the strategy workable?
© 2001 Prentice HallCh. 9-28
III. III. Take Corrective Take Corrective ActionAction
Making changes to reposition a firm competitively for the future
© 2001 Prentice HallCh. 9-29
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?
© 2001 Prentice HallCh. 9-30
Strategy ReviewStrategy Review
Characteristics of an effective system
• Evaluation activities must be economical.
• Evaluation activities must be meaningful.
© 2001 Prentice HallCh. 9-31
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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.
© 2001 Prentice HallCh. 9-32
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Characteristics of an effective system
• Information derived from evaluation process should facilitate action.
• Evaluation process should not dominate decisions.
© 2001 Prentice HallCh. 9-33
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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.
© 2001 Prentice HallCh. 9-34
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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.
© 2001 Prentice HallCh. 9-35
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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.
© 2001 Prentice HallCh. 9-36
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Auditing
• Financial audits to determine correspondence between assertions based on strategic plans and established criteria
• Environmental audits to insure sound and safe practices
© 2001 Prentice HallCh. 9-37
Key Terms & ConceptsKey Terms & Concepts
• 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
© 2001 Prentice HallCh. 9-38
Key Terms & ConceptsKey Terms & Concepts
• Revised IFE matrix
• Taking corrective actions