Module 9 Strategy Review, Evaluation, and Control

1. Module 9Strategy Review, Evaluation, and Control

3. Strategy Evaluation “Organizations are most vulnerable when they are at the peak of their success.” –R. T. Lenz

4. Strategy Review, Evaluation, and Control – Strategies become obsolete – Internal environments are dynamic – External environments are dynamic

5. Strategy Review, Evaluation, and Control • Vital to the organization’s well-being • Alert management to potential/actual problems in a timely fashion • Erroneous strategic decisions can have severe negative impact on organizations Strategy Evaluation

6. Strategy Review, Evaluation, and Control • Examine the underlying bases of a firm’s strategy • Compare expected to actual results • Take corrective actions to ensure that performance conforms to plans Three Basic Activities

7. Strategy Review, Evaluation, and Control • Complex & sensitive undertaking • Overemphasis can be expensive & counterproductive Strategy Evaluation

8. Strategy Review, Evaluation, and Control • Increase in assets? • Increase in profitability? • Increase in sales? • Increase in productivity? • Increases in profit margins, ROI, and EPS ratios? Appraisal of Strategic Performance

9. Strategy Review, Evaluation, and Control Consistency Rumelt’s4 Criteria Consonance Feasibility Advantage

10. Strategy Review, Evaluation, and Control • Strategy should not present inconsistent goals and policies Consistency

11. Strategy Review, Evaluation, and Control Consistency Rumelt’s4 Criteria Consonance Feasibility Advantage

12. Strategy Review, Evaluation, andControl • Need for strategists to examine sets of trends, as well as individual trends Consonance

13. Strategy Review, Evaluation, and Control Consistency Rumelt’s4 Criteria Consonance Feasibility Advantage

14. Strategy Review, Evaluation, andControl • Neither overtax resources nor create unsolvable subproblems Feasibility

15. Strategy Review, Evaluation, and Control Consistency Rumelt’s4 Criteria Consonance Feasibility Advantage

16. Strategy Review, Evaluation, and Control • Creation or maintenance of competitive advantage Advantage

17. Strategy Review, Evaluation, and Control • Increase in environment’s complexity • Difficulty predicting future with accuracy • Increasing number of variables Difficulties in Strategy Evaluation

18. Strategy Review, Evaluation, and Control • Rate of obsolescence of plans • Domestic and global events • Decreasing time span for planning certainty Difficulties in Strategy Evaluation

19. Strategy Review, Evaluation, and Control • Initiate managerial questioning of expectations and assumptions • Trigger a review of objectives & values • Stimulate creativity in generating alternatives and formulating criteria for evaluation Strategy Evaluation Should –

20. Strategy Review, Evaluation, and Control • Develop revised IFE Matrix • Develop revised EFE Matrix Review of Underlying Bases of Strategy –

21. Strategy Review, Evaluation, and Control • Competitors’ reaction to strategy • Competitors’ change in strategy • Competitors’ changes in strengths & weaknesses • Reasons for competitors’ strategic change Review Effectiveness of Strategy –

22. Strategy Review, Evaluation, and Control • Reasons for competitors’ successful strategies • Competitors’ satisfaction with present market positions & profitability • Potential for competitor retaliation • Potential for cooperation with competitors Review Effectiveness of Strategy –

23. Strategy Review, Evaluation, and Control • Are strengths still strengths? • Have we added additional strengths? • Are weaknesses still weaknesses? • Have we developed other weaknesses? Monitor Strengths & Weaknesses; Opportunities & Threats

24. Strategy Review, Evaluation, and Control • Are opportunities still opportunities? • Other opportunities develop? • Are threats still threats? • Other threats emerged? • Are we vulnerable to hostile takeover? Monitor Strengths & Weaknesses; Opportunities & Threats

27. Strategy Review, Evaluation, and Control • Compare expected to actual results • Investigate deviations from plan • Evaluate individual performance • Examine progress toward stated objectives Measuring Organizational Performance

28. Strategy Review, Evaluation, and Control • Financial Ratios • Compare performance over different periods • Compare performance to competitors’ • Compare performance to industry averages Quantitative Criteria for Strategy Evaluation

29. Return on investment (ROI) Return on equity (ROE) Profit margin Market share Debt to equity Earnings per share (EPS) Sales growth Asset growth Strategy Review, Evaluation, and Control Key Financial Ratios

30. Strategy Review, Evaluation, and Control • Human Resource Factors • Marketing • Finance/Accounting • R&D • Management Information Systems Qualitative Evaluation of Strategy

32. Strategy Review, Evaluation, and Control • Evaluate strategies from 4 perspectives: 1. Financial performance 2. Customer knowledge 3. Internal business processes 4. Learning & growth Balanced Scorecard

34. Strategy Review, Evaluation, and Control • Economical • Meaningful • Generates useful information • Timely information • Provides accurate picture of events Characteristics of an Effective Evaluation System

35. Strategy Review, Evaluation, and Control Alternative plans that can be put into effect if certain key events do not occur as expected Contingency Planning

36. Strategy Review, Evaluation, and Control Auditing A systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria, and communicating the results to interested users

37. Strategy Review, Evaluation, and Control 21st Century Challenges in Strategic Management • Should the process be more an “art” or a “science”? • Should strategies be visible or hidden from stakeholders? • Should process be more top-down or bottom-up?