S. M 9

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					Chapter 9
Strategy Review, Evaluation, and Control



   Strategic Management:
       Concepts & Cases
         12th Edition
         Fred David




Copyright © 2009 Pearson Education, Inc.   Ch 9-1
Publishing as Prentice Hall
  Chapter Outline

                The Nature of Strategy Evaluation



                A Strategy-Evaluation Framework



                        The Balanced Scorecard


Copyright © 2009 Pearson Education, Inc.            Ch 9-2
Publishing as Prentice Hall
  Chapter Outline (cont’d)
                   Published Sources of Strategy
                      Evaluation Information


                   Characteristics of an Effective
                        Evaluation System


                           Contingency Planning


Copyright © 2009 Pearson Education, Inc.             Ch 9-3
Publishing as Prentice Hall
  Chapter Outline (cont’d)



                                           Auditing


                       21st Century Challenges in
                         Strategic Management



Copyright © 2009 Pearson Education, Inc.              Ch 9-4
Publishing as Prentice Hall
 Strategy Evaluation



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




Copyright © 2009 Pearson Education, Inc.          Ch 9-5
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control



     – Strategies become obsolete
     – Internal environments are dynamic
     – External environments are dynamic




Copyright © 2009 Pearson Education, Inc.   Ch 9-6
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control
   Strategy Evaluation

     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



Copyright © 2009 Pearson Education, Inc.        Ch 9-7
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control
   Three Basic Activities

  1.    Examine the underlying bases of a firm’s
        strategy.
  2.    Compare expected to actual results.
  3.    Identify corrective actions to ensure that
        performance conforms to plans.



Copyright © 2009 Pearson Education, Inc.             Ch 9-8
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control
   Strategy Evaluation

       Complex & sensitive undertaking

       Overemphasis can be costly &
        counterproductive




Copyright © 2009 Pearson Education, Inc.   Ch 9-9
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control
 Appraisal of Strategic Performance

    Have assets increased?
    Increase in profitability?
    Increase in sales?
    Increase in productivity?
    Profit margins, ROI, and EPS ratios
     increased?


Copyright © 2009 Pearson Education, Inc.   Ch 9-10
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control
                                           Consistency


          Rumelt’s                         Consonance
          4 Criteria
                                            Feasibility


                                           Advantage

Copyright © 2009 Pearson Education, Inc.                  Ch 9-11
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

 Consistency

    Strategy should not present inconsistent
     goals & policies




Copyright © 2009 Pearson Education, Inc.        Ch 9-12
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control
                                           Consistency


          Rumelt’s                         Consonance
          4 Criteria
                                            Feasibility


                                           Advantage

Copyright © 2009 Pearson Education, Inc.                  Ch 9-13
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

 Consonance

    Need for strategies to examine sets of trends




Copyright © 2009 Pearson Education, Inc.      Ch 9-14
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control
                                           Consistency


          Rumelt’s                         Consonance
          4 Criteria
                                            Feasibility


                                           Advantage

Copyright © 2009 Pearson Education, Inc.                  Ch 9-15
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

 Feasibility

    Neither overtax resources or create
     unsolvable sub-problems




Copyright © 2009 Pearson Education, Inc.   Ch 9-16
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control
                                           Consistency


          Rumelt’s                         Consonance
          4 Criteria
                                            Feasibility


                                           Advantage

Copyright © 2009 Pearson Education, Inc.                  Ch 9-17
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

 Advantage

    Creation or maintenance of competitive
     advantage




Copyright © 2009 Pearson Education, Inc.      Ch 9-18
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

 Difficulties in Strategy Evaluation

1.     Increase in environment’s complexity
2.     Difficulty predicting future with accuracy
3.     Increasing number of variables




Copyright © 2009 Pearson Education, Inc.            Ch 9-19
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

 Difficulties in Strategy Evaluation

4.     Rate of obsolescence of plans
5.     Domestic and global events
6.     Decreasing time span for planning certainty




Copyright © 2009 Pearson Education, Inc.       Ch 9-20
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

 Strategy Evaluation Should –

      Initiate managerial questioning
      Trigger review of objectives & values
      Stimulate creativity in generating
       alternatives



Copyright © 2009 Pearson Education, Inc.       Ch 9-21
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

 Review of Underlying Bases of Strategy –

      Develop revised EFE Matrix

      Develop revised IFE Matrix




Copyright © 2009 Pearson Education, Inc.    Ch 9-22
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

 Review Effectiveness of Strategy –

1.     Competitors’ reaction to strategy
2.     Competitors’ change in strategy
3.     Competitors’ changes in strengths &
       weaknesses
4.     Reasons for competitors’ strategic change


Copyright © 2009 Pearson Education, Inc.      Ch 9-23
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

 Review Effectiveness of Strategy –

5.     Reasons for competitors’ successful
       strategies
6.     Competitors’ present market positions &
       profitability
7.     Potential for competitor retaliation
8.     Potential for cooperation with competitors

Copyright © 2009 Pearson Education, Inc.        Ch 9-24
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control
 Monitor Strengths & Weaknesses;
 Opportunities & Threats

      Are strengths still strengths?
      Have we added additional strengths?
      Are weaknesses still weaknesses?
      Have we developed other weaknesses?


Copyright © 2009 Pearson Education, Inc.     Ch 9-25
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control
 Monitor Strengths & Weaknesses;
 Opportunities & Threats
      Are opportunities still opportunities?
      Other opportunities develop?
      Are threats still threats?
      Other threats emerged?
      Are we vulnerable to hostile takeover?

Copyright © 2009 Pearson Education, Inc.        Ch 9-26
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc.   Ch 9-27
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc.   Ch 9-28
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

Measuring Organizational Performance

      Compare expected to actual results
      Investigate deviations from plan
      Evaluate individual performance
      Progress toward stated objectives


Copyright © 2009 Pearson Education, Inc.    Ch 9-29
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

Quantitative Criteria for Strategy Evaluation

        Financial Ratios
          Compare performance over different periods
          Compare performance to competitors’
          Compare performance to industry averages




Copyright © 2009 Pearson Education, Inc.                Ch 9-30
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

Key Financial Ratios

      Return on investment (ROI)
      Return on equity (ROE)
      Profit margin
      Market share


Copyright © 2009 Pearson Education, Inc.   Ch 9-31
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

Key Financial Ratios

      Debt to equity
      Earnings per share (EPS)
      Sales growth
      Asset growth


Copyright © 2009 Pearson Education, Inc.   Ch 9-32
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

Qualitative Evaluation of Strategy

      Internal consistency of strategy
      Consistency with environment
      Appropriateness in view of resources




Copyright © 2009 Pearson Education, Inc.      Ch 9-33
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

Qualitative Evaluation of Strategy

      Acceptable degree of risk
      Appropriate time frame
      Workability of the strategy




Copyright © 2009 Pearson Education, Inc.   Ch 9-34
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control
   Balanced Scorecard


     – Evaluate strategies from 4 perspectives:
            1.    Financial performance
            2.    Customer knowledge
            3.    Internal business processes
            4.    Learning & growth


Copyright © 2009 Pearson Education, Inc.          Ch 9-35
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc.   Ch 9-36
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc.   Ch 9-37
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

Characteristics of Strategy Evaluation

      Economical
      Meaningful
      Generates useful information
      Timely information
      Provides accurate picture of events

Copyright © 2009 Pearson Education, Inc.     Ch 9-38
Publishing as Prentice Hall
        Strategy-Evaluation Assessment Matrix
    Have major            Have major
      changes               changes
    occurred in           occurred in          Has the firm
     the firm’s            the firm’s           progressed
      internal              external       satisfactorily toward
     strategic             strategic       achieving its stated
     position?             position?            objectives?              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

Copyright © 2009 Pearson Education, Inc.                                       Ch 9-39
Publishing as Prentice Hall
 Strategy Review, Evaluation,
 and Control

Contingency Planning


Alternative plans that can be put into effect if
certain key events do not occur as expected




Copyright © 2009 Pearson Education, Inc.       Ch 9-40
Publishing as Prentice Hall
Strategy Review, Evaluation,
and Control

Auditing

      Financial audits determine correspondence
       between assertions based on strategic plan
       & established criteria

      Environmental audits ensure sound and safe
       practices


Copyright © 2009 Pearson Education, Inc.      Ch 9-41
Publishing as Prentice Hall
Strategy Review, Evaluation,
and Control
21st Century Challenges in
Strategic Management

      Process is more an “art” than “science”
      Should strategies be visible or hidden from
       stakeholders?
      Should process be more top-down or
       bottom-up?


Copyright © 2009 Pearson Education, Inc.       Ch 9-42
Publishing as Prentice Hall
 For Review (Chapter 9)

      Key Terms & Concepts

                Advantage                    Consonance


                  Auditing                 Contingency Plans


         Balanced Score Card               Corporate Agility


               Consistency                    Feasibility


Copyright © 2009 Pearson Education, Inc.                       Ch 9-43
Publishing as Prentice Hall
 For Review (Chapter 9)

      Key Terms & Concepts

              Future Shock                   Revised EFE Matrix


    Management by Wandering                  Revised IFE Matrix
           Around

            Measuring
                                           Taking Corrective Action
    Organizational Performance

        Reviewing Underlying
         Bases of Strategy
Copyright © 2009 Pearson Education, Inc.                          Ch 9-44
Publishing as Prentice Hall
      All rights reserved. No part of this publication may be reproduced, stored in a
        retrieval system, or transmitted, in any form or by any means, electronic,
       mechanical, photocopying, recording, or otherwise, without the prior written
            permission of the publisher. Printed in the United States of America.




Copyright © 2009 Pearson Education, Inc.                                            Ch 9-45
Publishing as Prentice Hall

				
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