strategy evaluation & control final.ppt
TRANSCRIPT
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Copyright 2007 Prentice HallCh 9-*Chapter 9Strategy Review, Evaluation, & ControlStrategic Management: Concepts & Cases 11th Edition Fred DavidPowerPoint Slides byAnthony F. ChelteWestern New England CollegeRevised byAzhar KazmiKFUPM Dhahran
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Copyright 2007 Prentice HallCh 9-*Strategic Management Process Model
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Develop Mission and Mission StatementsChap 2
Measure and Evaluate PerformanceChap 9
Implement StrategiesManagement IssuesChap 7
Generate, Evaluate and Select StrageiesChap 3
Implement StrategiesMarketing, Finance, accounting, R&D, MIS issuesChap 8
Perfrom External AuditChap 3
Establish Long-termObjectivesChap 4
Perform Internal AuditChap 4
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Copyright 2007 Prentice HallCh 9-* -- Strategies become obsolete-- Internal environments are dynamic-- External environments are dynamicStrategy Review, Evaluation & Control -- It is essential therefore that strategists systematically review, evaluate, and control the execution of strategy
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Copyright 2007 Prentice HallCh 9-*Vital to the organizations well-beingAlert management to potential/actual problems in a timely fashionErroneous strategic decisions can have severe negative impact on organizationsComplex and sensitive undertakingOveremphasis can be costly & counterproductiveToo much time spent measuring performance rather than in action and doing
Strategy Evaluation, Review, & ControlUnderstanding strategy evaluation
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Copyright 2007 Prentice HallCh 9-*Examine the underlying bases of a firms strategyCompare expected to actual resultsIdentify corrective actions to ensure that performance conforms to plansStrategy Evaluation, Review & ControlThree Basic Activities
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlHave the firms assets increased?Has there been an increase in profitability?Has there been an increase in sales?Has there been an increase in productivity?Have profit margins, ROI, and EPS ratios increased?Strategy evaluation is often an appraisal of performance. Strategists ask questions like:
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlIncrease in environments complexityDifficulty predicting future with accuracyIncreasing number of variablesRate of obsolescence of plansDomestic and global eventsDecreasing time span for planning certaintyDifficulties in Strategy Evaluation
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlConsonanceFeasibilityAdvantageRummelts 4 Criteria forStrategy evaluationConsistency
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlConsistencyStrategy should not present inconsistent goals and policies. There is inconsistency when:Persistence of issues-based (not personality-based) conflictsSuccess for one department means failure for anotherPolicy problems are frequently referred to the top for resolutionConsonanceNeed for strategies to examine sets of trends rather than a single trendNeed a holistic view (internal and external environments)
FeasibilityNeither overtax resources or create unsolvable sub-problemsCan it be done with the given or available resources?
AdvantageCreation or maintenance of competitive advantageIf it doesn't create a competitive advantage then whats the point?
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlInitiate managerial questioningTrigger review of objectives and valuesStimulate creativity in generating alternativesStrategy Evaluation Should --
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlDevelop a revised EFE MatrixWhat changed in the external environment?
Develop a revised IFE MatrixWhat internal changes occurred in the organization ?Review of underlying bases of strategy --
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Copyright 2007 Prentice HallCh 9-*A strategy evaluation matrix
Have major changes occurred in the firms internal strategic positionHave Mjor changes occurred in firms external strategic positionHas the firm progressed satisfactorily towards achieving its stated objectivesResultNoNoNoTake corrective actionsYesYesYesCorrective actionsYesYesNoCorrective actionsYesNo YesCorrective actionsYesNoNoCorrective actionsNoYesYesCorrective actionsNoYesYesCorrective actionsNoNoYesContinue present strategic course
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlCompetitors reaction to strategyCompetitors change in strategyCompetitors changes in strengths & weaknessesReasons for competitors strategic changeReasons for competitors successful strategiesCompetitors present market positions & profitabilityPotential for competitor retaliationPotential for cooperation with competitorsReview effectiveness of strategy --
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlAre strengths still strengths?Have we added additional strengths?Are weaknesses still weaknesses?Have we developed other weaknesses?
Monitor Strengths & Weaknesses; Opportunities & Threats
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlAre opportunities still opportunities?Have other opportunities developed?Are threats still threats?Have other threats emerged?Are we vulnerable to hostile takeover?
Monitor Strengths & Weaknesses; Opportunities & Threats
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Copyright 2007 Prentice HallCh 9-*Evaluation FrameworkContinue present courseDifferences?Differences?YesNOYesNO
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlCompare expected to actual resultsInvestigate deviations from planEvaluate individual performanceProgress toward stated objectivesMeasuring Organizational Performance
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlFinancial RatiosCompare performance over different periodsCompare performance to competitorsCompare performance to industry averages
Quantitative Criteria for Strategy Evaluation
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlReturn on investment (ROI)Return on equity (ROE)Profit marginMarket ShareDebt to equityEarnings per share (EPS)Sales growthAsset growth
Typical financial ratios used in strategy evaluation
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlInternal consistency of strategyConsistency with environmentAppropriateness in view of resourcesAcceptable degree of riskAppropriate time frameWorkability of the strategy
Qualitative Evaluation of Strategy
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & Control -- Evaluate strategies from 4 perspectives:1. Financial performance2. Customer knowledge3. Internal business processes4. Learning & growthBalanced Scorecard
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Copyright 2007 Prentice HallCh 9-*Balanced Scorecard
Area of ObjectivesMeasure or TargetTime ExpectationPrimary ResponsibilityCustomers12Managers/Employees12Operations/Processes12Community/Social Responsibility12Business Ethics/Natural Environment12Financial12
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlEconomicalMeaningfulGenerates useful informationTimely informationProvides accurate picture of events
Characteristics of strategy evaluation
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Copyright 2007 Prentice HallCh 9-*Strategy-Evaluation Assessment Matrix
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & Control Contingency Planning: Alternative plans that can be put into effect if certain key events do not occur as expected
Some examples of situations requiring contingency planning:If a major competitor withdraws from particular markets as intelligence reports indicate, what actions should the firm take?If our sales objectives are not reached, what actions should firm take to avoid losses?If demand for new product exceeds plans, what actions should firm take to meet higher demand?If a new technological development makes new product obsolete sooner than expected, what actions should firm take?
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlFinancial audits determine correspondence between assertions based on strategic plan and established criteriaRequired for publicly traded companies
Environmental audits insure sound and safe practicesAuditing
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Copyright 2007 Prentice HallCh 9-*Strategy Evaluation, Review & ControlIs the process of strategic management more an art than science or vice versa? (Your text says it is more science than art)Should strategies be visible or hidden from stakeholders? (Your text says that they should hidden only when secrecy gives some competitive advantage)Should process be more top-down or bottom up (Current research suggests bottom-up)21st Century Challenges in Strategic Management
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