Johnson Controls Our commitment to exceed the expectations of customers is the engine for our growth, and is at the core of our success. Technology adds value to our products and services, giving customers additional reasons to choose Johnson Controls. Our goal is to enhance shareholder’s value. Employee dedication to our customers is key to continued, profitable growth.

Outsourcing is the largest source of growth for our company, benefiting our automotive, plastics,,batteries and controls businesses. Whether it’s doing more within an automobile or a building, it adds up to a multi-billion dollar opportunity for Johnson Controls. Our customers expect Johnson Controls to be responsive to their needs anywhere in the world. Expanding our reach into emerging international markets like the Asia-Pacific region, Eastern Europe and South America is creating new opportunities for growth.

Chapter 9 Strategy Review, Evaluation, and Control

Chapter Objectives Describe a practical framework for evaluating strategies Explain why strategy evaluation is complex, sensitive, and yet essential for organizational success Discuss the importance of contingency planning in strategy evaluation

Nature of Strategy Evaluation Examining the underlying bases of a firm’s strategies Comparing forecasted results with actual results Taking corrective actions to ensure that performance conforms to plans. Adequate, accurate, and timely feedback is the cornerstone.

Importance of Strategy Evaluation Organizations face dynamic environments –External and internal factors changing quickly Successful organizations should never be lulled into complacency.

Examples of Organizational Declines (1995) Examples of Companies That Had More Than a 100% Drop in Revenues - Thiokol - Trans World Airlines - State Farm Group - Pennzoil - Bell Atlantic - Tyson Foods

Strategy Evaluation is Difficult Instability in world economies Shorter product development and product life cycles Constant technological advancements More competitors; fewer regulated industries International competition

The Process of Evaluating Strategies Necessary for all sizes and kinds of organizations. Should be performed on a continuing basis. Successful strategies may take years, so strategists need to combine patience with a willingness to take corrective action

Strategy Evaluation Framework

A Strategy - Evaluation Assessment Matrix (Table 9-3) Have Major Changes Occurred in the Firm’s Internal Strategic Position? Have Major Changes Occurred in the Firm’s External Strategic Position? Has the Firm Progressed Satisfactorily toward Achieving Its Stated Objectives? Result No NoNo Take Corrective Action Yes Yes Yes Take Corrective Action Yes Yes No Take Corrective Action Yes No Yes Take Corrective Action Yes No No Take Corrective Action No Yes Yes Take Corrective Action No Yes No Take Corrective Action No No Yes Continue present strategic course

Activity One: Review Underlying Bases of Strategy Evaluate internal situationEvaluate external situation Compare revised versus existing InternalCompare revised versus existing ExternalAudit Information Do significant differences occur? No Activity Two: Measure Organizational Performance: Compare planned versus actual progress toward meeting stated objectives Do significant differences occur? No Continue present course Yes Activity Three: Take Corrective Actions A Strategy-Evaluation Framework (Figure 9-2)

Activity One: Reviewing Bases of Strategy Re-examine external –How have competitors reacted to our strategies? –How could we more effectively cooperate with competitors? Re-examine internal –Have we added strengths and/or corrected weaknesses? Very important to continually be monitoring

Compare Past Periods and to Industry Averages for the Company By Product By Division By Department By Geographic Area By Salesperson By Strategic Business Unit By Product By Division By Department By Geographic Area By Salesperson By Strategic Business Unit Measure Organizational Performance Compare to Pro Forma Projections Annual Objectives Long Term Obj.

Activity Two: Measuring Organizational Performance Quantitative measures –most commonly used are financial ratios Return on investment; return of equity; profit margin; market share; debt to equity; earnings per share; sales growth; asset growth. Intuitive judgments of performance Internal consistency of strategies Acceptable level of risk

Activity Three: Taking Corrective Actions Making changes to reposition a firm competitively for the future.

Take Corrective Action Revise Mission Alter Goals and Objectives Establish New Goals and Objectives Alter Strategies Establish New Policies Hire New Employees or Managers Close or Open New Facilities

Take Corrective Action (cont.) Expand or Diversify Institute Advertising Campaign Purchase New Equipment Allocate resources differently Countless Other Actions May Be Needed

Characteristics of an Effective Strategy Evaluation System Simple, Not Cumbersome of Restrictive Economical Meaningful Provides Managers with Useful Information Provides Timely Information Provides a True Picture of What is Happening Does Not Dominate Decisions Fosters Mutual Understanding and Trust Developed With Input From Those To Be Evaluated

Contingency Planning Alternative plans that can be put into effect if certain key events do not occur as expected. –Acquisitions: BT and MCI Alternative strategies not selected can serve as contingency plans. Sometimes unexpected opportunities occur.

The End The Beginning and