Ch 9-1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter 9 Strategy Review, Evaluation, and Control Strategic Management: Concepts & Cases 12 th Edition Fred David

Ch 9-2 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall “Organizations are most vulnerable when they are at the peak of their success.” – R. T. Lenz Strategy Evaluation

Ch 9-3 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall – Strategies become obsolete – Internal environments are dynamic – External environments are dynamic Strategy Review, Evaluation, and Control

Ch 9-4 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Vital to the organization’s well-being Alert management to potential/actual problems in a timely fashion Erroneous/mistaken strategic decisions can have severe negative impact on organizations Strategy Review, Evaluation, and Control Strategy Evaluation

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

Ch 9-6 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Complex & sensitive undertaking Overemphasis can be costly & counterproductive Strategy Review, Evaluation, and Control Strategy Evaluation

Ch 9-7 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control Have assets increased? Increase in profitability? Increase in sales? Increase in productivity? Profit margins, ROI, and EPS ratios increased? Appraisal of Strategic Performance

Ch 9-8 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control: Evaluation Criteria Consonance Consistency Feasibility Advantage Rumelt’s 4 Criteria

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

Ch 9-10 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Consonance 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.

Ch 9-11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Feasibility 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.

Ch 9-12 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control Creation or maintenance of competitive advantage Advantage

Ch 9-13 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control 1. Increase in environment’s complexity 2. Difficulty predicting future with accuracy 3. Increasing number of variables Difficulties in Strategy Evaluation

Ch 9-14 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control 4. Rate of obsolescence of plans 5. Domestic and global events 6. Decreasing time span for planning certainty Difficulties in Strategy Evaluation

Ch 9-15 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control Initiate managerial questioning Trigger review of objectives & values Stimulate creativity in generating alternatives Strategy Evaluation Should –

Ch 9-16 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control Develop revised EFE Matrix Develop revised IFE Matrix Review of Underlying Bases of Strategy –

Ch 9-17 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control 1. Competitors’ reaction to strategy 2. Competitors’ change in strategy 3. Competitors’ changes in strengths & weaknesses 4. Reasons for competitors’ strategic change Review Effectiveness of Strategy –

Ch 9-18 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control 5. Reasons for competitors’ successful strategies 6. Competitors’ present market positions & profitability 7. Potential for competitor retaliation 8. Potential for cooperation with competitors Review Effectiveness of Strategy –

Ch 9-19 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 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

Ch 9-20 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 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

Ch 9-21 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Ch 9-22 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Ch 9-23 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control Compare expected to actual results Investigate deviations from plan Evaluate individual performance Progress toward stated objectives Measuring Organizational Performance

Ch 9-24 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 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

Ch 9-25 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control Return on investment (ROI) Return on equity (ROE) Profit margin Market share Key Financial Ratios

Ch 9-26 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control Internal consistency of strategy Consistency with environment Appropriateness in view of resources Qualitative Evaluation of Strategy

Ch 9-27 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control Acceptable degree of risk Appropriate time frame Workability of the strategy Qualitative Evaluation of Strategy

Ch 9-28 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 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

Ch 9-29 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Ch 9-30 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Ch 9-31 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control Economical Meaningful Generates useful information Timely information Provides accurate picture of events Characteristics of Strategy Evaluation

Ch 9-32 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy-Evaluation Assessment Matrix Continue courseYesNo Corrective actionsNoYesNo Corrective actionsYes No Corrective actionsNo Yes Corrective actionsYesNoYes Corrective actionsNoYes Corrective actionsYes Corrective actionsNo 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?

Ch 9-33 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control Alternative plans that can be put into effect if certain key events do not occur as expected Contingency Planning

Ch 9-34 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Strategy Review, Evaluation, and Control Process is more an “art” than “science” Should strategies be visible or hidden from stakeholders? Should process be more top-down or bottom-up? 21 st Century Challenges in Strategic Management

Ch 9-35 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Review Why has strategy evaluation become so important in business today? Answer: Strategy evaluation is critically important today because internal and external factors often change quickly and dramatically. Key factors need to be monitored during strategy-evaluation activities. For example, technology is shortening the product life cycle in nearly all industries. The low value of the dollar is opening up many foreign markets to American exports and is fostering foreign acquisition of U.S. assets and companies.

Ch 9-36 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Review As owner of a local, independent supermarket, explain how you would evaluate the firm’s strategy. Answer: For small businesses such as a local supermarket, strategy evaluation is less formal than in large organizations. However, both qualitative and quantitative criteria should be used to evaluate the small supermarket’s strategies, because large supermarket stores that offer one- stop shopping for virtually everything are proliferating across the country.

Ch 9-37 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Review Under what conditions are corrective actions not required in the strategy- evaluation process? Answer: The only time corrective actions would not be required in strategy evaluation is when major changes have not occurred in the firm’s internal or external strategic position and the firm is progressing satisfactorily towards achieving its stated objectives.

Ch 9-38 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Review Identify the types of organizations that may need to evaluate strategy more frequently than others. Justify your choices. Answer: Organizations that compete in more turbulent industries may need to evaluate strategies more often than others. Several examples of turbulent industries are the computer industry, the communications industry, and the aerospace industry.