Chapter 9 Strategy Review, Evaluation, & Control

Strategy Evaluation, Review & Control 3 Basic Activities Examine the underlying bases of a firm’s strategy Compare expected to actual results Identify corrective actions to ensure that performance conforms to plans

Strategy Evaluation, Review & Control Consistency Rummelt’s 4 Criteria Consonance Feasibility Advantage

Strategy Evaluation, Review & Control Consistency Strategy should not present inconsistent goals & policies

Strategy Evaluation, Review & Control Consonance Need for strategies to examine sets of trends

Strategy Evaluation, Review & Control Feasibility Neither overtax resources or create unsolvable sub-problems

Strategy Evaluation, Review & Control Advantage Creation or maintenance of competitive advantage

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

Strategy Evaluation, Review & 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?

II. Measure Firm Performance I. Review Underlying Bases Evaluation Framework III. Take Corrective Actions Yes Differences? NO II. Measure Firm Performance Yes Differences? NO Continue present course

Strategy Evaluation, Review & Control Key Financial Ratios Return on investment (ROI) Return on equity (ROE) Profit margin Market Share

Strategy Evaluation, Review & Control Key Financial Ratios Debt to equity Earnings per share (EPS) Sales growth Asset growth

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

Primary Responsibility Balanced Scorecard Area of Objectives Measure or Target Time Expectation Primary Responsibility Customers   1 2 Managers/Employees Operations/Processes Community/Social Responsibility Business Ethics/Natural Environment Financial

Strategy-Evaluation Assessment Matrix Continue course Yes No Corrective actions 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?

Strategy Evaluation, Review & 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