Johnsen & Scholes Chapter 8 Fred Wenstøp

2 Main evaluation criteria  Suitability qualitative assessment of how well the strategic alternatives fit with the circumstances of the organisation quantitative ranking of alternatives  Acceptability will the expected performances be acceptable to the stakeholders?  Feasibility are the available resources sufficient?

Fred Wenstøp3 Theoretical structure  Suitability of fit ranks lexicographically first J&S recommends that the suitability test is performed first to get rid of unsuitable options.  Screening the options according to suitability will produce a rank order J&S say precious little about what performance criteria to use beside ROC, or how to weight the criteria  Acceptability and feasibility must be considered as frames producing boundaries for the viable set of options

Fred Wenstøp4 Suitability as fit  Suitability with regard to: degree of fit with life cycle stage (Life Cycle Analysis) viability of positioning (Life Cycle Analysis) financial performance (Business Profile) improvement of balance of activities (Portefolio Analysis) value for money (Value Chain Analysis) exploitation of core competencies (Value chain Analysis)

Fred Wenstøp5 Screening options for suitability  Screening criteria (loosely) key factors in the environment resources stakeholders’expectations (ROC)  The need for weighting is mentioned

Fred Wenstøp6 Acceptability (the three first criteria are alternatives, not complements)  Profitability Return on capital employed, ROCE = PBIT/(OF + LTL) Payback period Discounted cash flows  Benefit/cost efficiency  Shareholder value  Risk

Fred Wenstøp7 Feasibility  Types of analyses Funds flow analysis, Liquidity (financial) Break-even analysis (financial) Resource deployment analysis Detailed analysis for the deployment of key resources and competences for each strategy