Copyright 2005 Prentice Hall1 Bus 411 Day 14
Copyright 2007 Prentice Hall Ch 6 -2 Agenda Assignment 4 Corrected 1 A, 4 B’s, 2 MIA’s, and 1 late Assignment 5 Posted (Last One!) Due March 20 (next class) SWOT, SPACE, BCG and QSPM Matrices for Google Mid term Exam Posted Due March 24 20 Short essays Finish Discussion on Implementing Strategies Discussion on Strategic Review, Evaluation and Control
Copyright 2007 Prentice Hall Ch 6 -3 Case Study Teams Team 1 Karen Geneice Lee James Team 2 Takefumi Matt Darius Danielle
Copyright 2007 Prentice Hall Ch 6 -4 Timeline (tentative) Today Finish Chapter 8 Chapter 9 March 20 Assignment 5 Due How to present a case study Tony Case Study One Apple Computer Team work if time allows March 24 Midterm due Team work (no class) March 27 Team Work (no class) March 31 Team 1 Case 19 Jet Blue April 3 Team 2 Case 20 AirTran April 7 Tony Case 27 Kroger April 10 Team 1 Case 26 Best Buy April 14 Team 2 Case 28 Home Depot April 17 Tony Case 23 Harrah’s April 21 Team 1 Case 24 Royal Caribbean Cruises April 24 Team 2 Case 25 Web Reservations International April 28 Team 1 Case 21 USA truck May 1 Team 2 Case 22 Yellow Roadway Corp. Take home final assigned May 10AM In-class final May 9 by 3 PM Take home final
Copyright 2007 Prentice Hall Ch 6 -5
Copyright 2007 Prentice Hall Ch 6 -6
Copyright 2007 Prentice Hall Ch 6 -7 Allow an organization to examine the expected results of various actions and approaches Finance/Accounting Issues Projected Financial Statements
Copyright 2007 Prentice Hall Ch Prepare income statement before balance sheet (forecast sales) 2. Use percentage of sales method to project CoGS & expenses 3. Calculate projected net income Finance/Accounting Issues Steps in Preparing Projected Financial Statements
Copyright 2007 Prentice Hall Ch Subtract dividends to be paid from Net Income and add remaining to Retained Earnings 5. Project balance sheet items beginning with retained earnings 6. List comments (remarks) on projected statements Finance/Accounting Issues Steps in Preparing Projected Financial Statements (cont’d)
Copyright 2007 Prentice Hall Ch Projected Income Statement for Litten Company (in millions) Prior Year 2005 Projected Year 2006Remarks Projected Income Statement Sales % increase Cost of Goods Sold % of sales Gross Margin Selling Expense % of sales Administrative Expense57.505% of sales EBIT Interest33.00 EBT Taxes % rate Net Income69.75 Dividends25.00 Retained Earnings44.75
Copyright 2007 Prentice Hall Ch Details how funds will be obtained and spent for a specified period of time. Finance/Accounting Issues Financial Budget
Copyright 2007 Prentice Hall Ch Cash budgets Operating budgets Sales budgets Profit budgets Factory Budgets Expense Budgets Divisional budgets Variable budgets Flexible budgets Fixed budgets Finance/Accounting Issues Types of Budgets
Copyright 2007 Prentice Hall Ch Central to strategy implementation – integrative, intensive, & diversification strategies often implemented through acquisitions of other firms Finance/Accounting Issues Evaluating Worth of a Business
Copyright 2007 Prentice Hall Ch What a firm owns 1. Total assets – liabilities (discount overvalued assets) 2. Stockholders equity 2. What a firm earns 1. 5 X times annual earnings (tax consequences) 3. What a firm will bring in the market 1. Outstanding shares Finance/Accounting Issues Evaluating Worth of a Business: 3 Basic Approaches
Copyright 2007 Prentice Hall Ch Worth of a Business Analysis (see 8-8) Southwest Airlines Stockholders’ Equity:$ 5,524 Net Income: 313 Stock Price: EPS:.45 Shares Outstanding 784 Company Worth Analysis Stockholders Equity $ 5,524 Net Income x 5 1,565 Share Price/EPS x NI 10,920 # Shares x Share Price 12,309
Copyright 2007 Prentice Hall Ch Research & Development Issues -- New products and improvement of existing products that allow for effective strategy implementation
Copyright 2007 Prentice Hall Ch Level of support constrained by resource availability Technological improvements shorten product life cycles Research & Development Issues Constraints
Copyright 2007 Prentice Hall Ch st firm to market new technological products 2. Innovative imitator of successful products 3. Low-cost producer of similar but less expensive products Research & Development Issues 3 Major R&D approaches to implementing strategies
Copyright 2007 Prentice Hall Ch Management Information Systems (MIS) Issues -- Information is the basis for understanding the firm. One of the most important factors differentiating successful from unsuccessful firms
Copyright 2007 Prentice Hall Ch Information collection, retrieval, & storage Keeping managers informed Coordination of activities among divisions Allow firm to reduce costs MIS Issues Functions of MIS
Copyright 2007 Prentice Hall Ch Chapter 9 Strategy Review, Evaluation, & Control Strategic Management: Concepts & Cases 11 th Edition Fred David
Copyright 2007 Prentice Hall Ch Strategic Management Process Model
Copyright 2007 Prentice Hall Ch Organizations are most vulnerable when they are at the peak of their success -- R.T. Lenz Strategy Evaluation
Copyright 2007 Prentice Hall Ch Strategies become obsolete -- Internal environments are dynamic -- External environments are dynamic Strategy Review, Evaluation, & Control
Copyright 2007 Prentice Hall Ch Vital to the organization’s well-being Alert management to potential/actual problems in a timely fashion Erroneous strategic decisions can have severe negative impact on organizations Strategy Review, Evaluation, & Control Strategy Evaluation
Copyright 2007 Prentice Hall Ch Examine the underlying bases of a firm’s strategy 1. Did we do a careful analysis? 2. Did things change? 2. Compare expected to actual results 3. Identify corrective actions to ensure that performance conforms to plans Strategy Review, Evaluation, & Control 3 Basic Activities
Copyright 2007 Prentice Hall Ch Complex & sensitive undertaking Overemphasis can be costly & counterproductive Too much time spent measuring rather than doing Strategy Review, Evaluation, & Control Strategy Evaluation
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Have assets increased Increase in profitability Increase in sales Increase in productivity Profit margins, ROI, & EPS ratios increased Appraisal of Strategic Performance
Copyright 2007 Prentice Hall Ch Strategy Evaluation, Review & Control Consonance Consistency Feasibility Advantage Rumelt’s 4 Criteria
Copyright 2007 Prentice Hall Ch Strategy Evaluation, Review & Control Strategy should not present inconsistent goals & policies Issue and not “people” problems Success for one department means failure for another Policy problems rise to the top Consistency
Copyright 2007 Prentice Hall Ch Strategy Evaluation, Review & Control Consonance Consistency Feasibility Advantage Rumelt’s 4 Criteria
Copyright 2007 Prentice Hall Ch Strategy Evaluation, Review & Control Need for strategies to examine sets of trends Need a Holistic view (internal and external) Consonance
Copyright 2007 Prentice Hall Ch Strategy Evaluation, Review & Control Consonance Consistency Feasibility Advantage Rumelt’s 4 Criteria
Copyright 2007 Prentice Hall Ch Strategy Evaluation, Review & Control Neither overtax resources or create unsolvable sub-problems Can it be done with the given or available resources? Feasibility
Copyright 2007 Prentice Hall Ch Strategy Evaluation, Review & Control Consonance Consistency Feasibility Advantage Rumelt’s 4 Criteria
Copyright 2007 Prentice Hall Ch Strategy Evaluation, Review & Control Creation or maintenance of competitive advantage If it doesn't create a competitive advantage then what’s the point? Advantage
Copyright 2007 Prentice Hall Ch Process of strategic evaluation Management should be continually aware of progress Management by wandering around Don't wait for information get to you, go out and get the information Things Change
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control 1. Increase in environment’s complexity 2. Difficulty predicting future with accuracy 3. Increasing number of variables Difficulties in Strategy Evaluation
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control 4. Rate of obsolescence of plans 5. Domestic and global events 6. Decreasing time span for planning certainty Difficulties in Strategy Evaluation
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Initiate managerial questioning Trigger review of objectives & values Stimulate creativity in generating alternatives Strategy Evaluation Should --
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Develop revised EFE Matrix Develop revised IFE Matrix Review of Underlying Bases of Strategy --
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & 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 --
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & 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 --
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Are strengths still strengths? Have we added additional strengths? Are weaknesses still weaknesses? Have we developed other weaknesses? Monitor Strengths & Weaknesses; Opportunities & Threats
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & 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
Copyright 2007 Prentice Hall Ch 6 -46
Copyright 2007 Prentice Hall Ch Evaluation Framework Review Underlying Bases New IFE & EFE Continue present course Measure Firm Performance Take Corrective Actions Differences? Yes NO Yes NO
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Compare expected to actual results Investigate deviations from plan Evaluate individual performance Progress toward stated objectives Measuring Organizational Performance
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Financial Ratios Compare performance over different periods Compare performance to competitors Compare performance to industry averages Quantitative Criteria for Strategy Evaluation
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Return on investment (ROI) Return on equity (ROE) Profit margin Market Share Key Financial Ratios
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Debt to equity Earnings per share (EPS) Sales growth Asset growth Key Financial Ratios
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Internal consistency of strategy Consistency with environment Appropriateness in view of resources Qualitative Evaluation of Strategy
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Acceptable degree of risk Appropriate time frame Workability of the strategy Qualitative Evaluation of Strategy
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control -- Evaluate strategies from 4 perspectives: 1. Financial performance 2. Customer knowledge 3. Internal business processes 4. Learning & growth Balanced Scorecard
Copyright 2007 Prentice Hall Ch Balanced Scorecard Area of ObjectivesMeasure or TargetTime ExpectationPrimary Responsibility Customers 1 2 Managers/Employees 1 2 Operations/Processes 1 2 Community/Social Responsibility 1 2 Business Ethics/Natural Environment 1 2 Financial 1 2
Copyright 2007 Prentice Hall Ch 6 -56
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Economical Meaningful Generates useful information Timely information Provides accurate picture of events Characteristics of Strategy Evaluation
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Alternative plans that can be put into effect if certain key events do not occur as expected Contingency Planning
Copyright 2007 Prentice Hall Ch Strategy Review, Evaluation, & Control Financial audits determine correspondence between assertions based on strategic plan & established criteria Environmental audits insure sound and safe practices Auditing
Copyright 2007 Prentice Hall Ch Strategy Evaluation, Review & Control Process is more an “art” than “science” You can learn the “science”, the “art” part requires experiences and practice Should strategies be visible or hidden from stakeholders Only when secrecy gives some competitive advantage Should process be more top-down or bottom up Current research suggests bottom-up 21 st Century Challenges in Strategic Management