1. CHAPTER 11 Evaluation & Control
STRATEGIC MANAGEMENT & BUSINESS POLICY 11TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
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2. Evaluation and Control
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3. Evaluation and Control Information –
Performance data
Activity reports
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4. Measuring performance –
Evaluation and Control
Measuring performance –
The end result of activity
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5. Types of Controls – Behavior controls
Evaluation and Control
Types of Controls –
Behavior controls
Some examples of behavior controls are company procedures, quotas of sales calls to potential customers, and rules regarding attendance and tardiness.
Behavior controls are very appropriate when results are hard to measure and a clear cause-effect exists between activities (behaviors) and results.
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6. Types of Controls – Output controls
Evaluation and Control
Types of Controls –
Output controls
What is to be accomplished; focus on end result through performance targets.
Some examples of output controls are sales quotas, cost reduction or profit objectives, and surveys of customer satisfaction.
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7. Types of Controls – Input controls
Evaluation and Control
Types of Controls –
Input controls
Resources – skills, abilities, values, motives.
Input controls are the least useful and are most appropriate when output is difficult to measure and there is no clear cause-effect relationship between behavior and performance (such as in college teaching).
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8. Types of Controls – Behavior controls ISO 9000 Standards Series
Evaluation and Control
Types of Controls –
Behavior controls
ISO 9000 Standards Series
ISO Standards Series
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9. Types of Controls – Activity Based Costing (ABC)
Evaluation and Control
Types of Controls –
Activity Based Costing (ABC)
Allocation of indirect and fixed costs to individual products or product lines
Based on value-added activities
More accurate charge of costs
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10. Types of Controls – Enterprise Risk Management (ERM) Identify risks
Evaluation and Control
Types of Controls –
Enterprise Risk Management (ERM)
Identify risks
Rank risks
Measure risks
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11. Primary Measures of Performance –
Evaluation and Control
Primary Measures of Performance –
Traditional Financial Measures
Return on investment (ROI)
Earnings per share (EPS)
Return on equity (ROE)
Operating cash flow
Free cash flow
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12. Primary Measures of Performance –
Evaluation and Control
Primary Measures of Performance –
Shareholder
Shareholder value
Economic value added (EVA)
Market value added (MVA)
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13. Is EVA really an improvement over ROI, ROE, or EPS?
 Economic value added (EVA) is being increasingly recommended as an improvement over traditional measures because of EVA's strong relationship to a company's stock price. It uses stock price to measure the difference between the pre-strategy and post-strategy value of a corporation. However, EVA is often difficult to calculate. It is for this reason that more simpler measures like ROI, ROE, and EPS continue to have widespread usage.
Another limitation of EVA is this its concern with only one aspect of the task environment - the stockholder. The conclusion seems clear. There is no one best measure or group of measures.
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14. Is the evaluation and control process appropriate for a corporation that emphasizes creativity?
 Control is not ignored. Data is just not collected on intermediate activities such as time in the office or manner of dress.
The emphasis tends to be on the end-result of activities rather than upon the activities themselves. To be successful, they need both talent and discipline.
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15. Market value added (MVA)
The difference between market value of corporation and the capital contributed by shareholders and lenders.
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16. Primary Measures of Performance –
Evaluation and Control
Primary Measures of Performance –
Balanced Scorecard Approach
Financial
Customer
Internal business perspective
Innovation and learning
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17. Evaluation and Control
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18. Evaluating Top Management & Board –
Evaluation and Control
Evaluating Top Management & Board –
Chairman-CEO Feedback Instrument
Management Audit
Strategic Audit
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19. Divisional & Functional Performance –
Evaluation and Control
Divisional & Functional Performance –
Responsibility Centers
Standard cost centers. Based on historical data
Revenue centers.
Expense centers profit centers
Investment centers. Difference between revenues and cost.
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20. Evaluation and Control
Using Benchmarking –
Continual process of measuring products, service, and practices against the toughest competitors or those companies recognized as industry leaders
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21. International Measurement Issues –
Evaluation and Control
International Measurement Issues –
International transfer pricing
Repatriation of profit
Piracy: copying top products and sell abroad
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22. Strategy Review
The firm’s internal and external environments are dynamic. Therefore, the best conceived and implemented strategies become obsolete!

23. Strategy Evaluation—the 3 Basics
Strategy Review
Strategy Evaluation—the 3 Basics
Examining the underlying basis of the firm’s strategy
Comparing actual to expected results
Taking corrective action to address performance gaps

24. Effective Strategy Evaluation
Strategy Review
Effective Strategy Evaluation
Adequate and timely feedback
The cornerstone of effective evaluation

25. Strategy Review Strategy Evaluation Must have both
Short- & long-term focus

26. Strategy Review Four Criteria (Richard Rumelt): Consistency الاتساق
Consonance=fit or harmony التكيف
Feasibility يمكن التحقق
Advantage

27. Consistency=uniformity
A strategy should not present inconsistent goals and policies
If managerial problems continue despite changes in personnel and are issue based, then strategies may be inconsistent.
If success for one department means failure for another department, then strategies may be inconsistent.
If policy problems/issues continue to be brought to the top for resolution, then strategies may be inconsistent.

28. Consonance= adapt, fit
Strategists need to examine sets of trends as well as individual trends in evaluating strategies.
Strategy must represent an adaptive response to the external environment and critical changes occurring within it.
Most trends are the result of interactions among other trends.
Difficult in matching key internal and external factors in formulation of strategy.

29. Feasibility
Strategy must neither overtax available resources nor create unsolvable subproblems.
Can the strategy be attempted within the physical, human and financial resources of the enterprise?
Limitation on strategic choice imposed by individual and organizational capabilities must be considered.
Important to examine whether in the past the organization has demonstrated the capabilities, abilities, competencies, skills, and talents to carry out strategy.

30. Strategy Review Contemporary Strategy Evaluation Difficulties
Increase in environment’s complexity
Difficulty in predicting the future with accuracy
Increasing number of variables
Contemporary
Strategy
Evaluation
Difficulties

31. Strategy Review Contemporary Strategy Evaluation Difficulties
Rate of obsolescence of even the best plans
Increase in domestic and world events
Decreasing time span for which planning can be done with any certainty
Contemporary
Strategy
Evaluation
Difficulties

32. Strategy Review Process of Evaluating Strategies:
Should initiate managerial questioning of expectations and assumptions
Should trigger a review of objectives and values
Should stimulate creativity in generating alternatives and criteria of evaluation

33. I. Review Bases of Strategy
Develop a Revised Evaluation Framework Matrix:
How have competitors reacted to our strategies?
How have competitors’ strategies changed?
Have major competitors’ strengths and weaknesses changed?

34. I. Review Bases of Strategy
Why are competitors making certain strategic changes?
Why are some competitors’ strategies more successful than others?
How satisfied are our competitors with their present market positions and profitability?

35. I. Review Bases of Strategy
How far can our major competitors be pushed before retaliating?
How could we more effectively cooperate with our competitors?

36. I. Review Bases of Strategy
Key Questions in Evaluating Strategy:
Are our internal strengths still strengths?
Have we added other internal strengths?
Are our internal weaknesses still weaknesses?

37. I. Review Bases of Strategy
Do we now have other internal weaknesses?
Are our external opportunities still opportunities?
Are there now external opportunities?

38. I. Review Bases of Strategy
Are our external threats still threats?
Are there now other external threats?
Are we vulnerable to a hostile takeover?