Strategic management

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Ch 9 -1
Chapter 9
Strategy Review, Evaluation, and Control
Strategic Management:
Concepts & Cases
13th Edition
Fred David

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Ch 9 -2

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Ch 9 -3
The best formulated and best implemented strategies
become obsolete as a firm’s external and internal
environments change. Therefore, it is essential for
strategists to systematically review, evaluate, and control
the execution of strategies.
Strategy Review, Evaluation,
and Control

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Ch 9 -4
Strategy Review, Evaluation, and
Control
Strategy Evaluation is vital to an organization’s well
being. Timely evaluations can alert management to
potential or actual problems before a situation
becomes critical.
Strategy Evaluation includes three basic activities:
(1) Examining the underlying bases of a firm’s
strategy.
(2) Comparing expected results to actual results.
(3) Taking corrective actions to ensure that
performance conforms to plans.

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Ch 9 -5
Strategy Review, Evaluation, and
Control
Strategy Evaluation
 Adequate and timely feedback is the
cornerstone of effective Strategy Evaluation.
 Strategy Evaluation is important because
organizations face dynamic environments in
which key external and internal factors can
change quickly and dramatically.
 Strategy Evaluation is essential to ensure that
the stated objectives of an organization are
being achieved.

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Strategy Review, Evaluation,
and Control
Consonance
Consistency
Feasibility
Advantage
Rumelt’s
4 Criteria

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

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Strategy Review, Evaluation,
and Control
 Need for strategists to examine sets of
trends, as well as individual trends
Consonance

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Ch 9 -9
Strategy Review, Evaluation,
and Control
 Neither overtax resources nor create
unsolvable subproblems
Feasibility

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

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Strategy Review, Evaluation,
and Control
 Initiate managerial questioning of expectations and
assumptions
 Trigger a review of objectives & values
 Stimulate creativity in generating alternative strategies
and formulating criteria for evaluation
 Be performed on a continuing basis, rather than at the
end of specified periods of time or just after problems
occur.
Strategy Evaluation Should –

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Strategy Review, Evaluation,
and Control
 Develop revised IFE Matrix
 Develop revised EFE Matrix
Review of Underlying Bases of Strategy –

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Strategy Review, Evaluation,
and Control
 Are our strengths still strengths?
 Has our organization added additional strengths?
 Are our weaknesses still weaknesses?
 Has our organization developed other
weaknesses?
Monitor Strengths & Weaknesses;
Opportunities & Threats

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Strategy Review, Evaluation,
and Control
 Are our opportunities still opportunities?
 Have other opportunities developed?
 Are our threats still threats?
 Have other threats emerged?
Monitor Strengths & Weaknesses;
Opportunities & Threats

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Ch 9 -15
Strategy Evaluation Framework
 Table 9-3 summarizes strategy evaluation
activities in terms of key questions that should
be addressed, alternative answers to those
questions, and appropriate actions for managers
to take. Note that corrective actions are needed
except when (1) external and internal factors
have not changed significantly and (2) the firm is
making satisfactory progress toward achieving
its objectives.
 Relationships among strategy evaluation
activities are illustrated in Figure 9-2.

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Ch 9 -16

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Ch 9 -17

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Strategy Review, Evaluation,
and Control
 Compare expected to actual results
 Investigate deviations from plan
 Evaluate individual performance
 Examine progress toward stated objectives
Measuring Organizational Performance

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Strategy Review, Evaluation,
and Control
Strategists use financial ratios to:
 Compare a firm’s performance over different time
periods
 Compare a firm’s performance to competitors’
performance
 Compare a firm’s performance to industry averages
Quantitative Criteria for Strategy Evaluation

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Strategy Review, Evaluation, and Control
 Return on
investment (ROI)
 Return on equity
(ROE)
 Profit margin
 Market share
 Debt to equity
 Earnings per share
(EPS)
 Sales growth
 Asset growth
Some key financial ratios that are useful for evaluating strategies
are:

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Taking Corrective Action
 Taking corrective action is the final strategy
evaluation activity. It requires making changes to
competitively reposition a firm for the future.
Examples of changes that may be needed are
altering an organization’s structure, replacing one or
more key employees, selling a division, devising new
policies, issuing stock to raise capital, allocating
resources differently, or revising the firm’s mission.
 Taking corrective action is necessary to keep an
organization on track toward achieving its
objectives.

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Strategy Review, Evaluation, and
Control
The Balanced Scorecard is a strategy evaluation
tool. It uses both quantitative and qualitative
measures to evaluate strategies.
A Balanced Scorecard analysis requires firms to
answer these questions:
1. How well is the firm continually improving and
creating value along measures such as innovation,
technological leadership, product quality,
operational process efficiencies, etc.?
2. How well is the firm sustaining or improving upon
its core competencies and competitive advantages?
3. How satisfied are the firm’s customers?

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The Balanced Scorecard
 An example of a Balanced Scorecard
appears in Table 9-6. Note that in this
example the firm examines six key issues in
evaluating its strategies: (1) customers, (2)
managers/employees, (3)
operations/processes, (4) community/social
responsibility, (5) business ethics/natural
environment, and (6) financial.
 The basic form of a Balanced Scorecard may
differ for different organizations.

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Ch 9 -24
Table 9-6