Chap11 PDF

Chapter 11
Strategy Review, Evaluation, & Control
Strategic Management:
Concepts & Cases
Dr. Ayham Jaaron
03 May 2017
Ch 11-1
Chapter Outline
The Nature of Strategy Evaluation
A Strategy-Evaluation Framework
The Balanced Scorecard
Ch 11-2
Chapter Outline
Published Sources of Strategy
Evaluation Information
Characteristics of an Effective
Evaluation System
Contingency Planning
Chapter Outline (cont’d)
Auditing
21st Century Challenges in

Strategic Management
Strategy Review, Evaluation,
& Control
Why do we need strategy review and evaluation?
-- Strategies become obsolete

-- Internal environments are dynamic
-- External environments are dynamic
Ch 9-5
& Control
Strategy Evaluation: importance
 Vital to the organization’s well-being

 Alert management to potential/actual problems
in a timely fashion
 Erroneous/inadequate strategic decisions can
have severe negative impact on organizations
Ch 9-6
& Control
3 Basic Activities
1. Examine the underlying bases of a firm’s

strategy
2. Compare expected to actual results
3. Identify corrective actions to ensure that
performance conforms to plans
& Control
Strategy Evaluation nature
 Complex & sensitive undertaking
 Overemphasis can be costly &

counterproductive
& Control
Appraisal of Strategic Performance
 Have assets increased

 Increase in profitability
 Increase in sales
 Increase in productivity
 Profit margins & ROI increased
& Control
Consistency
Rumelt’s
4 Criteria for Consonance
strategy
evaluation
Feasibility
Advantage
& Control
Consistency
 Strategy should not present inconsistent

goals & policies:
if success for one department means failure for
another, then strategies may be inconsistent.
& Control
Consistency
Rumelt’s Consonance
4 Criteria
Feasibility
Advantage
& Control
Consonance
 Need for strategies to examine sets of trends;
many strategies are formulated as a result of

changes on a number of levels (economical,
level of education, inflation…etc.), when
evaluating, all involved trends must be checked
for possible changes.
& Control
Consistency
4 Criteria
Feasibility
Advantage
& Control
Feasibility
 Neither overtax resources or create

unsolvable sub-problems;
can the strategy be attempted within the
physical, human, and financial resources of
the firm?
& Control
Consistency
4 Criteria
Feasibility
Advantage
& Control
Advantage
 Creation or maintenance of competitive

advantage
& Control
Difficulties in Strategy Evaluation
1. Increase in environment’s complexity

2. Difficulty predicting future with accuracy
3. Increasing number of variables
& Control
Difficulties in Strategy Evaluation
4. Rate of obsolescence of plans

5. Domestic and global events
6. Decreasing time span for planning certainty
& Control
Strategy Evaluation Should --
 Initiate managerial questioning of

expectations and assumptions.
 Trigger review of objectives & values
 Stimulate creativity in generating
alternatives
Strategy Evaluation Framework
(1) Review of Underlying Bases of Strategy --
 Develop revised EFE Matrix
 Develop revised IFE Matrix

Review Effectiveness of Strategy --
1. Competitors’ reaction to strategy

2. Competitors’ change in strategy
3. Competitors’ changes in strengths &
weaknesses
4. Reasons for competitors’ strategic change
Monitor Strengths & Weaknesses;

Opportunities & Threats
 Are strengths still strengths?

 Have we added additional strengths?
 Are weaknesses still weaknesses?
 Have we developed other weaknesses?
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?
Evaluation Framework
I. Review Underlying Bases
Differences? Yes
NO
III.
Take
II. Measure Firm Performance Corrective
Actions
Neg. Differences? Yes
NO
Continue present
Copyright 2007 course
Prentice Hall
(2) Measuring Organizational

Performance
 Compare expected to actual results
 Investigate deviations from plan
 Evaluate individual performance
 Progress toward stated objectives
Quantitative Criteria for Strategy Evaluation
 Financial Ratios
 Compare performance over different periods
 Compare performance to competitors
 Compare performance to industry averages
Qualitative Evaluation of Strategy
 Internal consistency of strategy

 Consistency with environment
 Appropriateness in view of resources
Qualitative Evaluation of Strategy
 Acceptable degree of risk

 Appropriate time frame
 Workability of the strategy
 (3) taking corrective action (examples):
& Control
Balanced Scorecard
-- Evaluate strategies from 4 perspectives:

1. Financial performance
2. Customer knowledge
3. Internal business processes
4. Learning & growth
Balanced scorecard: example
Balanced Scorecard
Area of Objectives Measure or Target Time Expectation Primary 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
& Control
Characteristics of Strategy Evaluation
 Economical
 Meaningful
 Generates useful information
 Timely information
 Provides accurate picture of events
& Control
Contingency Planning
Alternative plans that can be put into effect if

certain key events do not occur as expected
& 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

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Chapter 11

Strategy Review, Evaluation, & Control

Dr. Ayham Jaaron

The Nature of Strategy Evaluation

The Balanced Scorecard

21st Century Challenges in

Why do we need strategy review and evaluation?

-- Strategies become obsolete

 Vital to the organization’s well-being

1. Examine the underlying bases of a firm’s

 Complex & sensitive undertaking

 Overemphasis can be costly &

 Have assets increased

 Strategy should not present inconsistent

 Need for strategies to examine sets of trends;

many strategies are formulated as a result of

 Neither overtax resources or create

 Creation or maintenance of competitive

Difficulties in Strategy Evaluation

1. Increase in environment’s complexity

Difficulties in Strategy Evaluation

4. Rate of obsolescence of plans

Strategy Evaluation Should --

 Initiate managerial questioning of

(1) Review of Underlying Bases of Strategy --

 Develop revised EFE Matrix

 Develop revised IFE Matrix

Review Effectiveness of Strategy --

1. Competitors’ reaction to strategy

Monitor Strengths & Weaknesses;

 Are strengths still strengths?

Monitor Strengths & Weaknesses;

(2) Measuring Organizational

Quantitative Criteria for Strategy Evaluation

Qualitative Evaluation of Strategy

 Internal consistency of strategy

Qualitative Evaluation of Strategy

 Acceptable degree of risk

-- Evaluate strategies from 4 perspectives:

Business Ethics/Natural Environment

Characteristics of Strategy Evaluation

Alternative plans that can be put into effect if

 Process is more an “art” than “science”

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