Ch 11 1 Copyright 2011 Pearson Education Strategic

Strategic Management: Concepts and Cases Arab World Edition Fred R. David Abbas J. Ali

Chapter Outline • The Nature of Strategy Evaluation • A Strategy-Evaluation Framework • The

Strategy Review, Evaluation, and Control Strategy Evaluation • Vital to the organization’s well-being •

Source: Adapted from Fred R. David, “How Companies Define Their Mission, ” Long Range

Strategy Review, Evaluation, and Control Three Basic Activities 1. Examine the underlying bases of

Strategy Review, Evaluation, and Control Strategy Evaluation • Strategy evaluation can be complex &

Strategy Review, Evaluation, and Control Appraisal of Strategic Performance • In many organizations ,

Strategy Review, Evaluation, and Control Consistency Rumelt’s 4 Criteria Coherence Feasibility Advantage Ch 11

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

Strategy Review, Evaluation, and Control Coherence: Coherence refers to examine sets of trends Ch

Strategy Review, Evaluation, and Control Feasibility: The strategy must neither overtax resources or create

Strategy Review, Evaluation, and Control Advantage: A strategy must provide for the creation or

Strategy Review, Evaluation, and Control Difficulties in Strategy Evaluation 1. Increase in environment’s complexity

A Strategy-Evaluation Framework Review of Underlying Bases of Strategy • Develop revised EFE Matrix

Review Effectiveness of Strategy 1. Competitors’ reaction to strategy 2. Competitors’ change in strategy

Monitor Strengths & Weaknesses; Opportunities & Threats • Are strengths still strengths? • Have

Measuring Organizational Performance • Compare expected to actual results • Investigate deviations from plan

Quantitative Criteria for Strategy Evaluation • Financial Ratios – Compare performance over different periods

Qualitative Evaluation of Strategy • Internal consistency of strategy • Consistency with environment •

Taking Corrective Actions • Making changes to competitively reposition a firm for the future

Balanced Scorecard Evaluate strategies from 4 perspectives: 1. Financial performance 2. Customer knowledge 3.

Characteristics of Strategy Evaluation q Strategy evaluation must meet several basic requirements to be

Strategy-Evaluation Assessment Matrix Have major changes occurred in the firm’s internal strategic position? Have

computerized Evaluation q Computer networks and the internet help to coordinate SM activities and

Auditing : • Auditing is defined by the American Accounting Association (AAA) as :

The End Ch 9 Copyright © 2009 Pearson Education, Inc. 27 Publishing as Prentice

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Strategic Management: Concepts and Cases Arab World Edition Fred R. David Abbas J. Ali Abdulrahman Y. Al-Aali Chapter 11: Strategy Review, Evaluation and Control Ch 11 -2 Copyright © 2011 Pearson Education

Chapter Outline • The Nature of Strategy Evaluation • A Strategy-Evaluation Framework • The Balanced Scorecard • Published Sources of Strategy Evaluation Information • Characteristics of an Effective Evaluation System • Contingency Planning • Auditing • 21 st Century Challenges in Strategic Management Ch 11 -3 Copyright © 2011 Pearson Education

Strategy Review, Evaluation, and Control Strategy Evaluation • Vital to the organization’s well-being • Alert management to potential/actual problems in a timely fashion Ch 11 -4 Copyright © 2011 Pearson Education

Strategy Review, Evaluation, and Control Three Basic Activities 1. Examine the underlying bases of a firm’s strategy. 2. Compare expected to actual results. 3. Taking corrective actions to ensure that performance conforms to plans. Ch 11 -6 Copyright © 2011 Pearson Education

Strategy Review, Evaluation, and Control Strategy Evaluation • Strategy evaluation can be complex & sensitive undertaking • Too much emphasis can be costly & counterproductive Ch 11 -7 Copyright © 2011 Pearson Education

Strategy Review, Evaluation, and Control Appraisal of Strategic Performance • In many organizations , strategy evaluation is simply an assessment of the following : • How well an organization has performed? • Have assets increased? • Is the profitability increased ? • Is there any increasing in sales? • Is there any increasing in productivity? • Is there any increasing in profit margins? • If the answers are “yes” thus the strategy may be correct ? Ch 11 -8 Copyright © 2011 Pearson Education

Strategy Review, Evaluation, and Control Difficulties in Strategy Evaluation 1. Increase in environment’s complexity 2. Increasing number of variables 3. Rate of obsolescence of plans 4. Domestic and global events 5. Decreasing time span for planning certainty Ch 11 -14 Copyright © 2011 Pearson Education

Review Effectiveness of Strategy 1. Competitors’ reaction to strategy 2. Competitors’ change in strategy 3. Competitors’ changes in strengths & weaknesses 5. Reasons for competitors’ strategic change 6. Reasons for competitors’ successful strategies 7. Competitors’ present market positions & profitability 8. Potential for competitor retaliation 9. Potential for cooperation with competitors Ch 11 -16 Copyright © 2011 Pearson Education

Monitor Strengths & Weaknesses; Opportunities & Threats • Are strengths still strengths? • Have we added additional strengths? • Are weaknesses still weaknesses? • Have we developed other weaknesses? • Are opportunities still opportunities? • Are there any other opportunities develop? • Are threats still threats? • Are there any other threats emerged? Ch 11 -17 Copyright © 2011 Pearson Education

Measuring Organizational Performance • Compare expected to actual results • Investigate deviations from plan • Evaluate individual performance • Progress toward stated objectives Ch 11 -18 Copyright © 2011 Pearson Education

Quantitative Criteria for Strategy Evaluation • Financial Ratios – Compare performance over different periods – Compare performance to competitors’ – Compare performance to industry averages Ch 11 -19 Copyright © 2011 Pearson Education

Qualitative Evaluation of Strategy • Internal consistency of strategy • Consistency with environment • Acceptable degree of risk • Appropriate time frame • Workability of the strategy Ch 11 -20 Copyright © 2011 Pearson Education

Taking Corrective Actions • Making changes to competitively reposition a firm for the future • Keeping organization on track toward achieving stated objectives Ch 11 -21 Copyright © 2011 Pearson Education

Balanced Scorecard Evaluate strategies from 4 perspectives: 1. Financial performance 2. Customer knowledge 3. Internal business processes 4. Learning & growth Ch 11 -22 Copyright © 2011 Pearson Education

Characteristics of Strategy Evaluation q Strategy evaluation must meet several basic requirements to be effective : 1. Economical 2. Meaningful 3. Generates useful information 4. Provides accurate picture of events 5. Action-oriented Ch 11 -23 Copyright © 2011 Pearson Education

Strategy-Evaluation Assessment Matrix Have major changes occurred in the firm’s internal strategic position? Have major changes occurred in the firm’s external strategic position? No No No Corrective actions Yes Yes Corrective actions Yes No Yes Corrective actions Yes No No Corrective actions No Yes No Corrective actions No No Yes Continue course Ch 11 -24 Copyright © 2011 Pearson Education Has the firm progressed satisfactorily toward achieving its stated objectives? Result

computerized Evaluation q Computer networks and the internet help to coordinate SM activities and to ensure that decisions are based on good information q The checkmate strategic planning software is especially good in this regard (www. checkmateplan. com ) q Using a combination of intuition and analysis is key to effective strategy evaluation and to successful S. M. Ch 9 Copyright © 2009 Pearson Education, Inc. 25 Publishing as Prentice Hall

Auditing : • Auditing is defined by the American Accounting Association (AAA) as : A systematic process of objectively obtaining and evaluating evidence about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria. • Two important types of auditing : • Financial audits determine correspondence between assertions based on strategic plan & established criteria • Environmental audits ensure sound and safe practices Ch 11 -26 Copyright © 2011 Pearson Education