Chapter 7 Strategy Evaluation and Control chapter objectives

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Chapter 7 Strategy Evaluation and Control

Chapter 7 Strategy Evaluation and Control

chapter objectives o o after finish chapter student will understand: The controlling process What

chapter objectives o o after finish chapter student will understand: The controlling process What is Key Performance Indicators How to take action correction? Strategic Management: Chapter 7 Basic Strategy Evaluation and Control Page 2

The Nature of Strategy Evaluation Controlling and evaluation is the last activity in the

The Nature of Strategy Evaluation Controlling and evaluation is the last activity in the strategic management process. Most strategists agree, therefore, that strategy evaluation is vital to an organization’s well-being, timely evaluation can alert management to problem or potential problems before a situation become critical. Strategy Evaluation includes three basic activities: 1. Examining the underlying bases of a firm’s strategy, 2. Comparing expected results with actual results, 3. Taking corrective actions to ensure that performance conforms to plans.

The Process of Evaluation Strategies Set performance standard Measure Performance Take Correction action Compare

The Process of Evaluation Strategies Set performance standard Measure Performance Take Correction action Compare actual work Determine Deviation Standards Within limit? No Yes Continues works

Key Performance Indicators (KPIs) -Key performance indicators are quantifiable measurements that reflect the critical

Key Performance Indicators (KPIs) -Key performance indicators are quantifiable measurements that reflect the critical success factors of an organization. -In order to set performance standards according to the controlling process mentioned above, strategist should established KPI to measure the organization implementation. -4 KPI should be consider during evaluation: -Financial Perspective -Customer Perspective -Internal Process Perspective -Learning and Growth Perspective

Financial Perspective o o o Return of Investment Revenues Cost per Unit asset utilization

Financial Perspective o o o Return of Investment Revenues Cost per Unit asset utilization Unit cost. . . Strategic Management: Chapter 7 Basic Strategy Evaluation and Control Page 6

Customer Perspective o Firms should realize that its revenue comes from their customers who

Customer Perspective o Firms should realize that its revenue comes from their customers who willing to pay for firms value. n n market share customer retention customer acquisition customer satisfaction Strategic Management: Chapter 7 Basic Strategy Evaluation and Control Page 7

Internal Process Perspective o o Customer satisfaction to our products or services come from

Internal Process Perspective o o Customer satisfaction to our products or services come from employee’s effort. employee willing to work according to better work environment. Strategic Management: Chapter 7 Basic Strategy Evaluation and Control Page 8

Learning and growth perspective o o Organization capabilities competencies n We can measure by:

Learning and growth perspective o o Organization capabilities competencies n We can measure by: o o o Employee skills Attitude employee turnover employee satisfaction. . . Strategic Management: Chapter 7 Basic Strategy Evaluation and Control Page 9

q. Taking Corrective Actions The final strategy evaluation activity, taking corrective action, requires making

q. Taking Corrective Actions The final strategy evaluation activity, taking corrective action, requires making changes to reposition a firm competitively for the future. Examples of changes that may needed are alerting an organization’s structure, replacing one or more key individuals, selling a division, or revising a business mission. Other changes could include establishing or revising objectives, devising new policies, issuing stock t raise capital, adding additional salespersons, allocating resources differently, or developing new performance incentives.