CHAPTER 5 - EVALUATION OF STRATEGIC

MANAGEMENT
MBA Quynh Anh Nguyen
[email protected]
ISEF- APD
EVALUATION OF STRATEGIC MANAGEMENT
•Why strategy evaluation ?
• The strategic-management process results in decisions that can
have significant, long-lasting consequences.
• Timely evaluations can alert management to problems or
potential problems before a situation becomes critical.
• Organizations face dynamic environments having key external
and internal factors often change quickly and dramatically.
•Success today is no guarantee of success tomorrow!
EVALUATION OF STRATEGIC MANAGEMENT
1. Examine the
underlying bases of a
firm’s strategy.

3 basic activities
of strategy-
evaluation process 2. Compare
3. Take expected results
corrective with actual results.
actions.
A Strategy-
Evaluation
Framework
Reviewing Bases of Strategy
• Reviewing the bases of strategy could be approached by
developing a revised EFE Matrix and revised IFE Matrix.
• Revised IFE Matrix: ???
• Revised EFE Matrix:???
• Future shock = the nature, types, and speed of changes that overpower
the ability and capacity to adapt of organization & individual
• => Business environments are becoming dynamic and complex
• =>Need Strategy Evaluation enhances an organization’s ability to adapt

• Strategy evaluation can lead to strategy-formulation and/or

strategy- implementation changes, or no changes at all
Reviewing Bases of Strategy
• Key questions to address in evaluating strategies:
1. Are our internal strengths still strengths?
2. Have we added other internal strengths? if so, what are they?
3. Are our internal weaknesses still weaknesses?
4. Do we now have other internal weaknesses? if so, what are they?
5. Are our external opportunities still opportunities?
6. Are there now other external opportunities? if so, what are they?
7. Are our external threats still threats?
8. Are there now other external threats? if so, what are they?
9. Are we vulnerable to a hostile takeover?
A Strategy-
Evaluation
Framework
Measuring Organizational Performance
Comparing
Investigating
expected results to
deviations
actual results
from plans

Examining progress
Evaluating
being made toward
individual
meeting stated
performance
objectives
Measuring Organizational Performance
• Strategy evaluation : quantitative and qualitative criteria
• Criteria : should be measurable and easily verifiable
• Selecting the set of criteria depends on particular
organization’s size, industry, and strategies’ issues
• Quantitative criteria commonly used for finance issues
• 3 critical comparisons:
1. Compare the firm’s performance over different time
periods.
2. Compare the firm’s performance to competitors.
3. Compare the firm’s performance to industry averages.
• Qualitative criteria usually used for human factors( high
absenteeism and turnover rates, poor production quality and
quantity rates, or low employee satisfaction,…)
A Strategy-
Evaluation
Framework
Taking Corrective Actions
• Taking corrective actions: making changes to competitively reposition
a firm for the future
 Taking Corrective Actions
• Taking corrective actions: does not mean existing strategies will be abandoned
• Taking corrective actions: does not mean new strategies must be formulated
Taking Corrective Actions
• No organization can escape change => taking corrective actions is
necessary to keep organization to achieve objectives.
• Taking corrective actions: raising employees’ and managers’
anxieties and resistance to change
• => how to overcome individuals’ resistance to change
=participation in strategy-evaluation activities
The Balanced Scorecard
• Balanced Scorecard : a strategy evaluation and control technique.
• Balanced Scorecard : containing combination of strategic and
financial objectives for the company.
• Supporting firms to “balance” financial measures with
nonfinancial measures.
• Aiming to “balance” shareholder objectives with customer and
operational objectives
The Balanced Scorecard
• Balanced Scorecard approach : planning to balance long-term with
short- term concerns, balance financial with nonfinancial concerns, and
internal with external concerns.
Characteristics of effective Strategy
Evaluation System
1. Must be economical
2. Should be meaningful and specifically relate to a firm’s objectives
3. Should provide timely information
4. Should be simple, not too cumbersome, and not too restrictive

• There is no one ideal strategy-evaluation system!!!

•
Large organizations : ??? Small organizations: ???
Contingency Planning
• Contingency plans : alternative plans if certain key events do not
occur as expected.
• Only high-priority areas require the insurance of contingency plans.
• Contingency plans should be as simple as possible.
• Benefits:
1. enable quick responses to change.
2. prevent panic in crisis situations.
3. make managers more adaptable by encouraging them to appreciate
just how variable the future can be.
The effective contingency planning
1 • Identify both good and bad events that could jeopardize strategies

2 • Determine when the good and bad events are likely to occur

3 • Determine the expected pros and cons of each contingency event

4 • Develop contingency plans for key contingency events

5 • Determine early warning trigger points for key contingency events

Auditing
• The audit : a frequently used tool in strategy evaluation
• Auditing: “a systematic process of objectively obtaining and
evaluating evidence regarding assertions about economic actions
and events to ascertain the degree of correspondence between
these assertions and established criteria, and communicating the
results to interested users.”
(American Accounting Association-AAA )

• Examine the financial statements of firms

 21-Century Challenges in Strategic
Management

1 3
2 • Deciding whether
• Deciding whether
the process • Deciding whether the process should
should be more strategies should be more top-down
an art or a be visible or or bottom-up
science hidden from
stakeholders
 The Art or Science Issue
• Strategic management: be viewed as a science or an art?
• Science: firms need to systematically assess their external and
internal environments, conduct research, carefully evaluate the
pros and cons of various alternatives, perform analyses, decide on a
particular course of action
• Art: strategic decision making be based primarily on holistic
thinking, intuition, imagination,emotion, creativity, and politics
The Art or Science Issue
• The art-versus-science question :
strategists must decide for
themselves
• 2 approaches are not mutually
exclusive: “…the very best
solutions arise from a willingness to
blend art with science, ideas with
data, and instinct with analysis.”
Deciding
whether
strategies
should be
visible or
hidden from
stakeholders
 Visible Hidden

Keeping strategies secret could inhibit Strategic information should remain

employee and stakeholder communication, confidential to top managers, to
understanding, and commitment ensure that such information is not
revealed
1. Managers, employees, and other
stakeholders can readily contribute 1. Rival firms who could exploit
to the process. the firm given that information.
2. Stakeholder can support a firm when 2. Secrecy limits criticism, second
they know what the firm is doing and guessing, and hindsight.
where the firm is going.
Visible - Keeping strategies secret Hidden - Strategic information should
could inhibit employee and remain confidential to top
stakeholder communication, managers, to ensure that such
understanding, and commitment information is not revealed
3. Visibility promotes 3. Participants in a visible strategy
democracy, whereas secrecy process become more attractive to
promotes autocracy. rival firms who may lure them
4. Participation and openness away.
enhance understanding, 4. Secrecy limits rival firms from
commitment, and communication imitating or duplicating the firm’s
within the firm. strategies and undermining the firm.
The Top-Down or Bottom-Up
Approach
PROS AND CONS OF THE TOP-DOWN APPROACH

PROS CONS
• Decreased Risk • Potential abuse
• Strong Management • Underqualified leadership
• Good Organization • Toxic Culture
• Minimized Cost • Implementation problems
• Faster results • Absence of delegation
• Limited Creativity
PROS AND CONS OF THE BOTTOM-UP APPROACH

PROS CONS
• Increased Company-Wide • Overwhelming Feedback
Communication • Complexity
• Build Morale • Incapable Individuals
• Share Solutions • Vulnerable Future
• Increased Collaboration
 The bottom-up approach
• The lower,middle-level managers,
employees need to be actively
involved in strategic formulation The top-down approach
process to ensure their support • Top executives are the only persons
and commitment with experience, acumen,
responsibility to make key strategy
decisions

• Increased education and workforce diversity are reasons why both

high- middle- and lower-level managers—and even nonmanagers—
should participate in strategic planning process
Guidelines for effective Strategic
Management
• Keep the open-mindedness: be willing and eager to consider new
information, new viewpoints, new ideas, and new possibilities
• No organization has unlimited resources => DO NOT pursue too many
strategies at the same time
• Strategy trade-offs like long-term versus short-term considerations,
maximizing profits versus increasing shareholders’ wealth, AND ethics
issues.