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Chapter 7

1. Strategy evaluation involves examining the bases of a firm's strategy, comparing expected and actual results, and taking corrective actions. 2. It is more difficult today due to increased complexity, unpredictability, variables, and rapid changes. Continuous evaluation allows monitoring progress. 3. Key questions address whether internal strengths/weaknesses and external opportunities/threats remain accurate, competitors' strategies, and investments balanced between risks. Performance is measured over time, against competitors, and industry averages.

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13 views

Chapter 7

1. Strategy evaluation involves examining the bases of a firm's strategy, comparing expected and actual results, and taking corrective actions. 2. It is more difficult today due to increased complexity, unpredictability, variables, and rapid changes. Continuous evaluation allows monitoring progress. 3. Key questions address whether internal strengths/weaknesses and external opportunities/threats remain accurate, competitors' strategies, and investments balanced between risks. Performance is measured over time, against competitors, and industry averages.

Uploaded by

Julian
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Strategy

Review,
Evaluation,
and Control

Chapter Seven
The Nature of Strategy Evaluation
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 Nature of Strategy Evaluation

 Consonance and advantage are mostly based


on a firm’s external assessment

 Consistency and feasibility are largely based


on an internal assessment
Rumelt’s Criteria for Evaluating Strategies
Rumelt’s Criteria for Evaluating Strategies
Why Strategy Evaluation is More Difficult Today

1. A dramatic increase in the environment’s


complexity
2. The increasing difficulty of predicting the future
with accuracy
3. The increasing number of variables
4. The rapid rate of obsolescence of even the
best plans
Why Strategy Evaluation is More Difficult Today

5. The increase in the number of both domestic


and world events affecting organizations

6. The decreasing time span for which planning


can be done with any degree of certainty
The Process of Evaluating Strategies

 Strategy evaluation should initiate managerial


questioning of expectations and assumptions,
should trigger a review of objectives and
values, and should stimulate creativity in
generating alternatives and formulating criteria
of evaluation
The Process of Evaluating Strategies

 Evaluating strategies on a continuous rather


than on a periodic basis allows benchmarks of
progress to be established and more
effectively monitored

 Successful strategies combine patience with a


willingness to promptly take corrective actions
when necessary
Reviewing Bases of Strategy

 How have competitors reacted to our strategies?


 How have competitors’ strategies changed?
 Have major competitors’ strengths and
weaknesses changed?

 Why are competitors making certain strategic


changes?
Reviewing Bases of Strategy

 Why are some competitors’ strategies more


successful than others?
 How satisfied are our competitors with their
present market positions and profitability?
 How far can our major competitors be pushed
before retaliating?
 How could we more effectively cooperate with our
competitors?
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?
Key Questions to Address in Evaluating Strategies

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?


Additional Key Questions

 How good is the firm’s balance of investments


between high-risk and low-risk projects?

 How good is the firm’s balance of investments


between long-term and short-term projects?

 How good is the firm’s balance of investments


between slow-growing markets and fast-growing
markets?
Additional Key Questions…

 How good is the firm’s balance of investments


among different divisions?
 To what extent are the firm’s alternative strategies
socially responsible?
 What are the relationships among the firm’s key
internal and external strategic factors?
 How are major competitors likely to respond to
particular strategies?
Measuring Organizational Performance

Strategists use common quantitative criteria to


make three critical comparisons:
Comparing the firm’s performance over different time periods
Comparing the firm’s performance to competitors’
Comparing the firm’s performance to industry averages
Corrective Actions
The Balanced Scorecard(BSC)

1. How well is the firm continually improving and


creating value along measures such as
innovation, technological leadership, product
quality, operational process efficiencies, and
so on?
BSC…

2. How well is the firm sustaining and even


improving upon its core competencies and
competitive advantages?

3. How satisfied are the firm’s customers?


BSC…

 The Balanced Scorecard approach to strategy


evaluation aims to balance long-term with
short-term concerns, to balance financial with
nonfinancial concerns, and to balance internal
with external concerns.
Characteristics of an Effective Evaluation System

 Strategy evaluation activities must be


economical
 too much information can be just as bad as too
little information
 too many controls can do more harm than good
 Activities should be meaningful
 should specifically relate to a firm’s objectives
Characteristics of an Effective Evaluation System

 Activities should provide timely information


 Activities should be designed to provide a true
picture of what is happening

 Activities should not dominate decisions


 should foster mutual understanding, trust, and
common sense
Contingency Planning

 If a major competitor withdraws from particular


markets as intelligence reports indicate, what
actions should our firm take?

 If our sales objectives are not reached, what


actions should our firm take to avoid profit
losses?
Contingency Planning…
 If demand for our new product exceeds plans,
what actions should our firm take to meet the
higher demand?
 If certain disasters occur, what actions should our
firm take?
 If a new technological advancement makes our
new product obsolete sooner than expected, what
actions should our firm take?
Auditing
 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”
21st Century Challenges in Strategic Management

 Deciding whether the process should be more


an art or a science

 Deciding whether strategies should be visible


or hidden from stakeholders

 Deciding whether the process should be more


top-down or bottom-up in their firm

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