Strategic Management

Concepts & Cases

Chapter 9:
Strategy Review,
Evaluation, & Control
Western New England College

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 Comprehensive Strategic Management Model

External
Audit

Chapter 3

Implement Strategy
Vision Strategies Strategy Implement
Strategies: Review,
& In Analysis Strategies:
Marketing, Evaluation,
Mission & Management
Action Issues
Fin/Acct, &
Statements Choice R&D, CIS Control
Chapter 2 Chapter 5 Chapter 7
Chapter 6 Chapter 8
Chapter 9

Internal
Audit

Chapter 4

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 Strategy Review

“Complicated controls do not work.

They confuse. They misdirect attention
from what is to be controlled to the
mechanics and methodology of the
control.”

—Seymour Tilles—
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 Strategy Review

“Organizations are most vulnerable when

they are at the peak of their success.”

—R.T. Lenz—

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 Strategy Review

“While strategy is a word that is usually

associated with the future, its link to the past
is no less central. Life is lived forward but
understood backward. Managers may live
strategy in the future, but they understand it
through the past.”

—Henry Mintzberg—
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 Strategy Review

The firm’s internal and external

environments are dynamic. Therefore,
the best conceived and implemented
strategies become obsolete!

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 Strategy Review
Strategy Evaluation—the 3 Basics

► Examining the underlying basis of the

firm’s strategy
► Comparing actual to expected results
► Taking corrective action to address
performance gaps
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 Strategy Review
Effective Strategy Evaluation

► Adequate and timely feedback

The cornerstone of effective
evaluation

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 Strategy Review
Strategy Evaluation

► Must have both

Short- & long-term focus

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 Strategy Review
Four Criteria (Richard Rumelt):

► Consistency
► Consonance
► Feasibility
► Advantage

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 Consistency
A strategy should not present inconsistent
goals and policies
• If managerial problems continue despite changes in
personnel and are issue based, then strategies may be
inconsistent.

• If success for one department means failure for another

department, then strategies may be inconsistent.

• If policy problems/issues continue to be brought to the

top for resolution, then strategies may be inconsistent.
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 Consonance
Strategists need to examine sets of trends as well
as individual trends in evaluating strategies.
• Strategy must represent an adaptive response to the
external environment and critical changes occurring
within it.

• Most trends are the result of interactions among other

trends.

• Difficult in matching key internal and external factors in

formulation of strategy.
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 Feasibility
Strategy must neither overtax available resources
nor create unsolvable subproblems.

• Can the strategy be attempted within the physical,

human and financial resources of the enterprise?

• Limitation on strategic choice imposed by individual and

organizational capabilities must be considered.
• Important to examine whether in the past the
organization has demonstrated the capabilities, abilities,
competencies, skills, and talents to carry out strategy.
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 Strategy Review

• Increase in environment’s
complexity
Contemporary
Strategy • Difficulty in predicting the
Evaluation future with accuracy
Difficulties
• Increasing number of
variables
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 Strategy Review
• Rate of obsolescence of even
the best plans
Contemporary
Strategy • Increase in domestic and
Evaluation world events
Difficulties
• Decreasing time span for
which planning can be done
with any certainty
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 Strategy Review
Process of Evaluating Strategies:

► Should initiate managerial questioning

of expectations and assumptions
► Should trigger a review of objectives
and values
► Should stimulate creativity in
generating alternatives and criteria of
evaluation
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 Evaluation Framework
I. Review Underlying Bases

Differences? Yes

NO
III.
II. Measure Firm Performance Take
Corrective
Yes Actions
Differences?

NO

Continue present course 17

 I. Review Bases of Strategy
► Develop a Revised EFE Matrix:

• How have competitors reacted to our

strategies?

• How have competitors’ strategies changed?

• Have major competitors’ strengths and

weaknesses changed?

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 I. Review Bases of Strategy
• Why are competitors making certain
strategic changes?

• Why are some competitors’ strategies

more successful than others?

• How satisfied are our competitors with

their present market positions and
profitability?
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I. Review Bases of Strategy

• How far can our major competitors be

pushed before retaliating?

• How could we more effectively

cooperate with our competitors?

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 I. Review Bases of Strategy
Key Questions in Evaluating Strategy:

• Are our internal strengths still strengths?

• Have we added other internal strengths?

• Are our internal weaknesses still

weaknesses?

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 I. Review Bases of Strategy
• Do we now have other internal
weaknesses?

• Are our external opportunities still

opportunities?

• Are there now external opportunities?

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I. Review Bases of Strategy

• Are our external threats still threats?

• Are there now other external threats?

• Are we vulnerable to a hostile

takeover?

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 II. Measure Performance
► Compare the firm’s performance
over different time periods.

► Compare the firm’s performance to

competitors.

► Compare the firm’s performance to

industry averages.
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 II. Measure Performance
Quantitative Analysis:

 Return on investment
 Return on equity
 Profit margin
 Market share
 Debt to equity
 Earnings per share
 Sales growth
 Asset growth 25
 II. Measure Performance
Qualitative Analysis:

 Is the strategy internally consistent?

 Is the strategy consistent with the
environment?
 Is the strategy appropriate in view of
available resources?
 Does the strategy involve an acceptable
degree of risk?
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 II. Measure Performance
Qualitative Analysis:

 Does the strategy have an appropriate

time framework?
 Is the strategy workable?

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 III. Take Corrective Action

Making changes to reposition a firm

competitively for the future

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 Strategy-Evaluation Assessment Matrix
Have major Have major
changes changes
occurred in occurred in Has the firm
the firm’s the firm’s progressed
internal external satisfactorily toward
strategic strategic achieving its stated
position? position? objectives? Result
No No No Corrective actions
Yes Yes Yes Corrective actions
Yes Yes No Corrective actions
Yes No Yes Corrective actions
Yes No No Corrective actions
No Yes Yes Corrective actions
No Yes No Corrective actions
No No Yes Continue course
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 Strategy Review

Characteristics of an effective system

► Evaluation activities must be

economical.

► Evaluation activities must be

meaningful.

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 Strategy Review

Characteristics of an effective system

► Evaluation activities must provide

timely information.

► Evaluation system should be designed

to provide a true picture of what is
happening.
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 Strategy Review

Characteristics of an effective system

► Information derived from evaluation

process should facilitate action.

► Evaluation process should not dominate

decisions.

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 Strategy Review

Contingency Planning

► Identify both beneficial and unfavorable

events that could possibly derail the
strategy or strategies.

► Specify trigger points. Calculate about

when contingent events are likely to
occur.
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 Strategy Review

Contingency Planning

► Assess the impact of each contingent

event. Estimate the potential benefit or
harm of each contingent event.

► Develop contingency plans. Insure that

they are compatible with current
strategy and are economically feasible.
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 Strategy Review

Contingency Planning

► Assess the counterimpact of each

contingency plan. This quantifies the
potential value of each plan.
► Determine early warning signals for key
contingent events.
► Develop advance action plans to take
advantage of available lead time.
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 Strategy Review

Auditing

► Financial audits to determine

correspondence between assertions
based on strategic plans and
established criteria

► Environmental audits to insure sound

and safe practices
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 Key Terms & Concepts
► Advantage ► Measuring
► Auditing organizational
► Consistency performance
► Planning process
► Consonance
audit
► Contingency plans
► Reviewing the
► Corporate agility
underlying bases of
► Feasibility an organization’s
► Future shock strategy
► MBWA ► Revised EFE matrix
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Key Terms & Concepts
► Revised IFE matrix
► Taking corrective
actions

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