Strategy

Monitoring

Chapter Nine

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 Learning Objectives
1. Discuss the strategy-evaluation process, criteria, and methods used.
2. Discuss three activities that comprise strategy evaluation.
3. Describe and develop a Balanced Scorecard.
4. Identify and describe published sources of strategy-evaluation
information.
5. Identify and describe six characteristics of an effective strategy-
evaluation system.
6. Discuss the nature and role of contingency planning in strategy
evaluation.
7. Explain the role of auditing in strategy evaluation.
8. Identify and discuss three twenty-first-century challenges in strategic
management.
9. Identify and describe 17 guidelines for effective strategic management.
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A Comprehensive Strategic-
Management Model

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 Strategy Evaluation
Three basic activities:
1. Examine the underlying bases of a firm’s
strategy.

2. Compare expected results with actual

results.

3. Take corrective actions to ensure that

performance conforms to plans.
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Strategy Evaluation Criteria

Consonance Consistency

Advantage Feasibility

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 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

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 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

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 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.

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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.

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Strategy-Evaluation Assessment Matrix

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A Strategy-Evaluation Framework

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 Reviewing Bases of Strategy
1. How have competitors reacted to our
strategies?
2. How have competitors’ strategies changed?
3. Have major competitors’ strengths and
weaknesses changed?
4. Why are competitors making certain
strategic changes?

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 Reviewing Bases of Strategy
5. Why are some competitors’ strategies more
successful than others?
6. How satisfied are our competitors with their
present market positions and profitability?
7. How far can our major competitors be
pushed before retaliating?
8. How could we more effectively cooperate
with our competitors?

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Measuring Organizational Performance

Strategists use common quantitative criteria

to make three critical comparisons:
1. Comparing the firm’s performance over
different time periods
2. Comparing the firm’s performance to
competitors’
3. Comparing the firm’s performance to
industry averages

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Key Questions to Address in Evaluating
Strategies
1. How good is the firm’s balance of investments
between high-risk and low-risk projects?
2. How good is the firm’s balance of investments
between long-term and short-term projects?
3. How good is the firm’s balance of investments
between slow-growing markets and fast-
growing markets?

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Key Questions to Address in Evaluating
Strategies
4. How good is the firm’s balance of investments
among different divisions?
5. To what extent are the firm’s alternative strategies
socially responsible?
6. What are the relationships among the firm’s key
internal and external strategic factors?
7. How are major competitors likely to respond to
particular strategies?

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Corrective Actions

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 The Balanced Scorecard
1. Is the firm continually improving and creating
value along measures such as innovation,
technological leadership, product quality,
operational process efficiencies, and so on?
2. Is the firm sustaining and even improving on
its core competencies and competitive
advantages?
3. How satisfied are the firm’s customers?

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 The Balanced Scorecard
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.

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 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

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 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

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 Contingency Planning

Contingency Plans can be defined as

alternative plans that can be put into
effect if certain key events do not
occur as expected.

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 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?

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 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?

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 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.
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 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”

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 Twenty-First-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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 Guidelines for Effective Strategic
Management
1. Keep the process simple and easily understandable.
2. Eliminate vague planning jargon.
3. Keep the process nonroutine; vary assignments, team
membership, meeting formats, settings, and even the
planning calendar.
4. Welcome bad news and encourage devil’s advocate
thinking
5. Do not allow technicians to monopolize the planning
process.
6. To the extent possible, involve managers from all areas of
the firm.
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