Chapter 9

Strategy Review, Evaluation, and

Control

Ch 9 -1
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Strategy Review, Evaluation,
and Control

The best formulated and best implemented

strategies become obsolete as a firm’s
external and internal environments change.
Therefore, it is essential for strategists to
systematically review, evaluate, and control
the execution of strategies.

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Strategy Review, Evaluation, and
Control
Strategy Evaluation is vital to an organization’s well
being. Timely evaluations can alert management to
potential or actual problems before a situation
becomes critical.

Strategy Evaluation includes three basic activities:

(1) Examining the underlying bases of a firm’s
strategy.
(2) Comparing expected results to actual results.
(3) Taking corrective actions to ensure that
performance conforms to plans.
Ch 9 -4
Strategy Review, Evaluation, and
Control
Strategy Evaluation
 Adequate and timely feedback is the
cornerstone of effective Strategy Evaluation.
 Strategy Evaluation is important because
organizations face dynamic environments in
which key external and internal factors can
change quickly and dramatically.
 Strategy Evaluation is essential to ensure
that the stated objectives of an organization
are being achieved.

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Strategy Review, Evaluation,
and Control
Consistency

Rumelt’s Consonance
4 Criteria
Feasibility

Advantage

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Strategy Review, Evaluation,
and Control

Consistency

 Strategy should not present inconsistent

goals and policies

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Strategy Review, Evaluation,
and Control

Consonance

 Need for strategists to examine sets of

trends, as well as individual trends

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Strategy Review, Evaluation,
and Control

Feasibility

 Neither overtax resources nor create

unsolvable sub-problems

Ch 9 -9
Strategy Review, Evaluation,
and Control

Advantage

 Creation or maintenance of competitive

advantage

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Strategy Review, Evaluation,
and Control
Strategy Evaluation Should –
 Initiate managerial questioning of
expectations and assumptions
 Trigger a review of objectives & values
 Stimulate creativity in generating
alternative strategies and formulating
criteria for evaluation
 Be performed on a continuing basis, rather
than at the end of specified periods of time
or just after problems occur.
Ch 9 -11
Strategy Review, Evaluation,
and Control

Review of Underlying Bases of

Strategy –
 Develop revised IFE Matrix

 Develop revised EFE Matrix

Ch 9 -12
Strategy Review, Evaluation,
and Control
Monitor Strengths & Weaknesses;
Opportunities & Threats

 Are our strengths still strengths?

 Has our organization added additional
strengths?
 Are our weaknesses still weaknesses?
 Has our organization developed other
weaknesses?
Ch 9 -13
Strategy Review, Evaluation,
and Control
… Monitor Strengths & Weaknesses;
Opportunities & Threats
 Are our opportunities still opportunities?
 Have other opportunities developed?
 Are our threats still threats?
 Have other threats emerged?

Ch 9 -14
Strategy Evaluation Framework

 Table 9-3 summarizes strategy evaluation

activities in terms of key questions that
should be addressed, alternative answers to
those questions, and appropriate actions for
managers to take. Note that corrective
actions are needed except when (1) external
and internal factors have not changed
significantly and (2) the firm is making
satisfactory progress toward achieving its
objectives.
 Relationships among strategy evaluation
activities are illustrated in Figure 9-2. Ch 9 -15
Ch 9 -16
Ch 9 -17
Strategy Review, Evaluation,
and Control

Measuring Organizational Performance

 Compare expected to actual results

 Investigate deviations from plan
 Evaluate individual performance
 Examine progress toward stated
objectives

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Strategy Review, Evaluation,
and Control

Quantitative Criteria for Strategy Evaluation

Strategists use financial ratios to:

 Compare a firm’s performance over different time
periods
 Compare a firm’s performance to competitors’
performance
 Compare a firm’s performance to industry averages

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Strategy Review, Evaluation, and Control
Some key financial ratios that are useful for evaluating
strategies are:
 Debt
Return
to equity
on investment (ROI)
 Earnings
Return onperequity
share(ROE)
(EPS)
 Sales
Profitgrowth
margin
 Asset
Marketgrowth
share

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Taking Corrective Action
 Taking corrective action is the final strategy
evaluation activity. It requires making
changes to competitively reposition a firm
for the future.

 Examples of changes that may be needed are

 altering an organization’s structure,

 replacing one or more key employees,

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Taking Corrective Action
 selling a division,
 devising new policies,
 issuing stock to raise capital,
 allocating resources differently, or
 revising the firm’s mission.

 Taking corrective action is necessary to keep

an organization on track toward achieving its
objectives.

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Strategy Review, Evaluation, and
Control
The Balanced Scorecard is a strategy evaluation
tool. It uses both quantitative and qualitative
measures to evaluate strategies.
A Balanced Scorecard analysis requires firms to
answer these questions:
1. How well is the firm continually improving and
creating value along measures such as innovation,
technological leadership, product quality,
operational process efficiencies, etc.?
2. How well is the firm sustaining or improving upon
its core competencies and competitive advantages?
3. How satisfied are the firm’s customers?
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The Balanced Scorecard
 An example of a Balanced Scorecard
appears in Table 9-6. Note that in this
example the firm examines six key issues in
evaluating its strategies:
 (1) customers,
 (2) managers/employees,
 (3) operations/processes,
 (4) community/social responsibility,
 (5) business ethics/natural environment, and
 (6) financial.
 The basic form of a Balanced Scorecard may
differ for different organizations.
Ch 9 -24
Table 9-6

Ch 9 -25
 The Balanced Scorecard approach
to strategy evaluation aims to
balance
 long-term with short-term concerns,
 financial with nonfinancial concerns,

and
 internal with external concerns.

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The End of Chapter-9

Ch 9 -27