STRATEGIC MANAGEMENT:

Strategy Review, Evaluation and Control

DOCUMENTED AND REPORTED BY: Benjiemin Nicholson G. UY

Chiang Kai Shek College Graduate School of Business

2nd semester, School Year 2014 2015

Introductory Quotes
Organizations are most vulnerable when they are at the
peak of their success.
- R.T. Lenz
Unless strategy evaluation is performed seriously and
systematically, and unless strategists are willing to act on
the results, energy will be used up defending yesterday. No
one will have the time, resources, or will to work on
exploiting today, let alone to work on making tomorrow.
- Peter Drucker

LEARNING OBJECTIVES
to describe a practical framework for evaluating strategies.
to explain why strategy evaluation is complex, sensitive, and yet
essential for organizational success.
to discuss the importance of contingency planning in strategy evaluation.
to consider the role of auditing in strategy evaluation.
to go into detail how computers can aid in evaluating strategies.
to exchange views on the balanced scorecard.
to disclose three 21st century challenges in strategic management.

REPORT OUTLINE
I. The Nature of Strategy Evaluation

The Process of Evaluating Strategies

II. A Strategy-Evaluation Framework

A. Reviewing Bases of Strategy
B. Measuring Organizational Performance

C. Taking Corrective Actions

III. The Balanced Scorecard
A. Published Sources of Strategy-Evaluation Information

B. Characteristics of an Effective Evaluation System

REPORT OUTLINE
IV. Contingency Planning

V. Auditing

The Environmental Audit

VI.Twenty-First-Century Challenges in Strategic Management

A. The Art or Science Issue

B. The Visible or Hidden Issue
C. The Top-Down or Bottom-Up Approach

Three (3) Basic Activities Involved in a

Strategy Evaluation Process

examining the underlying bases of a firms strategy.

comparing expected results with actual results.
taking corrective actions to ensure that performance
conforms the plans.

A Comprehensive StrategicManagement Model

LEGENDS:
STRATEGY FORMULATION
STRATEGY IMPLEMENTATION
STRATEGY EVALUATION

Chapter 3
Perform
External
Audit

Develop
Vision and
Mission
Statements

Establish
Long-Term
Objectives

Chapter 6

Chapter 8

Generate,
Evaluate,
and Select
Strategies

Implement
Strategies
Marketing,
Finance,
Accounting,
Research and
Development
and MIS Issues

Implement
Strategies
Management
Issues

Chapter 2
Chapter 4
Perform
Internal
Audit

Chapter 5

Chapter 7

Chapter 9
Measure and
Evaluate
Performance

Rumelts Criteria for Evaluating

Strategies
consistency
consonance
feasibility
advantage
Based on the internal assessment:

consistency

feasibility

Based on the external assessment:

consonance

advantage

Consistency
A strategy should not present inconsistent goals and

policies.
Organizational conflict and interdepartmental bickering are

often symptoms of managerial disorder, but these

problems may also be a sign of strategic inconsistency.

Consistency
Here are the three guidelines that help determine if the organizational problems are due
to inconsistencies in strategy:
If managerial problems continue despite changes in personnel and if they tend to be

issue-based rather than people-based, then strategies may be inconsistent.

If success for one organizational department means, or is interpreted to mean,
failure for another department, then strategies may be inconsistent.

If policy problems and issues continue to be brought to the top for resolution, then
strategies may be inconsistent.

Consonance
It refers to the need for strategists to examine sets of trends, as well as
individual trends, in evaluating strategies.

A strategy must represent an adjusting response to the external environment

and to the critical changes occurring within it.
One difficulty in matching a firms key internal and external factors in the

formulation of strategy is that most trends are the result of interactions among
other trends.
Although single economic or demographic trends might appear steady for many
years, there are waves of change going on at the interaction level.

Feasibility
A strategy must neither overtax available resources nor

create unsolvable subproblems.

In evaluating a strategy, it is important to examine
whether an organization has demonstrated in the past
that it possesses the abilities, competencies, skills and
talents needed to carry out a given strategy.

Advantage
A strategy must provide for the creation and/or maintenance of a

competitive advantage in a selected area of activity.

Normally, competitive advantages are the result of superiority in
one of three areas: resources, skills or position.
In evaluating strategy, organizations should examine the nature
of positional advantages associated with a given strategy.

Reasonable Trends Why Strategy

Evaluation is More Difficult Today

stable domestic and world economies in the past

longer product life cycles
longer product development cycles
slower technological advancement
less frequent changes occurred
fewer competition
weak foreign companies
more regulated industries

Reasonable Trends Why Strategy

Evaluation is More Difficult Today

a dramatic increase in the environments complexity

the increasing difficulty of predicting the future with accuracy
the increasing number of variables
the rapid rate of obsolescence of even the best plans
the increase in the number of both domestic and world events
affecting organizations
the decreasing time span for which planning can be done with
any degree of certainty

Instances When Corrective Actions Are

Not Always Needed
External and internal factors have not significantly
changed.
The firm is progressing satisfactorily toward achieving
stated objectives.

Strategy-Evaluation Assessment Matrix

Have Major Changes
Occurred in the Firm
Internal Strategic
Position?

Have Major Changes

Occurred in the Firm
External Strategic
Position?

Has The Firm Progressed

Satisfactorily Toward
Achieving Its Stated
Objectives?

YES

YES

YES

YES

YES

NO

YES

NO

NO

YES

NO

YES

NO

NO

NO

NO

YES

NO

NO

YES

YES

NO

NO

YES

Corresponding
Result

Take corrective actions.

Continue present
strategic course.

Instruments Used for Reviewing Bases

of Strategy
revised EFE Matrix:
should indicate how effective a firms strategies have been in
response to key opportunities and threats.

revised IFE Matrix:

should focus on changes in the organizations management,
marketing, finance/accounting, production/operations, research and
development, and management information systems (MIS) strengths
and weaknesses.

Such Questions that Address in

Analyzing the Bases of Strategy
1.
2.
3.
4.
5.

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?
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?

Such Key Questions that Address in

Evaluating Strategies
1.
2.
3.
4.

5.
6.
7.
8.
9.

Are our internal strengths still strengths?

Have we added other internal strengths? If so, what are they?
Are our internal weaknesses still weaknesses?
Do we now have other internal weaknesses? If so, what are
they?
Are our external opportunities still opportunities?
Are there now other external opportunities? If so, what are they?
Are our external threats still threats?
Are there now other external threats? If so, what are they?
Are we vulnerable to a hostile takeover?

Strategy-Evaluation Framework
1st: Review underlying bases of strategy.
Prepare revised IFE Matrix
-> Compare revised to existing IFE Matrix.
Prepare revised EFE Matrix
-> Compare revised to existing EFE Matrix.

NO

Do significant
differences occur?

YES

3rd:

2nd: Measure organizational performance.

Compare planned to actual progress toward meeting stated
objectives.

NO

Do significant
differences occur?
Continue present course.

YES

Take
corrective
actions.

Steps Included on Measuring

Organizational Performance
comparing expected results to actual results

investigating deviations from plans

evaluating individual performance

examining progress being made toward meeting stated

objectives

Three Critical Comparisons Being Determined by

Strategists When Using Financial Ratios

comparing the firms performance over different time

periods
comparing the firms performance to the ones made by

competitors
comparing the firms performance to industry averages

Main Financial Ratios that are Specifically

Useful as Criteria for Strategy Evaluation
return on investment (ROI)
return on equity (ROE)
profit margin
market share
debt to equity
earnings per share
sales growth
asset growth

return on investment:
= (gain from investment cost of investment) / cost of investment

debt-equity ratio:
= total liabilities / equity

Six (6) Qualitative Questions that are

Useful in Evaluating Strategies
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?
Does the strategy have an appropriate time framework?
Is the strategy workable?

Additional Key Questions that Reveal the Need for

Qualitative Judgments in Strategy Evaluation
How good is the firms balance of investments between high-risk and low-risk projects?
How good is the firms balance of investments between long-term and short-term

projects?
How good is the firms balance of investments between slow-growing and fast-growing
markets?

How good is the firms balance of investments among different divisions?

To what extent are the firms alternative strategies socially responsible?
What are the relationships among the firms key internal and external strategic factors?
How are major competitors likely to respond to particular strategies?

Balanced Scorecard
refers to an important strategyevaluation tool that allows firms
to check strategies from four
perspectives:

financial

performance,

customer

knowledge,

internal

business

processes, and learning and

growth.

Characteristics of an Effective
Evaluation System
Strategy evaluation activities must be economical; too much information can be just as
bad as too little information; and too many controls can do more harm than good.
Strategy evaluation activities also should be meaningful; they should specifically relate
to a firms objectives.
Strategy evaluation activities must be purposive; they should provide managers with
useful information about tasks over which they have control and influence.
Strategy evaluation activities should provide timely information; on occasion and some
areas, managers may daily need information.

Characteristics of an Effective
Evaluation System
Strategy evaluation should be designed to provide a true picture of
what is happening.
Strategy evaluations should fairly portray certain type of situation.
The strategy-evaluation process should not dominate decisions; it

should foster mutual understanding, trust and common sense.

Strategy evaluations should be simple, not too cumbersome, and
not too restrictive.

Contingency Plans
can be defined as alternative

plans that can be put into

effect if certain key events
do not occur as expected.
should
possible.

be

simple

as

Commonly-Established Contingency
Plans
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?
If demand for our new product exceeds plans, what actions should
our firm take to meet the higher demand?

Commonly-Established Contingency
Plans
If certain disasters occur such as loss of computer capabilities; a

hostile takeover attempt; loss of patent protection; or destruction of

manufacturing facilities because of earthquakes, tornados, or
hurricanes 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?

Three Major Benefits of Contingency Planning

according to Linneman and Chandran

permitted quick response to change

prevented panic in crisis situations
made managers more adaptable by encouraging them
to appreciate just how variable the future can be

Seven (7) Steps in an Effective

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.
Assess the impact of each contingent event. Estimate the potential benefit or
harm of each contingent event.
Develop contingency plans. Be sure that contingency plans are compatible with
current strategy and are economically feasible.

Seven (7) Steps in an Effective

Contingency Planning
Assess the counterimpact of each contingency plan. That is, estimate how
much each contingency plan will capitalize on or cancel out its associated
contingent event. Doing this will quantify the potential value of each contingency
plan.
Determine early warning signals for key contingent events. Monitor the early
warning signals.
For contingent events with

reliable early warning signals, develop advance

action plans to take advantage of the available lead time.

Auditing
has been defined as 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.

Environmental Audit
pertains to a general term that
can reflect various types of
evaluations intended to identify
environmental compliance and

management
implementation

system
gaps,

along

with related corrective actions.

Different Types of Environmental Audit

compliance audits
multimedia
programmatic / thematic
management systems audits

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

Completely-Open Reasons Why Strategy Process

Should Incorporate with Resultant Decisions
Managers, employees and other stakeholders can readily contribute to the
process. They often have excellent ideas. Secrecy would forgo many excellent

ideas.
Investors, creditors and other stakeholders have greater basis for supporting a
firm when they know what the firm is doing and where the firm is going.

Visibility promotes democracy, whereas secrecy promotes autocracy. Most firms

prefer democracy over autocracy as a management style.
Participation

and

openness

communication within the firm.

enhance

understanding,

commitment

and

Reasons Why Some Firms Prefer Conducting Strategic

Planning Secretly from All but the Highest-Level Executives

Free dissemination of a firms strategies may easily translate into

competitive intelligence for rival firms who could exploit the firm
given that information.
Secrecy limits criticism, second guessing and hindsight.
Participants in a visible strategy process become more attractive to
rival firms who may lure them away.
Secrecy limits rival firms from imitating or duplicating the firms

strategies and undermining the firm.

CONCLUSIVE VIEWPOINT
The real key to effective strategic management is to accept the
premise that the planning process is more important than the written plan,

that the manager is continuously planning and does not stop planning
when the written plan is finished. The written plan is just only a snapshot
as of the moment it is approved. If the manager is not planning on a

continuous basis planning, measuring and revising the written plan can
become obsolete the day it is finished. This obsolescence becomes more
of a certainty as the increasingly rapid rate of change makes the business

environment more uncertain.

REFERENCE

David, Fred R. Strategic Management: Concepts and Cases

12th Edition. Singapore: Prentice Hall Pearson Education,
Inc., 2009.

Corporate Profile Snapshot:

First Philippine Holdings Corporation
First Philippine Holdings Corporation (FPH) is a management and investment
company whose major business is power generation and distribution, with strategic
initiatives in manufacturing and property development. In its 50 years, it has
pioneered and managed some of the country's best companies, who are market
leaders in their key industries. FPH is a member of the Lopez Group of Companies.

Its power generation subsidiary, First Gen Corporation (First Gen), is a renewable

energy producer, with power plants that use geothermal, hydro, and natural gas for
fuel. Today, it has a total installed capacity of 2,832.6 MW, or 18.2% of the countrys
total installed capacity. First Gen manages the world's second largest geothermal
power producer, Energy Development Corporation, which searches for indigenous,

low-carbon energy alternatives.

Corporate Profile Snapshot:

First Philippine Holdings Corporation
FPH's manufacturing subsidiary, First Philippine Electric Corporation (First Philec),
operates the country's first large-scale silicon wafer-slicing facility called First Philec
Solar Corporation (FPSC), which supplies some of the world's leading photovoltaic
companies. FPSC is a joint venture of First Philec and SunPower Corporation, an
established global technology leader in the solar industry.

In property development, FPH expands its reach through Rockwell Land

Corporation (Rockwell Land) and First Philippine Industrial Park (FPIP).

FPH maintains its corporate headquarters at the 4th floor of the Benpres Building in
Ortigas Center at Pasig City, Philippines.

Corporate Profile Snapshot:

First Philippine Holdings Corporation
In the 1950s, then-President Carlos Garcia pushed for a larger Filipino role in the
nation's economic activities. Among the many Filipino entrepreneurs whose
businesses flourished in this period was Don Eugenio Lopez Sr. (Don Eugenio), a
businessman who would soon establish a conglomerate that would become First
Philippine Holdings Corporation.

Lopez graduated from the Ateneo de Manila University in 1919, with an AB Degree,
Cum Laude. He went on to study law in the University of the Philippines and after
passing the bar exams, he underwent a year of post graduate studies in law at
Harvard University.

Corporate Profile Snapshot:

First Philippine Holdings Corporation
Lopez had various businesses. In 1932, he established the Iloilo
Negros Air Express Company. He also made his mark in sugar milling,

with the acquisition of the Binalbagan-Isabela Sugar Company

(BISCOM). He was a power in media, owning The Manila Chronicle
newspaper and ABS-CBN Broadcasting Corporation, the Philippines'
largest media conglomerate. He was also one of the founders of the

Philippine Commercial and Industrial Bank (PCI Bank).

But in 1962, he bought the biggest company in the Philippines,

Meralco.

Case Study: (The Philippine Star)

First Holdings acquires 46-ha lot in Batangas

MANILA, Philippines - First Philippine Holdings Corp. (FPHC) of the Lopez family
has acquired a new property in Batangas to beef up its industrial park operations.

In a disclosure to the Philippine Stock Exchange, FPHC said it topped the auction
for a 46-hectare property located at the Philtown Industrial Park in Tanauan,
Batangas.

The property, which was previously owned by Brilliante Realty Corp. and Mitsubishi
Motors Philippines Corp., consists of land and improvements.

Case Study: (The Philippine Star)

First Holdings acquires 46-ha lot in Batangas
FPHC has been advised that it has been selected as the
winning bidder in the private bidding for the property...with a
total area of 464,961 square meters. This will be subject to the
parties negotiation of, and final agreement on, the transaction
documents, the holding firm said.

FPHC disclosed last month that it participated in the private

bidding for the property.

Case Study: (The Philippine Star)

First Holdings acquires 46-ha lot in Batangas
The

Lopez-led

firm,

through

subsidiary

First

Philippine Industrial Park, operates an industrial

park in Santo Tomas, Batangas.

FPHC has strategic initiatives in manufacturing and

property development but its major business is in
power generation and distribution.

Case Study: (The Philippine Star)

First Holdings acquires 46-ha lot in Batangas
The company operates the power business through units Energy
Development Corp. and First Gen Corp.

FPHC is also into property development through Rockwell Land

Corp., a listed premier property developer of residential and
commercial projects catering to the high-end and upper-mid markets

mainly in Metro Manila.

Documented and reported by:

Richmond S. Mercurio, January 20, 2015

Gathering Applicable Viewpoints and

Feedbacks

Make some applicable viewpoints or possible feedbacks

about the case. Be sure that the article must be
connected with the Strategy Review, Evaluation and
Control as your learnings of what you have understood.

INSPIRATIONAL BIBLE VERSE TO

REMEMBER
Be strong and courageous. Do not fear or
be in dread of them, for it is the Lord your

God who goes with you. He will not leave

you or forsake you.

- Deuteronomy 31:6

THANK YOU VERY MUCH AND GOD BLESS!!!