Chapter 9
Strategy Review, Evaluation, and Control
Ms. Donna D. Mendoza, MPA
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.
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.
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.
Strategy Review, Evaluation,
and Control
Consistency
Rumelt’s Consonance
4 Criteria
Feasibility
Advantage
Strategy Review, Evaluation,
and Control
Consistency
Strategy should not present inconsistent
goals and policies
Strategy Review, Evaluation,
and Control
Consonance
Need for strategists to examine sets of
trends, as well as individual trends
Strategy Review, Evaluation,
and Control
Feasibility
Neither overtax available resources nor
create unsolvable sub problems
Strategy Review, Evaluation,
and Control
Advantage
Creation or maintenance of competitive
advantage
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.
Strategy Review, Evaluation,
and Control
Review of Underlying Bases of Strategy –
Develop revised
IFE Matrix
Develop revised
EFE Matrix
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?
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?
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
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
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
Strategy Review, Evaluation, and Control
Some key financial ratios that are useful for evaluating strategies
are:
Return on Debt to equity
investment (ROI) Earnings per share
Return on equity (EPS)
(ROE) Sales growth
Profit margin Asset growth
Market share
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, 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.
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?
The Balanced Scorecard
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
(6) financial.
The basic form of a Balanced Scorecard may
differ for different organizations.
Balanced Score Card
Balanced Score Card
“ Measurement is the first step leads to
control and eventually to improvement.
If you can’t measure something, you
can’t understand it. If you can’t
understand it, you can’t control it. If you
can’t control it, you can’t improve it”.
- H. James Harrington
Copyright © 2011 Pearson Education, Inc. Ch 9 -27
Publishing as Prentice Hall
