Strategy
Monitoring
Chapter Eleven
11-1
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.
11-2
A Comprehensive Strategic-Management
Model
11-3
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.
11-4
Strategy Evaluation Criteria
Consonance Consistency
Advantage Feasibility
11-5
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
11-6
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
11-7
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.
11-8
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.
11-9
Strategy-Evaluation Assessment Matrix
11-10
A Strategy-Evaluation Framework
11-11
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?
11-12
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?
11-13
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
11-14
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?
11-15
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?
11-16
Corrective Actions
11-17
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?
11-18
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.
11-19
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
11-20
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
11-21
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.
11-22
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?
11-23
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?
11-24
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.
11-25
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”
11-26
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
11-27
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.
11-28
