Chapter 8
Strategy Review, Evaluation, and
Control
Ch 9 -1
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.
Ch 9 -2
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 -3
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.
Ch 9 -4
Strategy Review, Evaluation,
and Control
Consistency
Rumelt’s Consonance
4 Criteria
Feasibility
Advantage
Ch 9 -5
Strategy Review, Evaluation,
and Control
Consistency
◼ Strategy should not present inconsistent
goals and policies
Ch 9 -6
Strategy Review, Evaluation,
and Control
Consonance
◼ Need for strategists to examine sets of
trends, as well as individual trends
Ch 9 -7
Strategy Review, Evaluation,
and Control
Feasibility
◼ Neither overtax resources nor create
unsolvable subproblems
Ch 9 -8
Strategy Review, Evaluation,
and Control
Advantage
◼ Creation or maintenance of competitive
advantage
Ch 9 -9
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 -10
Strategy Review, Evaluation,
and Control
Review of Underlying Bases of Strategy –
◼ Develop revised IFE Matrix
◼ Develop revised EFE Matrix
Ch 9 -11
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 -12
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 -13
Strategy Evaluation Framework
◼ Table below 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 table 9-3.
Ch 9 -14
Ch 9 -15
Ch 9 -16
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
Ch 9 -17
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
Ch 9 -18
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
Ch 9 -19
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.
Ch 9 -20
