Schedule For Next Two Weeks

Copyright 2005 Prentice Hall 1

BUS 411

Day 13

Copyright 2005 Prentice Hall Ch 9-2

Agenda

Templates available in WebCT Assignment 4 Graded

3 A’s, 3 B’s and 3 F’s F’s were due to unauthorized “group” work

Assignment 5 will be at the end of the semester Mid-term exam mailed in WebCT

Chapters 1-9 Due March 21, 9:30

Discussion on Case Study Groups Discussion on Strategy Review, Evaluation, &

Control


Schedule for next two weeks

This week Chap 9

Next Monday Discussion on how to prepare a oral Case presentation

Next Thursday Case 1 by Tony Group Work

Starting Monday March 28 Group Case Presentation 40 Min Group Work 40 Min


Case Studies

Groups Static or Dynamic?

Static Same group all semester One case every 3 Classes

Dynamic Changing groups Schedule coordination difficult

Compromise Start with Static and change groups after 3 weeks?

Schedule Case 2 on March 28

Dave, Keith, Louise Case 3 on March 31

Seth, Megan, Corey Case 4 on April 4

Beth, Jessica, Amy Case Info

http://perleybrook.umfk.maine.edu/slides/BUS411/Casestudies/


Chapter 9Strategy Review, Evaluation, & Control

Strategic Management: Concepts & Cases

10th EditionFred David

PowerPoint Slides by

Anthony F. Chelte

Western New England College


Chapter Outline

The Nature of Strategy Evaluation

A Strategy-Evaluation Framework

The Balanced Scorecard


Chapter Outline

Published Sources of StrategyEvaluation Information

Characteristics of an Effective Evaluation System

Contingency Planning


Chapter Outline (cont’d)

Auditing

21st Century Challenges in Strategic Management


Organizations are most vulnerable when they are at the peak of their success --

R.T. Lenz

Strategy Review


Strategic Management Process Model

Develop Mission and Mission Statements

Chap 2

Measure and Evaluate

PerformanceChap 9

Implement StrategiesManagement Issues

Chap 7

Generate, Evaluate and Select Strageies

Chap 3

Implement StrategiesMarketing, Finance, accounting, R&D,

MIS issuesChap 8

Perfrom External Audit

Chap 3

Establish Long-termObjectives

Chap 4

Perform Internal Audit

Chap 4


-- Strategies become obsolete

-- Internal environments are dynamic

-- External environments are dynamic

Strategy Review, Evaluation & Control


Vital to the organization’s well-being Alert management to potential/actual problems

in a timely fashion Erroneous strategic decisions can have severe

negative impact on organizations

Strategy Evaluation, Review, & Control

Strategy Evaluation


1. Examine the underlying bases of a firm’s strategy

2. Compare expected to actual results3. Identify corrective actions to ensure that

performance conforms to plans

Strategy Evaluation, Review & Control

3 Basic Activities


Complex & sensitive undertaking

Overemphasis can be costly & counterproductive


Strategy Evaluation



Have assets increased Increase in profitability Increase in sales Increase in productivity Profit margins, ROI, & EPS ratios increased

Appraisal of Strategic Performance



Consonance

Consistency

Feasibility

Advantage

Rummelt’s4 Criteria



Strategy should not present inconsistent goals & policies Issue and not “people” problems Success for one department means failure for another Policy problems rise to the top

Consistency



Consonance

Consistency

Feasibility

Advantage




Need for strategies to examine sets of trends Need a Holistic view

Consonance



Consonance

Consistency

Feasibility

Advantage




Neither overtax resources or create unsolvable sub-problems Can it be done with the given resources?

Feasibility



Consonance

Consistency

Feasibility

Advantage




Creation or maintenance of competitive advantage If it doesn't create a competitive advantage then what’s the

point?

Advantage


Process of strategic evaluation Management should be continually aware of

progress Management by walking around Things Change



1. Increase in environment’s complexity

2. Difficulty predicting future with accuracy

3. Increasing number of variables

Difficulties in Strategy Evaluation



4. Rate of obsolescence of plans

5. Domestic and global events

6. Decreasing time span for planning certainty

Difficulties in Strategy Evaluation



Initiate managerial questioning Trigger review of objectives & values Stimulate creativity in generating

alternatives

Strategy Evaluation Should --



Develop revised EFE Matrix What changed in the external environment?

Develop revised IFE Matrix What internal changes occurred in the organization ?

Review of underlying bases of strategy --



1. Competitors’ reaction to strategy

2. Competitors’ change in strategy

3. Competitors’ changes in strengths & weaknesses

4. Reasons for competitors’ strategic change

Review effectiveness of strategy --



5. Reasons for competitors’ successful strategies

6. Competitors’ present market positions & profitability

7. Potential for competitor retaliation

8. Potential for cooperation with competitors

Review effectiveness of strategy --



Are strengths still strengths? Have we added additional strengths? Are weaknesses still weaknesses? Have we developed other weaknesses?

Monitor Strengths & Weaknesses; Opportunities & Threats



Are opportunities still opportunities? Other opportunities develop? Are threats still threats Other threats emerged? Are we vulnerable to hostile takeover?

Monitor Strengths & Weaknesses; Opportunities & Threats


Evaluation FrameworkI. Review Underlying Bases

I. IFE an EFE

Continue present course

II. Measure Firm PerformanceI. Ratios and stated objectives

III.Take

Corrective Actions

Differences?

Differences?

Yes

NO

Yes

NO



Compare expected to actual results Investigate deviations from plan Evaluate individual performance Progress toward stated objectives

Measuring Organizational Performance



Financial Ratios Compare performance over different periods Compare performance to competitors Compare performance to industry averages

Quantitative Criteria for Strategy Evaluation



Return on investment (ROI) Return on equity (ROE) Profit margin Market Share

Key Financial Ratios



Debt to equity Earnings per share (EPS) Sales growth Asset growth

Key Financial Ratios



Internal consistency of strategy Consistency with environment Appropriateness in view of resources

Qualitative Evaluation of Strategy



Acceptable degree of risk Appropriate time frame Workability of the strategy

Qualitative Evaluation of Strategy



-- Evaluate strategies from 4 perspectives:

1. Financial performance

2. Customer knowledge

3. Internal business processes

4. Learning & growth

Balanced Scorecard


Balanced Scorecard

Area of Objectives Measure or Target Time Expectation Primary Responsibility

Customers

1

2

Managers/Employees

1

2

Operations/Processes

1

2

Community/Social Responsibility

1

2

Business Ethics/Natural Environment

1

2

Financial

1

2



Economical Meaningful Generates useful information Timely information Provides accurate picture of events

Characteristics of strategy evaluation


Strategy-Evaluation Assessment Matrix

Continue courseYesNoNo

Corrective actionsNoYesNo

Corrective actionsYesYesNo

Corrective actionsNoNoYes

Corrective actionsYesNoYes

Corrective actionsNoYesYes

Corrective actionsYesYesYes

Corrective actionsNoNoNo

Result

Has the firm progressed

satisfactorily toward achieving its stated

objectives?

Have major changes

occurred in the firm’s external

strategic position?

Have major changes

occurred in the firm’s internal

strategic position?



Alternative plans that can be put into effect if certain key events do not occur as expected

Contingency Planning



Financial audits determine correspondence between assertions based on strategic plan & established criteria

Environmental audits insure sound and safe practices

Auditing



Process is more an “art” than “science” Should strategies be visible or hidden from

stakeholders Should process be more top-down or bottom

up

21st Century Challenges in Strategic Management