Ch 11 -1
Copyright © 2011 Pearson Education
Strategic Management: Concepts
and Cases
Arab World Edition
Fred R. David
Abbas J. Ali
Abdulrahman Y. Al-Aali
Chapter 11:
Strategy Review,
Evaluation and Control
Ch 11 -2
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Chapter Outline
• The Nature of Strategy Evaluation
• A Strategy-Evaluation Framework
• The Balanced Scorecard
• Published Sources of Strategy Evaluation Information
• Characteristics of an Effective Evaluation System
• Contingency Planning
• Auditing
• 21st Century Challenges in Strategic Management
Ch 11 -3
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Strategy Review, Evaluation, and Control
Strategy Evaluation
• Vital to the organization’s well-being
• Alert management to potential/actual problems in a
timely fashion
Ch 11 -4
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Source: Adapted from Fred R. David, “How Companies Define Their Mission,” Long Range Planning 22,
no. 3 (June 1988) 40.
Ch 11 -5
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Strategy Review, Evaluation, and Control
Three Basic Activities
1. Examine the underlying bases of a firm’s strategy.
2. Compare expected to actual results.
3. Taking corrective actions to ensure that performance
conforms to plans.
Ch 11 -6
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Strategy Review, Evaluation, and Control
Strategy Evaluation
• Strategy evaluation can be complex & sensitive
undertaking
• Too much emphasis can be costly & counterproductive
Ch 11 -7
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Strategy Review, Evaluation, and Control
Appraisal of Strategic Performance
• In many organizations , strategy evaluation is simply
an assessment of the following :• How well an organization has performed?
• Have assets increased?
• Is the profitability increased ?
• Is there any increasing in sales?
• Is there any increasing in productivity?
• Is there any increasing in profit margins?
• If the answers are “yes” thus the strategy may be correct ?
Ch 11 -8
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Strategy Review, Evaluation, and Control
Consistency
Rumelt’s
4 Criteria
Coherence
Feasibility
Advantage
Ch 11 -9
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Strategy Review, Evaluation, and Control
Consistency:
Strategy should not present inconsistent goals & policies
Ch 11 -10
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Strategy Review, Evaluation, and Control
Coherence:
Coherence refers to
examine sets of trends
Ch 11 -11
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the need for strategies to
Strategy Review, Evaluation, and Control
Feasibility:
The strategy must neither overtax resources or create
unsolvable sub-problems
Ch 11 -12
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Strategy Review, Evaluation, and Control
Advantage:
A strategy must provide for the creation or maintenance of
competitive advantage
Ch 11 -13
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Strategy Review, Evaluation, and Control
Difficulties in Strategy Evaluation
1.
Increase in environment’s complexity
2.
Increasing number of variables
3.
Rate of obsolescence of plans
4.
Domestic and global events
5.
Decreasing time span for planning certainty
Ch 11 -14
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A Strategy-Evaluation Framework
Review of Underlying Bases of Strategy
• Develop revised EFE Matrix
• Develop revised IFE Matrix
Ch 11 -15
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Review Effectiveness of Strategy
1.
Competitors’ reaction to strategy
2.
Competitors’ change in strategy
3.
Competitors’ changes in strengths & weaknesses
5.
Reasons for competitors’ strategic change
6.
Reasons for competitors’ successful strategies
7.
Competitors’ present market positions & profitability
8.
Potential for competitor retaliation
9.
Potential for cooperation with competitors
Ch 11 -16
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Monitor Strengths & Weaknesses;
Opportunities & Threats
• Are strengths still strengths?
• Have we added additional strengths?
• Are weaknesses still weaknesses?
• Have we developed other weaknesses?
• Are opportunities still opportunities?
• Are there any other opportunities develop?
• Are threats still threats?
• Are there any other threats emerged?
Ch 11 -17
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Measuring Organizational Performance
• Compare expected to actual results
• Investigate deviations from plan
• Evaluate individual performance
• Progress toward stated objectives
Ch 11 -18
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Quantitative Criteria for Strategy Evaluation
• Financial Ratios
– Compare performance over different periods
– Compare performance to competitors’
– Compare performance to industry averages
Ch 11 -19
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Qualitative Evaluation of Strategy
• Internal consistency of strategy
• Consistency with environment
• Acceptable degree of risk
• Appropriate time frame
• Workability of the strategy
Ch 11 -20
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Taking Corrective Actions
• Making changes to competitively reposition a firm for the
future
• Keeping organization on track toward achieving stated
objectives
Ch 11 -21
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Balanced Scorecard
Evaluate strategies from 4 perspectives:
1. Financial performance
2. Customer knowledge
3. Internal business processes
4. Learning & growth
Ch 11 -22
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Characteristics of Strategy Evaluation
 Strategy evaluation must meet several basic
requirements to be effective :
1. Economical
2. Meaningful
3. Generates useful information
4. Provides accurate picture of events
5. Action-oriented
Ch 11 -23
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Strategy-Evaluation Assessment Matrix
Have major
changes
occurred in
the firm’s
internal
strategic
position?
Have major
changes
occurred in
the firm’s
external
strategic
position?
No
No
No
Corrective actions
Yes
Yes
Yes
Corrective actions
Yes
Yes
No
Corrective actions
Yes
No
Yes
Corrective actions
Yes
No
No
Corrective actions
No
Yes
Yes
Corrective actions
No
Yes
No
Corrective actions
No
No
Yes
Continue course
Ch 11 -24
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Has the firm
progressed
satisfactorily
toward achieving
its stated
objectives?
Result
computerized Evaluation

Computer networks and the internet help to coordinate
SM activities and to ensure that decisions are based on
good information

The checkmate strategic planning software is especially
good in this regard (www.checkmateplan.com )

Using a combination of intuition and analysis is key to
effective strategy evaluation and to successful S.M.
Ch 9-Copyright © 2009 Pearson Education, Inc.
25 Publishing as Prentice Hall
Auditing :• Auditing is defined by the American Accounting Association
(AAA) as : A systematic process of objectively obtaining
and evaluating evidence about economic actions and
events to ascertain the degree of correspondence
between these assertions and established criteria .
• Two important types of auditing :• Financial audits determine correspondence between
assertions based on strategic plan & established criteria
• Environmental audits ensure sound and safe practices
Ch 11 -26
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The End
Ch 9-Copyright © 2009 Pearson Education, Inc.
27 Publishing as Prentice Hall