2 Strategy EvaluationOrganizations are most vulnerable when they are at the peak of their successErroneous strategic decisions can inflict severe penalties and can be exceedingly difficult, if not impossible, to reverse.Strategy evaluation is vital to an organization’s well-being; timely evaluations can alert management to problems or potential problems before a situation becomes critical.
3 Strategy Review, Evaluation, & Control 3 Basic ActivitiesExamine the underlying bases of a firm’s strategyCompare expected to actual resultsIdentify corrective actions to ensure that performance conforms to plans
4 Strategy Review, Evaluation, & Control Strategy EvaluationComplex & sensitive undertakingOveremphasis can be costly & counterproductiveNo evaluation can create even worse problems.Strategy evaluation is essential to ensure that stated objectives are being achieved.
5 Strategy Review, Evaluation, & Control Some ways to evaluate of Strategic PerformanceHave assets increasedIncrease in profitabilityIncrease in salesIncrease in productivityIncreased Profit margins
6 Strategy Review, Evaluation, & Control Difficulties in Strategy EvaluationIncrease in environment’s complexityDifficulty predicting future with accuracyIncreasing number of variablesRate of obsolescence of plansDomestic and global eventsDecreasing time span for planning certainty Table 9-2 provides examples of organizational demise.
7 Strategy Review, Evaluation, & Control Strategy Evaluation Should --Initiate managerial questioning of evaluation and assumptionsTrigger review of objectives & valuesStimulate creativity in generating alternativesManagers and employees of the firm should continually be aware of progress being made toward achieving the firm’s objectives. As critical success factors change, organizational members should be involved in determining appropriate corrective actions.
8 Strategy Review, Evaluation, & Control Monitor Strengths & Weaknesses; Opportunities & ThreatsAre strengths still strengths?Have we added additional strengths?Are weaknesses still weaknesses?Have we developed other weaknesses?
9 Strategy Review, Evaluation, & Control Monitor Strengths & Weaknesses; Opportunities & ThreatsAre opportunities still opportunities?Other opportunities develop?Are threats still threatsOther threats emerged?Are we vulnerable to hostile takeover?
11 II. Measure Firm Performance I. Review Underlying BasesEvaluation FrameworkIII.TakeCorrectiveActionsYesDifferences?NOII. Measure Firm PerformanceYesDifferences?NOContinue present course
12 Strategy Review, Evaluation, & Control Measuring Organizational Performance: based on an long term and annual objectivesCompare expected to actual resultsInvestigate deviations from planEvaluate individual performanceProgress toward stated objectivesFailure to make satisfactory progress signals a need for corrective action.
13 Strategy Review, Evaluation, & Control Quantitative Criteria for Strategy EvaluationFinancial RatiosCompare performance over different periodsCompare performance to competitorsCompare performance to industry averages
14 Strategy Review, Evaluation, & Control Key Financial RatiosReturn on investment (ROI)Return on equity (ROE)Profit marginMarket ShareDebt to equityEarnings per share (EPS)Sales growthAsset growth
15 Strategy Review, Evaluation, & Control Taking Corrective action:taking corrective action, requires making changes to reposition a firm competitively for the future.Examples of changes that may be needed are altering an organization’s structure, replacing one or more key individuals, selling a division, or revising a business mission.Taking corrective action raises employees’ and managers’ anxieties. Research suggests that participation in strategy-evaluation activities is one of the best ways to overcome individuals’ resistance to change.
16 Strategy Review, Evaluation, & Control CHARACTERISTICS OF AN EFFECTIVE EVALUATION SYSTEMStrategy-evaluation activities must be economical; too much information can be just as bad as too little information.Strategy-evaluation activities should also be meaningful; they should specifically relate to a firm’s objectives.Strategy-evaluation activities should provide timely information; on occasion and in some areas, managers may need information daily.Strategy evaluation should be designed to provide a true picture of what is happening.
17 Strategy Review, Evaluation, & Control Key Financial RatiosReturn on investment (ROI)Return on equity (ROE)Profit marginMarket ShareDebt to equityEarnings per share (EPS)Sales growthAsset growth
18 Strategy Review, Evaluation, & Control 21st Century Challenges in strategic ManagementCurrently process is more an “art” than “science”Should strategies be visible or hidden from stakeholdersVisible: Participation and openness enhances understanding, commitment, and communication within the firm.Hidden: Secrecy limits rival firms from imitating or duplicating the firm’s strategies and undermining the firm.Should process be more top-down or bottom upTop executives are the only persons in the firm with the collective experience…; to make key strategy decisions.Lower- and middle-level managers and employees who will be implementing the strategies need to be actively involved in the process of formulating the strategies to assure their support and commitment.
19 QuestionsFormulation, implementation, and evaluation forms a framework for strategic management. Discuss the importance of the IT department in this framework.It is essential that IT professional understand strategy formulation, implementation, and evaluation if they are develop enterprise systems that can help the realisation of organisation strategy. Discuss the validity of this statement.Discuss whether strategic management is an “art”, a science or an art and a science.