1. Copyright 2005 Prentice Hall
Bus 411
Day 13
Copyright 2005 Prentice Hall

2. Copyright 2005 Prentice Hall
Agenda
Question?
Assignment 4 Due
Assignment 5 (last one) will be later this week
EBIT analysis, Projected financials
Due March 19
Mid-term exam March 22th
Chapters 1 – 9 and 10, 11?
Bring Calculators
Finish Discussion on Implementing Strategies: Marketing, Finance/Accounting R&D and MIS Issues
Discussion on Control and evaluation
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3. Schedule Change March 8 Chap 8 & 9 March 12 Chap 10 March 15 Chap 11
March 19. How to prepare and present a case study, Group Assignment, Case assignments
March 22, Mid-term
Back on Schedule after Spring break
First Student Case Presentation on Apr 5
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4. Groups and Cases Two possibilities based on 10 cases
Two groups –one 4 the other 5
Tony does two cases
Each group does 4 cases
Case 1 & 2 10 days prep
Case 3 & 4  7 days prep
Three groups- 3 in each
Tony does one case
Each groups does 3 cases
10 days prep each
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5. Finance/Accounting Issues
Projected Financial Statement Analysis
Allows an organization to examine the expected results of various actions and approaches
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6. Finance/Accounting Issues
Steps in Preparing Projected Financial Statements
Prepare income statement before balance sheet (forecast sales)
Use percentage of sales method to project CGS & expenses
Calculate projected net income
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7. Finance/Accounting Issues
Steps in Preparing Projected Financial Statements (cont’d)
Subtract dividends to be paid from net income and add remaining to retained earnings
Project balance sheet items beginning with retained earnings
List comments (remarks) on projected statements
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8. Projected Income Statement
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9. Projected Balance Sheet
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10. Finance/Accounting Issues
Financial Budget
Details how funds will be obtained and spent for a specified period of time
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11. Types of Budgets Cash budgets Operating budgets Sales budgets
Profit budgets
Factory budgets
Capital budgets
Expense budgets
Divisional budgets
Variable budgets
Flexible budgets
Fixed budgets
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12. Finance/Accounting Issues
Evaluating Worth of a Business
Central to strategy implementation – integrative, intensive, and diversification strategies often implemented through acquisitions of other firms
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13. Evaluating Worth of a Business
Three Basic Approaches
What a firm owns
What a firm earns
What a firm will bring in the market
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14. Evaluating Worth of a Business
Net worth or stockholder’s equity
Net profit – conservative value would be five times the firm’s current annual profits
Price-earnings ratio method
Outstanding shares method
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15. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

16. Research & Development Issues
New products and improvement of existing products that allow for effective strategy implementation
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17. Research & Development Issues
Constraints
Level of support constrained by resource availability
Technological improvements shorten product life cycles
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18. Research & Development Issues
Three Major R&D Approaches to Implementing Strategies
First firm to market new technological products
Innovative imitator of successful products
Low-cost producer of similar but less expensive products
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19. Management Information Systems (MIS) Issues
Having an effective management information system (MIS) may be the most important factor in differentiating successful from unsuccessful firms.
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20. MIS Issues Functions of MIS
Information collection, retrieval, and storage
Keeping managers informed
Coordination of activities among divisions
Allows firm to reduce costs
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21. Chapter 9 Strategy Review, Evaluation, and Control
Strategic Management: Concepts & Cases
13th Edition
Fred David
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22. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

23. Strategy Evaluation – R. T. Lenz
“Organizations are most vulnerable when they are at the peak of their success.”
– R. T. Lenz
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24. Strategy Review, Evaluation, and Control
– Strategies become obsolete
– Internal environments are dynamic
– External environments are dynamic
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25. Strategy Review, Evaluation, and Control
Strategy Evaluation
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
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26. Strategy Review, Evaluation, and Control
Three Basic Activities
Examine the underlying bases of a firm’s strategy
Compare expected to actual results
Take corrective actions to ensure that performance conforms to plans
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27. Strategy Review, Evaluation, and Control
Strategy Evaluation
Complex & sensitive undertaking
Overemphasis can be expensive & counterproductive
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28. Strategy Review, Evaluation, and Control
Appraisal of Strategic Performance
Increase in assets?
Increase in profitability?
Increase in sales?
Increase in productivity?
Increases in profit margins, ROI, and EPS ratios?
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29. Strategy Review, Evaluation, and Control
Consistency
Rumelt’s 4 Criteria
Consonance
Feasibility
Advantage
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30. Strategy Review, Evaluation, and Control
Consistency
Strategy should not present inconsistent goals and policies
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31. Strategy Review, Evaluation, and Control
Consistency
Rumelt’s 4 Criteria
Consonance
Feasibility
Advantage
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32. Strategy Review, Evaluation, and Control
Consonance
Need for strategists to examine sets of trends, as well as individual trends
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33. Strategy Review, Evaluation, and Control
Consistency
Rumelt’s 4 Criteria
Consonance
Feasibility
Advantage
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34. Strategy Review, Evaluation, and Control
Feasibility
Neither overtax resources nor create unsolvable subproblems
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35. Strategy Review, Evaluation, and Control
Consistency
Rumelt’s 4 Criteria
Consonance
Feasibility
Advantage
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36. Strategy Review, Evaluation, and Control
Advantage
Creation or maintenance of competitive advantage
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37. Strategy Review, Evaluation, and Control
Difficulties in Strategy Evaluation
Increase in environment’s complexity
Difficulty predicting future with accuracy
Increasing number of variables
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38. Strategy Review, Evaluation, and Control
Difficulties in Strategy Evaluation
Rate of obsolescence of plans
Domestic and global events
Decreasing time span for planning certainty
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39. 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 alternatives and formulating criteria for evaluation
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40. Strategy Review, Evaluation, and Control
Monitor Strengths & Weaknesses; Opportunities & Threats
Are strengths still strengths?
Have we added additional strengths?
Are weaknesses still weaknesses?
Have we developed other weaknesses?
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41. Strategy Review, Evaluation, and Control
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?
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42. Strategy Review, Evaluation, and Control
Review of Underlying Bases of Strategy –
Develop revised IFE Matrix
Develop revised EFE Matrix
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43. Strategy Review, Evaluation, and Control
Review Effectiveness of Strategy –
Competitors’ reaction to strategy
Competitors’ change in strategy
Competitors’ changes in strengths & weaknesses
Reasons for competitors’ strategic change
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44. Strategy Review, Evaluation, and Control
Review Effectiveness of Strategy –
Reasons for competitors’ successful strategies
Competitors’ satisfaction with present market positions & profitability
Potential for competitor retaliation
Potential for cooperation with competitors
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45. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

46. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

47. 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
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48. Strategy Review, Evaluation, and Control
Quantitative Criteria for Strategy Evaluation
Financial Ratios
Compare performance over different periods
Compare performance to competitors’
Compare performance to industry averages
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49. Strategy Review, Evaluation, and Control
Key Financial Ratios
Return on investment (ROI)
Return on equity (ROE)
Profit margin
Market share
Debt to equity
Earnings per share (EPS)
Sales growth
Asset growth
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50. Strategy Review, Evaluation, and Control
Qualitative Evaluation of Strategy
Human Resource Factors
Marketing
Finance/Accounting
R&D
Management Information Systems
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51. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

52. Strategy Review, Evaluation, and Control
Balanced Scorecard
Evaluate strategies from 4 perspectives:
1. Financial performance
2. Customer knowledge
3. Internal business processes
4. Learning & growth
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53. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

54. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

55. Strategy Review, Evaluation, and Control
Characteristics of an Effective Evaluation System
Economical
Meaningful
Generates useful information
Timely information
Provides accurate picture of events
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56. Strategy Review, Evaluation, and Control
Contingency Planning
Alternative plans that can be put into effect if
certain key events do not occur as expected
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57. Strategy Review, Evaluation, and Control
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
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58. Strategy Review, Evaluation, and Control
21st Century Challenges in Strategic Management
Should the process be more an “art” or a “science”?
Should strategies be visible or hidden from stakeholders?
Should process be more top-down or bottom-up?
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59. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
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