1. 1
Short Notes: Mgt 603
STRATEGIC MANAGEMENT
Lecture No. 23
Strategy Analysis And Choice
Strategic Management: Concepts and Cases. 9th edition
Fred R. David
PowerPoint Slides by Anthony F. Chelte Western New England College
Chapter Outline
• The Nature of Strategy Analysis and Choice
• A Comprehensive Strategy-Formulation Framework
• The Input Stage
• The Matching Stage
• The Decision Stage
• Cultural Aspects of Strategy Choice
• The Politics of Strategy Choice
• The Role of a Board of Directors
Strategy Analysis & Choice
Whether it’s broke or not, fix it—make it better. Not just products, but the whole company if
necessary.- Bill Saporito
Strategy Analysis & Choice
Strategic analysis and choice largely involves making subjective decisions based on
objective information.
information.
The Nature of Strategy Analysis and Choice –
– Establishing long-term objectives
– Generating alternative strategies
– Selecting strategies to pursue
– Best alternative to achieve mission and objectives
Alternative strategies derive from –
– Vision
– Mission
– Objectives
– External audit
– Internal audit
– Past successful strategies
Participation in generating alternative strategies should be broad –
Stage 1: The Input Stage
Stage 2: The Matching Stage
Stage 3: The Decision Stage
Formulation Framework

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Short Notes: Mgt 603
Internal Factor Evaluation
Matrix (IFE)
External Factor Evaluation
Stage 1: Matrix (EFE)
The Input Stage
Competitive Profile
Matrix
Formulation Framework
TOWS Matrix
SPACE Matrix
Stage 2:
BCG Matrix
The Matching Stage
IE Matrix
Grand Strategy Matrix
Matching Key Factors to Formulate Alternative Strategies
Key Internal Factor Key External Factor Resultant Strategy
20% annual growth in the
Excess working capacity
+ cell phone industry = Acquire Cellfone, Inc.
(strength)
(opportunity)
Exit of two major foreign Pursue horizontal integration
Insufficient capacity
+ competitors form the = by buying competitor's
(weakness)
industry (opportunity) facilities
Decreasing numbers of Develop new products for
Strong R&D (strength) + =
young adults (threat) older adults
Poor employee morale Develop a new employee
+ Strong union activity =
(weakness) (threat) benefits package
Strategy-Formulation Analytical Framework
Formulation Framework

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Short Notes: Mgt 603
Stage 3: Quantitative Strategic
Planning Matrix
The Decision Stage
(QSPM)
Input Stage
• Provides basic input information for the matching and decision stage matrices
• Requires strategists to quantify subjectivity early in the process
• Good intuitive judgment always needed
Matching Stage
• Match between organization’s internal resources and skills and the opportunities and
organization’
risks created by its external factors.
Matching Key Factors to Formulate Alternative Strategies
Lecture No. 24
Matching Stage
TOWS Matrix
– Threats
– Opportunities
– Strengths
– Weaknesses
Develop four types of strategies
– Strengths-Opportunities (SO)
– Weaknesses-Opportunities (WO)
– Strengths-Threats (ST)
– Weaknesses-Threats (WT)
1. SO Strategies
Use a firm’s internal strengths to take advantage of external opportunities
2. WO Strategies
Improving internal weaknesses by taking advantage of external opportunities
3. ST Strategies
Using firm’s strengths to avoid or reduce the impact of external threats.
4. WT Strategies
Defensive tactics aimed at reducing internal weaknesses and avoiding environmental threats.
5. TOWS Matrix
Steps in developing the TOWS Matrix
– List the firm’s key external opportunities
– List the firm’s key external threats
– List the firm’s key internal strengths

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Short Notes: Mgt 603
– List the firm’s key internal weaknesses
TOWS Matrix
Developing the TOWS Matrix
• Match internal strengths with external opportunities and record the resultant SO Strategies
• Match internal weaknesses with external opportunities and record the resultant WO
Strategies
• Match internal strengths with external threats and record the resultant ST Strategies
• Match internal weaknesses with external threats and record the resultant WT Strategies
Leave Blank Strengths-S Weaknesses-W
List Strengths List Weaknesses
Opportunities-O SO Strategies WO Strategies
List Opportunities Use strengths to take Overcome weaknesses
advantage of opportunities by taking advantage of
opportunities
Threats-T ST Strategies WT Strategies
List Threats Use strengths to avoid Minimize weaknesses
threats and avoid threats
Lecture No, 25-26
Formulation Framework
SPACE Matrix
Strategic Position and Action Evaluation Matrix
 Four quadrant framework
 Determines appropriate strategies
 Aggressive
 Conservative
 Defensive
 Competitive
Two Internal Dimensions
 Financial Strength [FS]
 Competitive Advantage [CA]
Two External Dimensions
 Environmental Stability [ES]
 Industry Strength [IS]
Overall Strategic position determined by:
– Financial Strength [FS]
– Competitive Advantage [CA]
– Environmental Stability [ES]

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Short Notes: Mgt 603
– Industry Strength [IS]
Developing the SPACE Matrix:
• EFE Matrix
• IFE Matrix
• Financial Strength
• Competitive Advantage
• Environmental Stability
• Industry Strength
• Select variables to define FS, CA, ES, & IS
• Assign numerical ranking from +1 (worst) to +6 (best) for FS and IS; Assign numerical
ranking from –1 (best) to –6 (worst) for ES and CA.
• Compute average score for FS, CA, ES, & IS
• Plot the average scores on the Matrix
• Add the two scores on the x-axis and plot point on X. Add the scores on the y-axis and plot
Y. Plot the intersection of the new xy point.
• Draw a directional vector from origin through the new intersection point.
• SPACE Factors
Internal Strategic Position External Strategic Position
Financial Strength (FS) Environmental Stability (ES)
Return on investment Technological changes
Leverage Rate of inflation
Liquidity Demand variability
Working capital Price range of competing products
Cash flow Barriers to entry
Ease of exit from market Competitive pressure
Risk involved in business Price elasticity of demand
Internal Strategic Position External Strategic Position
Competitive Advantage CA Industry Strength (IS)
Market share Growth potential
Product quality Profit potential
Product life cycle Financial stability
Customer loyalty Technological know-how
Competition’s capacity utilization Resource utilization
Technological know-how Capital intensify
Control over suppliers & distributors Ease of entry into market
Productivity, capacity utilization
SPACE Matrix

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Short Notes: Mgt 603
FS
Conservative +6
Aggressive
+5
+4
+3
+2
+1
CA IS
-6 -5 -4 -3 -2 -1 -1 +1 +2 +3 +4 +5 +6
-2
-3
-4
-5
Defensive -6 Competitive
ES
Lecture No. 27-28
BCG Matrix
Boston Consulting Group Matrix
• Enhances multidivisional firms’ efforts to formulate strategies
• Autonomous divisions (or profit centers) constitute the business portfolio
• Firm’s divisions may compete in different industries requiring separate strategy
Boston Consulting Group Matrix
• Graphically portrays differences among divisions
• Focuses on market share position and industry growth rate
• Manage business portfolio through relative market share position and industry growth rate
Relative market share position defined:
• Ratio of a division’s own market share in a particular industry to the market share held by
the largest rival firm in that industry.
BCG Matrix
Relative Market Share Position
High Medium Low
1.0 .50 0.0
High
+20
Stars Question Marks
II I
Medium
0
Cash Cows Dogs
III IV
Low
-20
• Question Marks
• Stars
• Cash Cows

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Short Notes: Mgt 603
• Dogs
Question Marks
• Low relative market share position yet compete in high-growth industry.
• Cash needs are high
• Case generation is low
• Decision to strengthen (intensive strategies) or divest
Stars
• High relative market share and high industry growth rate.
• Best long-run opportunities for growth and profitability
• Substantial investment to maintain or strengthen dominant position
• Integration strategies, intensive strategies, joint ventures
Cash Cows
• High relative market share position, but compete in low-growth industry
• Generate cash in excess of their needs
• Milked for other purposes
• Maintain strong position as long as possible
• Product development, concentric diversification
• If becomes weak—retrenchment or divestiture
Dogs
• Low relative market share position and compete in slow or no market growth
• Weak internal and external position
• Decision to liquidate, divest, retrenchment
Lecture No. 29-30
Grand Strategy Matrix
• Popular tool for formulating alternative strategies
• All organizations (or divisions) can be positioned in one of four quadrants
• Based on two evaluative dimensions:
– Competitive position
– Market growth

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Short Notes: Mgt 603
RAPID MARKET GROWTH
Quadrant II Quadrant I
Market development Market development
Market penetration Market penetration
Product development Product development
Horizontal integration Forward integration
Divestiture Backward integration
Liquidation Horizontal integration
Strong Postion
Quadrant III Quadrant IV
Concentric diversification
Retrenchment Concentric diversification
Concentric diversification Horizontal diversification
Horizontal diversification Conglomerate diversification
Conglomerate diversification Joint ventures
Liquidation
SLOW MARKET GROWTH
Quadrant I
• Excellent strategic position
• Concentration on current markets and products
• Take risks aggressively when necessary
Quadrant II
• Evaluate present approach seriously
• How to change to improve competitiveness
• Rapid market growth requires intensive strategy
Quadrant III
• Compete in slow-growth industries
• Weak competitive position
• Drastic changes quickly
• Cost and asset reduction indicated (retrenchment)
Quadrant IV
• Strong competitive position
• Slow-growth industry
• Diversification indicated to more promising growth areas
Stage 3: The Decision Stage
Quantitative Strategic Planning Matrix (QSPM)
Quantitative Strategic Planning Matrix
• Only technique designed to determine the relative attractiveness of feasible alternative
actions
• Tool for objective evaluation of alternative strategies

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Short Notes: Mgt 603
• Based on identified external and internal crucial success factors
• Requires good intuitive judgment
• List the firm’s key external opportunities & threats; list the firm’s key internal strengths
and weaknesses
• Assign weights to each external and internal critical success factor
• Examine the Stage 2 (matching) matrices and identify alternative strategies that the
organization should consider implementing
• Determine the Attractiveness Scores (AS)
• Compute the total Attractiveness Scores
• Compute the Sum Total Attractiveness Score
QSPM
Limitations:
• Requires intuitive judgments and educated assumptions
• Only as good as the prerequisite inputs
Positives:
• Sets of strategies examined simultaneously or sequentially
• Requires the integration of pertinent external and internal factors in the decision-making
process
Lecture No. 31
Chapter Outline
• The nature of Strategy Implementation
• Annual Objectives
• Policies
• Resource Allocation
• Managing Conflict
• Matching Structure with Strategy
• Restructuring, Reengineering, and E-Engineering
• Linking Performance and Pay to Strategies
• Managing Resistance to Change
• Managing the Natural Environment
• Creating a Strategy-Supportive Culture
• Production/Operations Concerns When Implementing Strategies
• Human Resource Concerns When Implementing Strategies
Implementing Strategies: Management Issues
Pretend that every single person you meet has a sign around his or her neck that says, “Make
me feel important.” -- Mary Kay Ash, CEO of Mary Kay, Inc.
Management Issues
• Annual Objectives
• Policies
• Resources
• Organizational structure

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Short Notes: Mgt 603
• Restructuring
• Rewards/Incentives
• Resistance to Change
• Managers & strategy
• Supportive culture
• Production/operations
• Human resources
• Downsizing
Contrasting strategy formulation and strategy implementation
– Formulation is positioning forces before the action
– Implementation is managing forces during the action
Contrasting strategy formulation and strategy implementation
– Formulation focuses on effectiveness
– Implementation focuses on efficiency
– Formulation is primarily an intellectual process
– Implementation is primarily an operational process
– Formulation requires good intuitive and analytical skills
– Implementation requires special motivation and leadership skills
– Formulation requires coordination among a few individuals
– Implementation requires coordination among many persons
Strategy implementation –
– Varies among different types and sizes of organizations
Strategy implementation Actions –
– Altering sales territories
– Adding new departments
– Closing facilities
– Hiring new employees
– Cost-control procedures
– Changing advertising strategies
– Building new facilities
Formulation to Implementation transition –
– Shift in responsibility
• From strategists to division and functional managers
1. Management Issues
2. Management Issues (continued)
3. Annual Objectives
• Decentralized activity
• Involves all managers in the firm
Annual Objectives
• Basis for allocating resources

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Short Notes: Mgt 603
• Primary mechanism for evaluating managers
• Major instrument for monitoring progress toward long-term objectives
• Establish organizational, divisional, and departmental priorities
• Horizontal consistency of objectives
• Vertical consistency of objectives
Objectives should state –
– Quantity
– Quality
– Cost
– Time
Policies
Policies facilitate solving recurring problems and guide the implementation of strategy
Policies set –
– Boundaries
– Constraints
– Limits
Example Issues requiring management policy --
– To offer extensive or limited management development workshops and seminars
– To centralize or decentralize employee-training activities
– To recruit through employment agencies, college campuses, and/or newspapers
– To promote from within or hire from the outside
– To establish a high- or low-safety stock of inventory
– To buy lease, or rent new production equipment
Lecture No. 32
Resource Allocation –
A central management activity that allows for strategy execution
Four types of resources –
• Financial resources
• Physical resources
• Human resources
• Technological resources
Managing Conflict
Conflict –
Disagreement between two or more parties on one or more issues
• Conflict is not always “bad”
“bad”
• Absence of conflict
– Signal indifference or apathy
• Can energize opposing groups to action

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Short Notes: Mgt 603
• May help managers identify problems
Conflict Management and Resolution
– Avoidance
– Defusion
– Confrontation
Matching Structure with Strategy
1. Changes in Strategy
2. Changes in Structure
• Structure largely dictates how objectives and policies will be established.
• Structure dictates how resources will be allocated
Chandler’s Strategy-Structure Relationship
Organizational
New strategy New administrative
performance
Is formulated problems emerge
declines
Organizational
New organizational
performance
structure is established
improves
Lecture No. 33
Basic Forms of Structure
1. Functional Structure
Groups tasks and activities by business function
2. Divisional Structure
Decentralized and organized by geography, product, customer, or process
3. Strategic Business Unit Structure (SBU)
Groups similar divisions; delegates authority and responsibility to SBU executive
4. Matrix Structure
Most complex of all designs. Depends upon both vertical and horizontal flows of
authority and communication
Lecture No. 34
Restructuring –
Reducing the size of the firm in terms of number of employees, divisions, or units, and the
number of hierarchical levels in the firm’s organizational structure
Also called –
– Downsizing
– Rightsizing
– Delayering
• Employed when ratios out of line with benchmarked competitors

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Short Notes: Mgt 603
• Primary benefit sought is cost reduction
Reengineering
Involves reconfiguring or redesigning work, jobs, and processes to improve cost, quality, service
and speed.
Reengineering
Also called –
– Process management
– Process innovation
– Process redesign
Concerned more with employee and customer well-being than shareholder well-being
Linking Performance and Pay to Strategies
Most companies practicing pay-for-performance
• Dual bonus system becoming more common
– Based on both annual objectives and long-term objectives
• Profit Sharing
– Incentive compensation used by 30% of companies
• Gain Sharing
– Performance targets set for employees or departments
Tests for Performance-Pay Plans
1. Does the plan capture attention?
2. Do employees understand the plan?
3. Is the plan improving communication?
4. Does the plan pay out when it should?
5. Is the company or unit performing better?
Managing Resistance to Change
Change raises anxiety over fear of:
– Economic loss
– Inconvenience
– Uncertainty
– Break in status-quo
Resistance to change –
– Single greatest threat to successful strategy implementation
Change Strategies
• Force Change Strategy
• Educative Change Strategy
• Rational or Self-Interest Change Strategy
Managing the Natural Environment
• Wide appreciation for firms that conduct operations that “mend” rather than “harm” the
“mend” “harm”
environment.
Creating a Strategy-Supportive Culture

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Short Notes: Mgt 603
Strategists should strive to preserve, emphasize, and build upon aspects of existing culture that
support new strategies.
Elements linking culture to strategy:
• Formal statements of philosophy, charters, etc. used for recruitment and selection, and
socialization
• Designing of physical spaces, facades, buildings
• Deliberate role modeling, teaching and coaching
• Explicit reward and status system, promotion criteria
• Stories, legends, myths about key people and events
• What leaders pay attention to, measure and control
• Leader reactions to critical incidents and crises
• How the organization is designed and structured
• Organizational systems and procedures
• Criteria used for recruitment, selection, promotion, retirement
Lecture No. 35
Production/Operations Concerns
• Production processes typically constitute more than 70% of firm’s total assets
• Decisions on:
– Plant size
– Inventory/inventory control
– Quality control
– Cost control
– Technological innovation
Human Resource Concerns
• Assessing staffing needs and costs
• Develop performance incentives
• ESOPs
• Child-care policies
• Work-life balance
Lecture No. 36-37
Marketing variables affect success or failure of strategy implementation
• Market Segmentation
• Production Positioning
Marketing Decisions requiring polices –
– Use exclusive dealerships or multiple channels of distribution
– Use heavy, light, or no TV advertising
– Limit (or not) the share of business done with a single customer
– Be a price leader or price follower
– Offer a complete or limited warranty
– Reward salespeople based on straight commission or combination salary/commission

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Short Notes: Mgt 603
• Subdividing of a market into distinct subsets of customers according to needs and buying
habits
• Widely used in implementing strategies
• Small and specialized firms
Market Segmentation Important Variable:
• Market and product development, market penetration, and diversification require increased
sales through new markets or products
• Firm can operate with limited resources. Enables a small firm by maximizing per-unit
profits and per-segment sales.
• Segmentation decisions directly affect marketing mix variables:
- Product, place, promotion, and price
Marketing Mix – Component Factors
Bases for Segmenting Markets –z
• Geographic
• Demographic
• Psychographic
• Behavioral
Geographic Basis:
– Region
– County Size
– City or SMSA size
– Density
– Climate
Demographic Basis:
– Age
– Family Size
– Family Life Cycle
– Income Occupation
– Education
– Religion
– Race Nationality
Psychographic Basis:
– Social Class
– Lifestyle
– Personality
Behavioral Basis:
– Use occasion
– Benefits sought
– User status
– Usage rate
– Loyalty status

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Short Notes: Mgt 603
– Readiness Stage
– Attitude toward product
Developing schematic representations that reflect how products or services compare to
competitors’ on dimensions most important to success in the industry
Product Positioning based on:
– Customers wants
– Customers needs
Product Positioning Steps
1. Select Key Criteria
2. Diagram Map
3. Plot competitors’ products
4. Look for niches
5. Develop Marketing Plan
Product Positioning Map
Rental Car Market
•
Firm 1
Firm 2
•
•
Firm 3
Low
Convenience
Product Positioning Map as Strategy-Implementation Tool—
– Look for vacant niche
– Avoid sub-optimization
– Don’t serve 2 segments with same strategy
– Don’t position in the middle of the map
Lecture No. 38
Finance/Accounting Issues
Central to Strategy Implementation –
– Acquiring needed capital
– Developing pro forma financial statements
– Preparing financial budgets
– Evaluating worth of a business

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Short Notes: Mgt 603
Finance/Accounting Issues
Acquiring Capital to Implement Strategies –
• Basic sources of capital:
– Debt
– Equity
Debt vs. Equity Decisions –
• EPS/EBIT analysis
– Earnings per share/Earnings before interest and taxes
Pro Forma Financial Statements -
• Allows an organization to examine the expected results of various actions and
approaches
6 Steps in Pro Forma Financial Analysis
• Prepare income statement before balance sheet (forecast sales)
• Use percentage-of-sales method to project CGS and expenses
• Calculate projected net income
• Subtract dividends to be paid from Net Income and add remaining to Retained Earnings
• Project balance sheet times beginning with retained earnings
• List comments (remarks) on projected statements
Financial Budget –
Document that details how funds will be obtained and spent for a specified period of time.
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
Evaluating Worth of a Business
Central to strategy implementation as integrative, intensive and diversification strategies are
often implement through acquisitions of other firms.
Evaluating Worth of a Business
3 Basic approaches:
1. What a firm owns
2. What a firm earns
3. What a firm will bring in the market

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Short Notes: Mgt 603
Lecture No. 39
Same above given in chapter 38
Central to Strategy Implementation –
Evaluating Worth of a Business
3 Basic approaches: Till
Decisions Requiring Finance/Accounting Policies
1. Raise capital w/ short-term, long-term preferred or common stock
2. Lease or buy fixed assets
3. Determine an appropriate dividend payout ratio
4. Use LIFO, FIFO, or market-value accounting approach
5. Extend time of accounts receivable
6. Establish percentage discount on accounts for terms
7. Determine the amount of cash kept on hand
Lecture No. 40
Systematic Review, Evaluation & Control –
– Strategies become obsolete
– Internal environments are dynamic
– External environments are dynamic
• Strategy evaluation is vital to the organization’s well-being
• Alert management to potential or actual problems in a timely fashion
• Erroneous strategic decisions can have severe negative impact on organizations
3 Basic Activities –
• Examining the underlying bases of a firms’ strategy
• Comparing expected to actual results
• Corrective actions to ensure performance conforms to plans
Strategy evaluation –
– Complex and sensitive undertaking
– Overemphasis can be costly and counterproductive
In many organizations, evaluation is an appraisal of performance –
• Have assets increased?
• Increase in profitability?
• Increase in sales?
• Increase in productivity?
• Profit margins, ROI and EPS ratios increased?
Four Criteria (Richard Rummelt):
• Consistency
• Consonance
• Feasibility

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Short Notes: Mgt 603
• Advantage
Consistency
– Strategy should not present inconsistent goals and policies.
• Conflict and interdepartmental bickering symptomatic of managerial disorder and
strategic inconsistency
Consonance
– Need for strategies to examine sets of trends
• Adaptive response to external environment
• Trends are results of interactions among other trends
Feasibility
– Neither overtax resources or create unsolvable sub-problems
• Organizations must demonstrate the abilities, competencies, skills and talents to carry
out a given strategy
Advantage
– Creation or maintenance of competitive advantage
• Superiority in resources, skills, or position
Difficulty in strategy evaluation –
• Increase in environment’s complexity
• Difficulty predicting future with accuracy
• Increasing number of variables
Difficulty in strategy evaluation –
• Rate of obsolescence of plans
• Domestic and global events
• Decreasing time span for planning certainty
Strategy evaluation should –
– Initiative managerial questioning
– Trigger review of objectives and values
– Stimulate creativity in generating alternatives
Lecture No. 41
Porter Supply Chain Model
The Value Chain framework of Michael Porter is a model that helps to analyze specific activities
through which firms can create value and competitive advantage.
The activities of the Value Chain
• Primary activities (line functions)

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Short Notes: Mgt 603
• Support activities (Staff functions, overhead)
Primary activities (line functions)
• Inbound Logistics
• Operations
• Outbound Logistics
• Marketing and Sales
• Service
Support activities (Staff functions, overhead)
• Firm Infrastructure
• Technology Development
• Human Resource Management
• Procurement
Creating a cost advantage based on the value chain
• A firm may create a cost advantage:
• By reducing the cost of individual value chain activities, or
• By reconfiguring the value chain.
10 cost drivers related to value chain activities
• Economies of scale
• Learning
• Capacity utilization
• Linkages among activities
• Interrelationships among business units
• Degree of vertical integration
• Timing of market entry
• Firm's policy of cost or differentiation
• Geographic location
• Institutional factors (regulation, union activity, taxes, etc.).
Lecture No. 42
Same in above chapter
Four Criteria (Richard Rummelt):
Strategy evaluation should –
Lecture No. 43
Review of underlying bases of strategy –
– Develop revised EFE Matrix

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Short Notes: Mgt 603
– Develop revised IFE Matrix
Review effectiveness of strategy –
• Competitors’ reaction to strategy
• Competitors’ change in strategy
• Competitors’ changes in strengths and weaknesses
• Reasons for competitors’ strategic change
• Reasons for competitors’ successful strategies
• Competitors’ present market positions and profitability
• Potential for competitor retaliation
• Potential for cooperation with competitors
Monitor Threats and Opportunities and Weaknesses and Strengths
• Are our internal strengths still strengths?
• Have we added additional strengths?
• Are our weaknesses still weaknesses?
• Have we other internal weaknesses?
• Are opportunities still opportunities?
• Other external opportunities?
• Are threats still threats?
• Are there other threats?
• Are we vulnerable to a hostile takeover?
Evaluation Framework
I. Review Underlying
Bases
Differences? Yes
NO III.
II. Measure Firm Take
Performance Corrective
Actions
Differences? Yes
NO
Continue present course
Lecture No. 44
• Comparing expected to actual results
• Investigating deviations from plan

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Short Notes: Mgt 603
• Evaluating individual performance
• Progress toward stated objectives
Quantitative criteria for strategy evaluation –
– Financial Ratios:
• Compare performance over different periods
• Compare performance to competitors
• Compare performance to industry averages
Key Financial Ratios –
– Return on investment
– Return on equity
– Profit margin
– Market share
– Debt to equity
– Earnings per share
– Sales growth
– Asset growth
Qualitative evaluation of strategy -
– Internal consistency of strategy
– Consistency of strategy with environment
– Strategy appropriate in view of resources
– Acceptable degree of risk
– Appropriate time frame
– Workability of the strategy
Lecture No. 45
Basic requirements for effective strategy evaluation –
– Economical
– Meaningful
– Generate useful information
– Timely information
– Provide a true picture of what is happening
Strategy-Evaluation Assessment Matrix

23. 23
Have major Have major
Short Notes: Mgt 603
changes changes
occurred in occurred in Has the firm
the firm’s the firm’s progressed
internal external satisfactorily toward
strategic strategic achieving its stated
position? position? objectives? Result
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
Premise of sound strategic management –
– Planning to deal with unfavorable and favorable events before they occur.
Contingency Planning –
– Alternative plans that can be put into effect if certain key events do not occur as
expected
• Financial audits to determine correspondence between assertions based on strategic plans
and established criteria
• Environmental audits to insure sound and safe practices.