MGM4139 CHP11 STRATEGY MONITORING

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Visible or Hidden

Sun Tzu: Strategies is secret

War based on deception

Strategy cant be duplicated

Less attractive to rival

Limit critisicm

Free disemination

Business Organisation prefer Visible

Reason

Cant implement strategy well

Inhibit commitment

Inhibit understanding

Secret inhibit communication

Advantages

Enhance commitment,understanding + communication

Democracy

Full support

All staff involve

Art or Science

Mintzberg's notion : More as Arts

Politics

Creativity

Hunch

Emotion

More as Science

Research

Access Internal + External environment

Decide action

Perform analysis

Pros + cons alternative

Top-Down or Bottom-Up

'Top-Dowm'

Top executive makes decision

'Bottom-Up'

Manager + employee involve in decision making

MGM4139 CHP11 STRATEGY MONITORING

The Process of Evaluating Strategies

Organizational members should involved.

Managers and employees shold be aware of the firm's progress

Example : If the assumptions made are deviate significantly from forecast, then a change or renew in Strategy-Formulation is needed.

Performed in CONTINUING BASIS

NOT in the end of specific time or when problems occurred.

Should

Stimulate creativity in generating ALTERNATIVES & CRITERIA of EVALUATION

Trigger a review of OBJECTIVES & VALUES

Initiate managerial questions of EXPECTATION & ASSUMPTIONS.

21st-Century Challenges in Strategic Management

Auditing

Reason of switching standards from GAAP to IFRS

IFRS rules are more streamlined and less complex than GAAP

New standard - International Financial Reporting Standards (IFRS)

Old standard - Generally Accepted Accounting Principles (GAAP)

A systematic process of objectively obtaining and evaluating evidence - assert and communicate the results to interested users

Contingency Planning

Five-step process of effective Contingency Planning

Determine early warning trigger points key contingency events

Develop contingency plans for key contingency events

Determine the expected pros and cons of each contingency events

Determine when the events occur

Identify events that could jeopardize strategies

Benefits of Contingency Planning

It made managers more adaptable the changes

It prevent panic in crisis situations

It permit quick response to change

The organization need a major change after the evaluation phase - thus, can promote a strategist's ability to respond quickly

Alternative plans that can take into action if certain strategy/plan do not occur as expected

Characteristics of an Effective Evaluation System

Do not dominate decision

Provide current situation

Simple

Provide timely info

Meaningful to managers

Adequate control

Adequate info

Economical

Published Sources of Strategy-Evaluation Information

Dun's Business Month

Industry Week

Businessweek

Fortune

Innovativeness

Product quality

Quality of management

Financial soundness

Global competitiveness

Social responsibilty

Long-term investment

Use of assets

People management

The Balanced Scorecard

aims to balance:

Internal & External

Financial & Nonfinancial

Long terms & short terms

allows firms to evaluate strategies

6 Key issues

financial

business ethics/natural environment

community/social responsibility

operations processes

managers/employees

customers

from 4 prospectives

Learning and growth

customer knowledge

internal business processes

financial performance

Strategy Evaluation Framework

Reviewing Bases of Strategy

S-W-O-T of the current strategies shoud be continually monitored for a better change

Develop a revised IFE and EFE Matrices -to prevent any upcoming failures toward the organization's objectives

Measuring Organizational Performance

Strategy evaluation based on

Qualitative criteria

Quantitative criteria

Activities

Examining progress

Evaluating individual performance

Investigating deviations from plans

Comparing expected results to actual results

Taking Corrective Action

Outsource (or rein in) business functions

Allocate resources differently

Add or terminate salespersons, employees or managers

Raise capital with stock or debt

Install new performance incentives

Devise new policies

Alter policies

Revise Objectives

Alter the firm's vision or mission

Divest a division

Replace one or more key individuals

Alter the firm's structure

The Nature of Strategy Evaluation

Difficulties

Decreasing time span for planning certainty

Domestic and global events

Rate of obsolescence of plans

Increasing number of variables

Difficulty predicting future with accuracy

Increase in environment’s complexity

Rumelt 4 Criteria

Consonance

Advantage

Feasibility

Consistency

Appraisal of Strategic Performance

Profit margins, ROI, & EPS ratios increased

Increase in productivity

Increase in sales

Increase in profitability

Have assets increased

3 Basic Activities

Corrective actions

Compare expected to actual results

Examine the underlying bases of a firm’s strategy

Strategy Evaluation

Overemphasis can be costly & counterproductive

Complex & sensitive undertaking

Erroneous strategic decisions can have severe negative impact on organizations

Alert management to potential/actual problems in a timely fashion

Vital to the organization’s well-being