Untitled Quiz

Study Notes

Strategy evaluation is crucial for organizational success, as erroneous strategic decisions can have significant and long-lasting negative consequences.
The evaluation process involves:
- Examining the underlying basis of a firm's strategy.
- Comparing expected results with actual results.
- Taking corrective actions to ensure that performance aligns with plans.
Key factors to consider during evaluation include:
- Consonance: Alignment of strategic goals and actions with external opportunities and threats.
- Advantage: A firm's competitive advantage based on its internal strengths relative to external opportunities and threats.
- Consistency: A firm's strategic actions are aligned with its internal capabilities and resources.
- Feasibility: A firm's strategic actions are realistic and achievable given its internal resources and capabilities.

Organizations operate within dynamic environments where key internal and external factors can change rapidly.
Continuously monitoring these factors and adapting strategies accordingly is essential.

Strategy evaluation should trigger critical thinking and questioning of expectations and assumptions.
This process involves:
- Reviewing objectives and values.
- Generating new alternatives for consideration.
- Formulating evaluation criteria.
Regular informal evaluation through management by wandering around at all levels promotes effective strategy evaluation.

The strategy-evaluation assessment matrix provides a framework for identifying key questions, potential answers to those questions, and appropriate actions to be taken.

Measuring organizational performance involves comparing expected results to actual results.
Deviations from plans, individual performance, and progress toward meeting objectives should be carefully examined.
Both long-term and annual objectives are useful for performance evaluation. Unsatisfactory progress towards accomplishing these objectives indicates a need for corrective actions.
Contributing factors to unsatisfactory progress can include:
- Unreasonable policies.
- Unexpected economic changes.
- Reliable suppliers or distributors.
- Inadequate strategies.
Problems can stem from ineffectiveness (incorrect actions taken) or inefficiency (poor execution of appropriate actions).

Quantitative criteria are commonly used to evaluate strategies, including financial ratios, which allow three key comparisons:
- Comparing a firm's performance over time.
- Comparing a firm's performance to its competitors.
- Comparing a firm's performance to industry averages.
Key financial ratios for evaluating organizational strategy:
- Return on investment (ROI)
- Return on equity (ROE)
- Profit margin
- Market share
- Debt to equity
- Earnings per share
- Sales growth
- Asset growth