Strategy Evaluation and Control

Strategic Control Process

• Quantitative

• Qualitative

In both cases process consists of three phases – 1. Evaluation Criteria . 2. Performance Evaluation 3. Feedback

Quantitative

• To compare the performance of the organization over different time periods

• To compare the performance with it’s competitors in the industry

• To compare the performance against industry averages

Financial Ratios

• ROI• Return on Equity• Profit Margin• Market Share• Debt to Equity• EPS• Sales Growth• Asset Growth

Methods of Control

• DuPont Chart

• Budgets

• Audits

Time Related Control

• Critical Path Method

• PERT

• MBO

Problems of Control System

• Reporting data validity

• Criteria for measurement in question

• Performance standards may be set with inherent contradictions

• Over emphasis on short term measures

Evaluation of Strategy

• Strategy Formulation

• Strategy Implementation

• Strategy Evaluation

Business Portfolio Analysis

• BCG Matrix

• McKinsey Matrix

• Strategic Planning Institute’s Matrix

• Arthur D’Little Company’s Matrix

• Hofer’s Product / Evolution Matrix

Qualitative Factors

• Balanced Score Card by Norton and Kaplan

The Basic Performance Pyramid

Mission

Vision

Goals/Objectives

Strategies

Success Drivers

Where are we going?

What are we in business for?

What do we want to achieve?

How will you achieve your goals/objectives?

What do you need to do well?

How will you measure how well you are

doing?Performance Measures

Balanced Scorecard Approach• The Balanced Scorecard translates an organization’s mission and

strategy into goals and measures, organized into four different

perspectives

» customer

» financial

» internal business process

» innovation and learning

Balanced Scorecard Approach (Cont’d)

• The Balanced Scorecard helps an organization to:

– determine progress towards its goals/objectives

– communicate strategic direction

– determine success or failure of its

strategies/initiatives

– define future strategies

– establish benchmarks

– demonstrate value-added

Balanced Scorecard Approach (Cont’d)

• The best Balanced Scorecards will tell the story of

the organization’s strategy and cause the overall

performance to be managed such that the stated

mission is accomplished.