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Evaluating Strategy

Evaluating Strategy

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Evaluating Strategy

  1. 1. Slide 11.1 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Lesson 09: Evaluating Strategies BM3040 Strategic Management Pro. Wasantha Rajapakshe, PhD Associate Professor, SLIIT Business School, SLIIT, Malabe.
  2. 2. Slide 11.2 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Learning outcomes • Employ three success criteria for evaluating strategic options (the SAFe criteria): – Suitability: whether a strategy addresses the key issues relating to the opportunities and constraints an organisation faces. – Acceptability: whether a strategy meets the expectations of stakeholders. – Feasibility: whether a strategy could work in practice.
  3. 3. Slide 11.3 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 The SAFe criteria and techniques of evaluation
  4. 4. Slide 11.4 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Suitability Suitability is concerned with assessing which proposed strategies address the key opportunities and threats an organisation faces. It is concerned with the overall rationale of the strategy: • Does it exploit the opportunities in the environment and avoid the threats? • Does it capitalise on the organisation’s strengths and avoid or remedy the weaknesses?
  5. 5. Slide 11.5 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Suitability of strategic options in relation to strategic position
  6. 6. Slide 11.6 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Acceptability Acceptability is concerned with whether the expected performance outcomes of a proposed strategy meet the expectations of stakeholders. There are three important aspects to acceptability: • Risk • Return • Stakeholder reactions.
  7. 7. Slide 11.7 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Risk Risk concerns the extent to which strategic outcomes are unpredictable, especially with regard to negative outcomes.
  8. 8. Slide 11.8 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Return These are a measure of the financial effectiveness of a strategy. Different approaches to assessing return: • Financial analysis – see Figure 11.3 • Shareholder value analysis – see Table 11.5 • Cost–benefit analysis – see Illustration 11.6 • Real options – see Illustration 11.7.
  9. 9. Slide 11.9 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Feasibility (1) Feasibility is concerned with whether a strategy could work in practice, i.e. whether an organisation has the capabilities to deliver a strategy. Two key questions: • Do the resources and competences currently exist to implement the strategy effectively? • If not, can they be obtained?
  10. 10. Slide 11.10 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Feasibility (2) Need to consider: • Financial feasibility – funding and cash flow • People and skills – competences, knowledge and experience • Integrating resources – obtaining and integrating new resources.
  11. 11. Slide 11.11 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Financial strategy and the business life cycle
  12. 12. Slide 11.12 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 People and skills (1) Three questions arise: • Do people in the organisation currently have the competences to deliver a proposed strategy? • Are the systems to support those people fit for the strategy? • If not, can the competences be obtained or developed?
  13. 13. Slide 11.13 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Integrating resources The success of a strategy depends on the management of many resource areas, for example: • people • finance • physical resources • Information • technology • resources provided by suppliers and partners. It is essential to integrate resources – inside the organisation and in the wider value system.
  14. 14. Slide 11.14 Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Summary • Performance can be assessed in terms of both economic performance and overall organisation effectiveness. • Gap analysis indicates the extent to which achieved or projected performance diverges from desired performance and the scale of the strategic initiatives required to close the gap. • Strategies can be evaluated according to the three SAFe criteria of suitability in view of organisational opportunities and threats, acceptability to key stakeholders and feasibility in terms of capacity for implementation.

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