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Bus 411. Day 14. Agenda. Assignment 4 Corrected 1 A, 4 B’s, 2 MIA’s, and 1 late Assignment 5 Posted (Last One!) Due March 20 (next class) SWOT, SPACE, BCG and QSPM Matrices for Google Mid term Exam Posted Due March 24 20 Short essays Finish Discussion on Implementing Strategies

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bus 411

Bus 411

Day 14

Copyright 2005 Prentice Hall

agenda
Agenda
  • Assignment 4 Corrected
    • 1 A, 4 B’s, 2 MIA’s, and 1 late
  • Assignment 5 Posted (Last One!)
    • Due March 20 (next class)
    • SWOT, SPACE, BCG and QSPM Matrices for Google
  • Mid term Exam Posted
    • Due March 24
    • 20 Short essays
  • Finish Discussion on Implementing Strategies
  • Discussion on Strategic Review, Evaluation and Control

Copyright 2007 Prentice Hall

case study teams
Team 1

Karen

Geneice

Lee

James

Team 2

Takefumi

Matt

Darius

Danielle

Case Study Teams

Copyright 2007 Prentice Hall

timeline tentative
Today

Finish Chapter 8

Chapter 9

March 20

Assignment 5 Due

How to present a case study

Tony Case Study One Apple Computer

Team work if time allows

March 24

Midterm due

Team work (no class)

March 27

Team Work (no class)

March 31

Team 1 Case 19 Jet Blue

April 3

Team 2 Case 20 AirTran

April 7

Tony Case 27 Kroger

April 10

Team 1 Case 26 Best Buy

April 14

Team 2 Case 28 Home Depot

April 17

Tony Case 23 Harrah’s

April 21

Team 1 Case 24 Royal Caribbean Cruises

April 24

Team 2 Case 25 Web Reservations International

April 28

Team 1 Case 21 USA truck

May 1

Team 2 Case 22 Yellow Roadway Corp.

Take home final assigned

May 6 @ 10AM

In-class final

May 9 by 3 PM

Take home final

Timeline (tentative)

Copyright 2007 Prentice Hall

slide7

Finance/Accounting Issues

Projected Financial Statements

  • Allow an organization to examine the expected results of various actions and approaches

Copyright 2007 Prentice Hall

slide8

Finance/Accounting Issues

Steps in Preparing Projected Financial Statements

  • Prepare income statement before balance sheet (forecast sales)
  • Use percentage of sales method to project CoGS & expenses
  • Calculate projected net income

Copyright 2007 Prentice Hall

slide9

Finance/Accounting Issues

Steps in Preparing Projected Financial Statements (cont’d)

  • Subtract dividends to be paid from Net Income and add remaining to Retained Earnings
  • Project balance sheet items beginning with retained earnings
  • List comments (remarks) on projected statements

Copyright 2007 Prentice Hall

slide11

Finance/Accounting Issues

Financial Budget

-- Details how funds will be obtained and spent for a specified period of time.

Copyright 2007 Prentice Hall

slide12
Cash budgets

Operating budgets

Sales budgets

Profit budgets

Factory Budgets

Expense Budgets

Divisional budgets

Variable budgets

Flexible budgets

Fixed budgets

Finance/Accounting Issues

Types of Budgets

Copyright 2007 Prentice Hall

slide13

Finance/Accounting Issues

Evaluating Worth of a Business

  • Central to strategy implementation – integrative, intensive, & diversification strategies often implemented through acquisitions of other firms

Copyright 2007 Prentice Hall

slide14

Finance/Accounting Issues

Evaluating Worth of a Business:

3 Basic Approaches

  • What a firm owns
    • Total assets – liabilities (discount overvalued assets)
    • Stockholders equity
  • What a firm earns
    • 5 X times annual earnings (tax consequences)
  • What a firm will bring in the market
    • Outstanding shares

Copyright 2007 Prentice Hall

worth of a business analysis see 8 8
Worth of a Business Analysis (see 8-8)

Southwest Airlines

Stockholders’ Equity: $ 5,524

Net Income: 313

Stock Price: 15.70

EPS: .45

Shares Outstanding 784

Company Worth Analysis

Stockholders Equity $ 5,524

Net Income x 5 1,565

Share Price/EPS x NI 10,920

# Shares x Share Price 12,309

Copyright 2007 Prentice Hall

slide16

Research & Development Issues

-- New products and improvement of existing products that allow for effective strategy implementation

Copyright 2007 Prentice Hall

slide17

Research & Development Issues

  • Level of support constrained by resource availability
  • Technological improvements shorten product life cycles

Constraints

Copyright 2007 Prentice Hall

slide18

Research & Development Issues

  • 1st firm to market new technological products
  • Innovative imitator of successful products
  • Low-cost producer of similar but less expensive products

3 Major R&D approaches to implementing strategies

Copyright 2007 Prentice Hall

slide19

Management Information Systems (MIS) Issues

-- Information is the basis for understanding the firm. One of the most important factors differentiating successful from unsuccessful firms

Copyright 2007 Prentice Hall

slide20

MIS Issues

  • Information collection, retrieval, & storage
  • Keeping managers informed
  • Coordination of activities among divisions
  • Allow firm to reduce costs

Functions of MIS

Copyright 2007 Prentice Hall

chapter 9 strategy review evaluation control
Chapter 9Strategy Review, Evaluation, & Control

Strategic Management: Concepts & Cases

11th Edition

Fred David

Copyright 2007 Prentice Hall

strategic management process model
Strategic Management Process Model

Copyright 2007 Prentice Hall

slide23

Strategy Evaluation

Organizations are most vulnerable when they are at the peak of their success --

R.T. Lenz

Copyright 2007 Prentice Hall

slide24

Strategy Review, Evaluation, & Control

-- Strategies become obsolete

-- Internal environments are dynamic

-- External environments are dynamic

Copyright 2007 Prentice Hall

slide25

Strategy Review, Evaluation, & Control

  • Vital to the organization’s well-being
  • Alert management to potential/actual problems in a timely fashion
  • Erroneous strategic decisions can have severe negative impact on organizations

Strategy Evaluation

Copyright 2007 Prentice Hall

slide26

Strategy Review, Evaluation, & Control

  • Examine the underlying bases of a firm’s strategy
    • Did we do a careful analysis?
    • Did things change?
  • Compare expected to actual results
  • Identify corrective actions to ensure that performance conforms to plans

3 Basic Activities

Copyright 2007 Prentice Hall

slide27

Strategy Review, Evaluation, & Control

  • Complex & sensitive undertaking
  • Overemphasis can be costly & counterproductive
    • Too much time spentmeasuringrather than doing

Strategy Evaluation

Copyright 2007 Prentice Hall

strategy review evaluation control
Strategy Review, Evaluation, & Control
  • Have assets increased
  • Increase in profitability
  • Increase in sales
  • Increase in productivity
  • Profit margins, ROI, & EPS ratios increased

Appraisal of Strategic Performance

Copyright 2007 Prentice Hall

strategy evaluation review control
Strategy Evaluation, Review & Control

Consistency

Rumelt’s4 Criteria

Consonance

Feasibility

Advantage

Copyright 2007 Prentice Hall

strategy evaluation review control30
Strategy Evaluation, Review & Control
  • Strategy should not present inconsistent goals & policies
    • Issue and not “people” problems
    • Success for one department means failure for another
    • Policy problems rise to the top

Consistency

Copyright 2007 Prentice Hall

strategy evaluation review control31
Strategy Evaluation, Review & Control

Consistency

Rumelt’s4 Criteria

Consonance

Feasibility

Advantage

Copyright 2007 Prentice Hall

strategy evaluation review control32
Strategy Evaluation, Review & Control
  • Need for strategies to examine sets of trends
    • Need a Holistic view (internal and external)

Consonance

Copyright 2007 Prentice Hall

strategy evaluation review control33
Strategy Evaluation, Review & Control

Consistency

Rumelt’s4 Criteria

Consonance

Feasibility

Advantage

Copyright 2007 Prentice Hall

strategy evaluation review control34
Strategy Evaluation, Review & Control
  • Neither overtax resources or create unsolvable sub-problems
    • Can it be done with the given or available resources?

Feasibility

Copyright 2007 Prentice Hall

strategy evaluation review control35
Strategy Evaluation, Review & Control

Consistency

Rumelt’s4 Criteria

Consonance

Feasibility

Advantage

Copyright 2007 Prentice Hall

strategy evaluation review control36
Strategy Evaluation, Review & Control
  • Creation or maintenance of competitive advantage
    • If it doesn't create a competitive advantage then what’s the point?

Advantage

Copyright 2007 Prentice Hall

process of strategic evaluation
Process of strategic evaluation
  • Management should be continually aware of progress
    • Management by wandering around
      • Don't wait for information get to you, go out and get the information
    • Things Change

Copyright 2007 Prentice Hall

strategy review evaluation control38
Strategy Review, Evaluation, & Control
  • Increase in environment’s complexity
  • Difficulty predicting future with accuracy
  • Increasing number of variables

Difficulties in Strategy Evaluation

Copyright 2007 Prentice Hall

strategy review evaluation control39
Strategy Review, Evaluation, & Control
  • Rate of obsolescence of plans
  • Domestic and global events
  • Decreasing time span for planning certainty

Difficulties in Strategy Evaluation

Copyright 2007 Prentice Hall

strategy review evaluation control40
Strategy Review, Evaluation, & Control
  • Initiate managerial questioning
  • Trigger review of objectives & values
  • Stimulate creativity in generating alternatives

Strategy Evaluation Should --

Copyright 2007 Prentice Hall

strategy review evaluation control41
Strategy Review, Evaluation, & Control
  • Develop revised EFE Matrix
  • Develop revised IFE Matrix

Review of Underlying Bases of Strategy --

Copyright 2007 Prentice Hall

strategy review evaluation control42
Strategy Review, Evaluation, & Control
  • Competitors’ reaction to strategy
  • Competitors’ change in strategy
  • Competitors’ changes in strengths & weaknesses
  • Reasons for competitors’ strategic change

Review Effectiveness of Strategy --

Copyright 2007 Prentice Hall

strategy review evaluation control43
Strategy Review, Evaluation, & Control
  • Reasons for competitors’ successful strategies
  • Competitors’ present market positions & profitability
  • Potential for competitor retaliation
  • Potential for cooperation with competitors

Review Effectiveness of Strategy --

Copyright 2007 Prentice Hall

strategy review evaluation control44
Strategy Review, Evaluation, & Control
  • Are strengths still strengths?
  • Have we added additional strengths?
  • Are weaknesses still weaknesses?
  • Have we developed other weaknesses?

Monitor Strengths & Weaknesses; Opportunities & Threats

Copyright 2007 Prentice Hall

strategy review evaluation control45
Strategy Review, Evaluation, & Control
  • Are opportunities still opportunities?
  • Other opportunities develop?
  • Are threats still threats
  • Other threats emerged?
  • Are we vulnerable to hostile takeover?

Monitor Strengths & Weaknesses; Opportunities & Threats

Copyright 2007 Prentice Hall

slide47

Review Underlying Bases

New IFE & EFE

Take

Corrective

Actions

Measure Firm Performance

Evaluation Framework

Yes

Differences?

NO

Yes

Differences?

NO

Continue present course

Copyright 2007 Prentice Hall

strategy review evaluation control48
Strategy Review, Evaluation, & Control
  • Compare expected to actual results
  • Investigate deviations from plan
  • Evaluate individual performance
  • Progress toward stated objectives

Measuring Organizational Performance

Copyright 2007 Prentice Hall

strategy review evaluation control49
Strategy Review, Evaluation, & Control
  • Financial Ratios
    • Compare performance over different periods
    • Compare performance to competitors
    • Compare performance to industry averages

Quantitative Criteria for Strategy Evaluation

Copyright 2007 Prentice Hall

strategy review evaluation control50
Strategy Review, Evaluation, & Control
  • Return on investment (ROI)
  • Return on equity (ROE)
  • Profit margin
  • Market Share

Key Financial Ratios

Copyright 2007 Prentice Hall

strategy review evaluation control51
Strategy Review, Evaluation, & Control
  • Debt to equity
  • Earnings per share (EPS)
  • Sales growth
  • Asset growth

Key Financial Ratios

Copyright 2007 Prentice Hall

strategy review evaluation control52
Strategy Review, Evaluation, & Control
  • Internal consistency of strategy
  • Consistency with environment
  • Appropriateness in view of resources

Qualitative Evaluation of Strategy

Copyright 2007 Prentice Hall

strategy review evaluation control53
Strategy Review, Evaluation, & Control
  • Acceptable degree of risk
  • Appropriate time frame
  • Workability of the strategy

Qualitative Evaluation of Strategy

Copyright 2007 Prentice Hall

slide54

Strategy Review, Evaluation, & Control

-- Evaluate strategies from 4 perspectives:

1. Financial performance

2. Customer knowledge

3. Internal business processes

4. Learning & growth

Balanced Scorecard

Copyright 2007 Prentice Hall

balanced scorecard
Balanced Scorecard

Copyright 2007 Prentice Hall

strategy review evaluation control57
Strategy Review, Evaluation, & Control
  • Economical
  • Meaningful
  • Generates useful information
  • Timely information
  • Provides accurate picture of events

Characteristics of Strategy Evaluation

Copyright 2007 Prentice Hall

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Strategy Review, Evaluation, & Control

Alternative plans that can be put into effect if certain key events do not occur as expected

Contingency Planning

Copyright 2007 Prentice Hall

strategy review evaluation control59
Strategy Review, Evaluation, & Control
  • Financial audits determine correspondence between assertions based on strategic plan & established criteria
  • Environmental audits insure sound and safe practices

Auditing

Copyright 2007 Prentice Hall

strategy evaluation review control60
Strategy Evaluation, Review & Control

21st Century Challenges in Strategic Management

  • Process is more an “art” than “science”
    • You can learn the “science”, the “art” part requires experiences and practice
  • Should strategies be visible or hidden from stakeholders
    • Only when secrecy gives some competitive advantage
  • Should process be more top-down or bottom up
    • Current research suggests bottom-up

Copyright 2007 Prentice Hall