David Tif 09
David Tif 09
David Tif 09
CHAPTER 9
Strategy Review, Evaluation, and Control
True/False
The Nature of Strategy Evaluation
4. Strategy evaluation should have a long-run focus and avoid a short-run focus.
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11. Competitive advantages normally are the result of superiority in one of three
areas: feasibility, consistency, or consonance.
13. Because large companies have more at stake, it is more important for large
organizations to conduct strategy evaluation than small companies.
14. The end of the fiscal year is the best time to do strategy evaluation.
A Strategy-Evaluation Framework
15. Changes in the organization’s management, marketing, finance, R&D and CIS
strengths and weaknesses should all be the focus of a revised EFE matrix in
strategy evaluation.
16. In strategy evaluation, a revised IFE matrix should indicate how effective a firm’s
strategies have been in response to key opportunities and threats.
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18. When taking corrective action, you need to compare expected results to actual
results.
19. Criteria for evaluating strategies should be measurable and easily verifiable.
20. Specific financial ratios are rarely used criteria to evaluate strategies.
22. Intuitive judgments are almost always involved in deriving quantitative criteria.
23. Most quantitative evaluation criteria are geared to long-term objectives rather than
annual objectives.
25. Taking corrective actions does not necessarily mean that existing strategies will
be abandoned, or even that new strategies must be formulated.
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27. Alvin Toffler argues that environments are becoming so dynamic and complex
that they threaten people and organizations with future shock in his thought-
provoking books entitled Future Shock and The Third Wave.
28. Future shock occurs when the type and speed of changes overpower an individual
or organization’s ability and capacity to adapt.
30. The basic form of a Balanced Scorecard is the same for all organizations and
industries.
31. The Balanced Scorecard Approach deals with the question, “How satisfied are the
firm’s customers.”
32. Each year, Fortune publishes strategy evaluation research on both the United
States and other countries.
33. The most admired company in the world in 2007 was Apple.
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36. The test of an effective evaluation system is its usefulness and complexity.
Contingency Planning
39. Contingency plans are alternative plans that can be put into effect if certain key
events do not occur as expected.
40. Organizations should prepare contingency plans just for unfavorable events.
41. Strategies should try to cover all bases by planning for all possible contingencies.
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43. Alternative strategies not selected for implementation should be discarded, as they
have a tendency to contaminate the contingency plans.
44. Identifying both beneficial and unfavorable events that could possibly derail the
strategy or strategies is the first step of effective contingency planning.
Auditing
45. Independent auditors, government auditors and IRS auditors are the three groups
of people who perform audits.
46. Independent auditors are basically CPAs who provide their services to
organizations for a fee.
49. Over 90 percent of China’s energy is derived from solar and nuclear power.
51. Moving environmental affairs from the line side of the organization to the staff
side is required when instituting an environmental audit.
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53. Increased education and diversity of the workforce at all levels are reasons why
the top-down approach should be favored in organizations.
Multiple Choice
The Nature of Strategy Evaluation
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57. All of these are Richard Rumelt’s criteria to evaluate a strategy except:
a. advantage.
b. consistency.
c. feasibility.
d. distinctiveness.
e. consonance.
59. All of the following are reasons strategy evaluation is more difficult today except:
a. a dramatic increase in the environment’s complexity.
b. the increasing number of variables.
c. the increase in the number of both domestic and world events affecting
organizations.
d. the decreasing difficulty of predicting the future with accuracy.
e. the rapid rate of obsolescence of even the best plans.
60. Which of the following is not a reason for the increasing difficulty of evaluating
strategies?
a. Product life cycles are longer today than ever.
b. Domestic and world economies are less stable than ever.
c. Product development cycles are longer than ever.
d. Technological advancement is more rapid.
e. Change is occurring more frequently than ever.
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61. What is important because organizations face dynamic environments in which key
external and internal factors often change quickly and dramatically?
a. Strategy formulation
b. Strategy evaluation
c. Strategy simplification
d. Strategy modification
e. Strategy implementation
63. Competitive advantage normally is the result of superiority in resources, skills and
a. employees.
b. position.
c. consistency.
d. feasibility.
e. governance.
64. What term refers to the need for strategists to examine sets of trends, as well as
individual trends in evaluating strategies?
a. Consistency
b. Consonance
c. Synergy
d. Feasibility
e. Advantage
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65. In evaluating strategies, which one of Rumelt’s criteria for evaluating strategies,
refers to the need for strategists to examine sets of trends?
a. consistency
b. consonance
c. feasibility
d. advantage
e. empowerment
66. If success for one organizational department means failure for another
department, then strategies may be
a. synergistic.
b. advantageous.
c. inconsonant
d. failures.
e. inconsistent.
67. When empowered employees are held accountable for and pressured to achieve
specific goals and are given wide latitude in their actions to achieve them, there
can be
a. increased productivity.
b. dysfunctional behavior.
c. decreased number of complaints.
d. decreased turnover.
e. increased number of litigations.
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A Strategy-Evaluation Framework
70. When you discover major changes have occurred in the firm’s internal strategic
position while conducting strategy evaluation, you should
a. continue on the present strategic course.
b. immediately discontinue all aspects of the present strategic course.
c. take corrective actions.
d. add additional funds to the present strategic plan.
e. copy the actions of major competitors.
72. A revised __________ should indicate how effective a firm’s strategies have been
in response to key opportunities and threats.
a. IFE matrix
b. mission
c. EFE matrix
d. vision
e. CPM matrix
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78. Financial ratios are used to compare a firm’s performance over different time
periods, compare the firm’s performance to industry averages, and compare a
firm’s performance with
a. overall business standards.
b. the performance of international firms.
c. the performance of suppliers.
d. non-financial ratios.
e. the performance of competitors.
80. What corrective actions should a firm take during strategy evaluation?
a. Revising the business mission
b. Issuing stock
c. Revising objectives
d. Selling a division
e. all of the above
81. What occurs when the nature, types and speed of changes overpower an
individual’s or organization’s ability and capacity to adapt?
a. Corporate downfall
b. Corrective actions
c. Future shock
d. Corporate agility
e. Measuring performance
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83. What is the best way to overcome individuals’ resistance to change in strategy
evaluation?
a. Participation
b. Command-and-control
c. Laissez-faire system
d. Rational argument
e. Emotional reactions
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87. What aims to balance long term with short term concerns, financial with non-
financial concerns, and internal with external concerns.
a. Contingency planning
b. The Balanced Scorecard approach
c. Taking corrective action
d. Measuring performance
e. reviewing Bases of Strategy
88. In the important publication used to evaluate a firm’s strategy, the Fortune 50
includes all of the following except:
a. the top retailers.
b. the top transportation companies.
c. the top utilities.
d. the top banks.
e. the top hospitals.
89. Which of these is not a key attribute in Fortune’s strategy evaluation research on
“America’s Most Admired Companies”?
a. People management
b. Innovativeness
c. Financial soundness
d. Amount of physical resources
e. Use of corporate assets
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93. What factor determines the final design of a firm’s strategy-evaluation and control
system?
a. Opportunities
b. Threats
c. External characteristics
d. The organization’s characteristics
e. The competition’s characteristics
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94. Familiarity with local environments usually makes gathering and evaluating
information much easier for organizations than for ones.
a. non-profit; for-profit
b. for-profit; non-profit
c. large; small
d. small; large
e. foreign; domestic
Contingency Planning
95. What activity is defined as having alternative plans that can be put into effect if
certain key events do not occur as expected?
a. Corporate agility
b. Scenario planning
c. Strategy evaluation
d. Contingency planning
e. Forecasting
96. Which of the following statements about contingency plans is not true?
a. Contingency plans should be as simple as possible.
b. Only high-priority areas require the insurance of contingency plans.
c. Contingency plans should be developed for favorable and unfavorable
events.
d. Develop contingency plans for all contingent events.
e. Contingency plans minimize the impact of potential threats.
97. What permits quick response to change, prevents panic in crisis situations, and
makes managers more adaptable.
a. Auditing
b. Implementing a balanced scorecard
c. Contingency planning
d. Taking corrective actions
e. Measuring performance
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Auditing
98. What term refers to a systematic process of objectively obtaining and evaluating
evidence regarding assertions about economic actions and events to ascertain the
degree of correspondence between these assertions and established criteria, and
communicating the results to interested users?
a. Auditing
b. Innovation
c. R&D
d. Strategic Management
e. Accounting
99. What county has the largest percentage of the worlds most polluted cities?
a. Japan
b. U.S.
c. Mexico
d. Brazil
e. China
101. What percent of China’s population lack access to clean drinking water?
a. 5 percent
b. 16 percent
c. 20 percent
d. 26 percent
e. 35 percent
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102. Which type of auditors are specifically responsible for safeguarding the assets of a
company?
a. Independent auditors
b. Government auditors
c. Internal auditors
d. External auditors
e. Research auditors
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105. All of the following are reasons to be completely open with the strategy process
except:
a. managers, employees and other stakeholders can readily contribute to the
process.
b. investors, creditors and other stakeholders have greater basis for
supporting a firm that is open.
c. visibility promotes democracy whereas secrecy promotes autocracy.
d. participation and openness enhances understanding, commitment and
communication within the firm.
e. openness limits rival firms from imitating or duplicating the firm’s
strategies.
106. Which of the following is not a reason why some firms prefer to conduct
strategic-planning in secret?
a. Dissemination of a firm’s strategies may translate into competitive
intelligence for rival firms.
b. It enhances understanding, commitment and communication within the
firm.
c. It limits criticism, second-guessing and hindsight.
d. Participants in a visible strategy process become more attractive to rival
firms, who may lure them away.
e. Secrecy limits rival firms from imitating or duplicating the firm’s
strategies.
Essay Questions
107. Explain why strategy evaluation can be a complex and sensitive undertaking.
Strategy can be a complex and sensitive undertaking because too much emphasis
on evaluating strategies may be expensive and counterproductive. No one likes to
be evaluated too closely! The more managers attempt to evaluate the behavior of
others, the less control they have. Yet too little or no evaluation can create even
worse problems. Strategy evaluation is essential to ensure stated objectives are
being achieved.
Page: 298
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108. Discuss some of the reasons why strategy evaluation is becoming increasingly
difficult with the passage of time.
Possible answers include: Domestic and world economies were more stable in
years past; Product life cycles were longer; product development cycles were
longer; technological advancement was slower; change occurred less frequently;
there were fewer competitors; foreign companies were weak; and there were more
regulated industries. Other reasons include: 1) A dramatic increase in the
environment’s complexity; 2) The increasing difficulty of predicting the future
with accuracy; 3) The increasing number of variables; 4) The rapid rate of
obsolescence of even the best plans; 5) The increase in the number of both
domestic and world events affecting organizations; and 6) The decreasing time
span for which planning can be done with any degree of certainty.
Page: 300
109. Compare and contrast two of Rumelt’s four criteria for evaluating strategies.
Page: 299
The activities that comprise strategy evaluation are: (1) reviewing bases of an
organization’s strategy, (2) measuring organizational performance and (3) taking
corrective actions. Please refer to pages 302-305 for descriptions of each activity.
Page: 302-305
111. What are the most commonly used quantitative criteria to evaluate strategies?
Give several examples of these criteria.
Page: 304
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112. Discuss the different perspectives and concerns of the Balanced Scorecard.
The Balanced Scorecard is a process that allows firms to evaluate strategies from
four perspectives: financial performance, customer knowledge, internal business
processes, and learning and growth. It aims to balance long-term concerns with
short-term concerns, financial with non-financial concerns, and internal with
external concerns.
Page: 306
Page: 307
Page: 311
115. Individuals who perform audits can be divided into three groups. Identify these
three groups and give an example of each.
People who perform audits can be divided into three groups: independent
auditors, government auditors and internal auditors. An example of an
independent auditor is the CPAs at Arthur Andersen public accounting firm. The
GAO and IRS are examples of government auditors. Employees within an
organization who are responsible for safeguarding company assets, for assessing
the efficiency of company operations and for ensuring the generally accepted
business procedures are examples of internal auditors.
Page: 311-312
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China is today home to 16 of the world’s 20 most polluted cities, and it battles
soil erosion, spreading deserts, polluted water, and smog everywhere. About 40
percent of Chinese cities lack sewage treatment facilities. All of China’s major
rivers are dangerously polluted, and two-thirds of the country’s rivers and lakes
are severely polluted. Data indicate that 340 million of the 1.3 billion Chinese (26
percent) lack access to clean drinking water, and 10 percent of China’s farmland
is polluted.
In 2006, China had 161 serious environmental accidents, the most ever, according
to Pan Yue, deputy director of China’s EPA. Mr. Pan also says “the year 2006
was the most grim year ever for China’s environmental situation.” Rising sea
levels now threaten the deltas of the Yellow, Yangtze, and Pearl rivers—home to
the bulk of China’s manufacturing and export business.
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The three challenges that strategists face today are 1) deciding whether the
process of strategic management should be more of an art or a science; 2)
deciding whether strategies should be visible or hidden from stakeholders; or 3)
deciding whether the process should be more top-down or bottom-up in the firm.
Page: 312-315
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