Quantitative criteria for strategy evaluation

Chapter 9: Strategy Review, Evaluation, and Control

Chapter 9: Strategy Review, Evaluation, and Control

CHAPTER 9

Strategy Review, Evaluation, and Control

True/False

The Nature of Strategy Evaluation

1. Most strategists believe that an organization’s well being depends on evaluation of the strategic-management process.

(t; easy; p. 298)

2. Adequate, timely feedback is important to effective strategy evaluation.

(t; easy; p. 298)

3. Too much emphasis on evaluating strategies may be expensive and counterproductive.

(t; medium; p. 298)

4. Strategy evaluation should have a long-run focus and avoid a short-run focus.

(f; medium; p. 299)

5. According to Richard Rumelt, consonance and consistency are based on a firm’s external assessment.

(f; medium; p. 299)

6. According to Rumelt, consistency and feasibility are largely based on a firm’s internal assessment.

(t; medium; p. 299)

7. Consistency, distinctiveness, advantage and feasibility are Richard Rumelt’s four criteria for evaluating a strategy.

(f; medium; p. 299)

8. Strategy evaluation is becoming increasingly easier with the passage of time, given the technological advances.

(f; difficult; p. 300; AACSB: Reflective thinking skills)

9. The decreasing time span for which planning can be done with any degree of certainty is a reason strategy evaluation is more difficult today.

(t; medium; p. 300; AACSB: Reflective thinking skills)

10. Strategies may be inconsistent if policy problems and issues continue to be brought to the top for resolution.

(t; easy; p. 300)

11. Competitive advantages normally are the result of superiority in one of three areas: feasibility, consistency, or consonance.

(f; medium; p. 300; AACSB: Reflective thinking skills)

12. Regardless of the size of the organization, a certain amount of management by wandering around at all levels is essential to effective strategy evaluation.

(t; medium; p. 301)

13. Because large companies have more at stake, it is more important for large organizations to conduct strategy evaluation than small companies.

(f; easy; p. 301)

14. The end of the fiscal year is the best time to do strategy evaluation.

(f; medium; p. 301; AACSB: Reflective thinking skills)

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.

(f; medium; p. 300; AACSB: Analytic skills)

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.

(f; medium; p. 302; AACSB: Reflective thinking skills)

17. Strengths, weaknesses, opportunities and threats should continually be monitored for change because it is not really a question of whether these factors will change but rather when they will change and in what ways.

(t; medium; p. 302)

18. When taking corrective action, you need to compare expected results to actual results.

(f; easy; p. 302)

19. Criteria for evaluating strategies should be measurable and easily verifiable.

(t; easy; p. 302)

20. Specific financial ratios are rarely used criteria to evaluate strategies.

(f; medium; p. 302)

21. Measuring organizational performance includes comparing expected results to actual results, investigating deviations from plans, evaluating individual performance and examining progress being made toward meeting stated objectives.

(t; medium; p. 304; AACSB: Reflective thinking skills)

22. Intuitive judgments are almost always involved in deriving quantitative criteria.

(t; medium; p. 304)

23. Most quantitative evaluation criteria are geared to long-term objectives rather than annual objectives.

(f; medium; p. 304; AACSB: Analytic skills)

24. Measuring organizational performance requires making changes to reposition a firm competitively for the future.

(f; medium; p. 304)

25. Taking corrective actions does not necessarily mean that existing strategies will be abandoned, or even that new strategies must be formulated.

(t; medium; p. 305)

26. Corrective action in strategy evaluation is necessary to keep an organization on track toward achieving stated objectives.

(t; easy; p. 305)

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.

(t; medium; p. 305; AACSB: Reflective thinking skills)

28. Future shock occurs when the type and speed of changes overpower an individual or organization’s ability and capacity to adapt.

(t; medium; p. 305)

29. According to research, participation in strategy-evaluation activities is one of the best ways to overcome individuals’ resistance to change.

(t; medium; p. 305)

The Balanced Scorecard

30. The basic form of a Balanced Scorecard is the same for all organizations and industries.

(f; easy; p. 306)

31. The Balanced Scorecard Approach deals with the question, “How satisfied are the firm’s customers.”

(t; medium; p. 306)

Published Sources of Strategy-Evaluation Information

32. Each year, Fortune publishes strategy evaluation research on both the United States and other countries.

(t; medium; p. 306)

33. The most admired company in the world in 2007 was Apple.

(f; medium; p. 308)

Characteristics of an Effective Evaluation System

34. Strategy-evaluation activities must be meaningful, i.e., they should specifically relate to a firm’s objectives.

(t; medium; p. 308)

35. Timely approximate information is generally more desirable as a basis for strategy evaluation than accurate information that does not depict the present.

(t; easy; p. 308)

36. The test of an effective evaluation system is its usefulness and complexity.

(f; medium; p. 308)

37. Small organizations require a more elaborate and detailed strategy-evaluation system because they are still evolving.

(f; medium; p. 308; AACSB: Reflective thinking skills)

38. There is no one ideal strategy-evaluation system for all organizations.

(t; easy; p. 309)

Contingency Planning

39. Contingency plans are alternative plans that can be put into effect if certain key events do not occur as expected.

(t; medium; p. 309)

40. Organizations should prepare contingency plans just for unfavorable events.

(f; difficult; p. 309)

41. Strategies should try to cover all bases by planning for all possible contingencies.

(f; medium; p. 309)

42. Contingency plans should be as simple as possible.

(t; easy; p. 309)

43. Alternative strategies not selected for implementation should be discarded, as they have a tendency to contaminate the contingency plans.

(f; medium; p. 298; AACSB: Reflective thinking skills)

44. Identifying both beneficial and unfavorable events that could possibly derail the strategy or strategies is the first step of effective contingency planning.

(t; medium; p. 311)

Auditing

45. Independent auditors, government auditors and IRS auditors are the three groups of people who perform audits.

(f; medium; p. 311)

46. Independent auditors are basically CPAs who provide their services to organizations for a fee.

(t; easy; p. 311)

47. Public accounting firms usually avoid strategy evaluation services.

(f; medium; p. 312)

48. China is home to 16 of the world’s 20 most polluted cities.

(t; easy; p. 312; AACSB: Multicultural and diversity understanding)

49. Over 90 percent of China’s energy is derived from solar and nuclear power.

(t; medium; p. 313; AACSB: Multicultural and diversity understanding)

50. Two government agencies—IRS and GAO—employ government auditors responsible for making sure organizations comply with federal laws, statutes and policies.

(t; medium; p. 312)

51. Moving environmental affairs from the line side of the organization to the staff side is required when instituting an environmental audit.

(f; difficult; p. 312; AACSB: Ethical understanding and reasoning abilities)

52. The strategic management process should be completely open because participation and openness enhance understanding, commitment, and communication within the firm.