Rumelt's criteria for evaluating strategies example

PART 4 Strategy Evaluation CHAPTER 9 Strategy Review, Evaluation, and Control CHAPTER OBJECTIVES After studying this chapter, you should be able to do the following: 1. Describe a practical framework for evaluating strategies. 5. Explain how computers can aid in evaluating strategies. 2. Explain why strategy evaluation is complex, sensitive, and yet essential for organizational success. 6. Discuss the Balanced Scorecard. 3. Discuss the importance of contingency planning in strategy evaluation. 4. Discuss the role of auditing in strategy evaluation. Assurance of Learning Exercise 9A Assurance of Learning Exercise 9B Preparing a StrategyEvaluation Report for McDonald’s Evaluating My University’s Strategies 7. Discuss three twenty-first-century challenges in strategic management. Source: Shutterstock/Diego Cervo “Notable Quotes” "Complicated controls do not work. They confuse. They misdirect attention from what is to be controlled to the mechanics and methodology of the control." —Seymour Tilles "Although Plan A may be selected as the most realistic . . . the other major alternatives should not be forgotten. They may well serve as contingency plans." —Dale McConkey "Organizations are most vulnerable when they are at the peak of their success." —R. T. Lenz "Strategy evaluation must make it as easy as possible for managers to revise their plans and reach quick agreement on the changes." —Dale McConkey "While strategy is a word that is usually associated with the future, its link to the past is no less central. Life is lived forward but understood backward. Managers may live strategy in the future, but they understand it through the past." —Henry Mintzberg "Unless strategy evaluation is performed seriously and systematically, and unless strategists are willing to act on the results, energy will be used up defending yesterday. No one will have the time, resources, or will to work on exploiting today, let alone to work on making tomorrow." —Peter Drucker "Executives, consultants, and B-school professors all agree that strategic planning is now the single most important management issue and will remain so for the next five years. Strategy has become a part of the main agenda at lots of organizations today. Strategic planning is back with a vengeance." —John Byrne "Planners should not plan, but serve as facilitators, catalysts, inquirers, educators, and synthesizers to guide the planning process effectively." —A. Hax and N. Majluf 286 PART 4 • STRATEGY EVALUATION Doing Great in a Weak Economy. How? Family Dollar Stores F ounded in 1959 by the father of CEO Howard Levine, Family Dollar Stores (FDO) is doing great in the ongoing recession as cash-strapped consumers hunt for bargains. The company’s second-quarter 2009 results exceeded expectations: Sales were up 8.7 percent from last year to $2 billion. Pro-forma earnings are expected to be between 59 and 61 cents per share, safely ahead of the consensus estimate of 50 cents. Family Dollar’s same-store sales, a key retail metric, were up 6.4 percent the second quarter of 2009. FDO’s fiscal 2009 3rd quarter earnings increased another 36 percent. Family Dollar’s earnings held up well throughout the global recession, beating estimates in each of the last four quarters. The company was one of three S&P 500 companies to have a rising stock price in 2008. For fiscal 2008, FDO’s sales increased from $6.8 billion to $6.9 billion. The company’s net income for 2008 was $233 million. The nation’s number two dollar store (behind Dollar General), Family Dollar targets women shopping for a family that earns less than $30,000 a year. Family Dollar operates about 6,600 stores in some 45 states and the District of Columbia. Consumables (food, health and beauty aids, and household products) account for about 60 percent of sales; the stores also sell apparel, shoes, and linens. Family Dollar emphasizes neighborhood stores near its low- and middle-income customers in rural and urban areas. Most merchandise is less than $10. The best formulated and best implemented strategies become obsolete as a firm’s external and internal environments change. It is essential, therefore, that strategists systematically review, evaluate, and control the execution of strategies.