Fred r david – strategic management, 13th edition ch11

Exam Name _ TRUE/FALSE Write 'T' if the statement is true and 'F' if the statement is false 1) Most strategists believe that an organization's wellbeing depends on evaluation of the strategicmanagement process 1) _ 2) Adequate, timely feedback is important to effective strategy evaluation 2) _ 3) Too much emphasis on evaluating strategies may be expensive and counterproductive 3) _ 4) Strategy evaluation should have a long-run focus and avoid a short-run focus 4) _ 5) According to Richard Rumelt, consonance and consistency are based on a firm's external assessment 5) _ 6) According to Rumelt, consistency and feasibility are largely based on a firm's internal assessment 6) _ 7) Consistency, distinctiveness, advantage and feasibility are Richard Rumelt's four criteria for evaluating a strategy 7) _ 8) Strategy evaluation is becoming increasingly easier with the passage of time, given the technological advances 8) _ 9) The decreasing time span for which planning can be done with any degree of certainty is a reason why strategy evaluation is more difficult today 9) _ 10) E 87) D 88) E 89) B 90) B 91) A 92) C 93) B 94) C 95) E 96) C 97) A 98) C 99) C 100) A 101) B 102) D 103) 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 104) Possible answers include domestic and world economies were more stable in years past; both product life cycles and 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 a dramatic increase in the environment's complexity; the increasing number of variables; the rapid rate of obsolescence of even the best plans; the increase in the number of both domestic and world events affecting organizations; and the decreasing time span for which planning can be done with any degree of certainty 105) Rumelt's four criteria for evaluating strategies are consistency, consonance, feasibility and advantage Students should take their answers from Table 11-1 on page 351, which provides descriptions of each 106) 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 355-358 for descriptions of each activity 107) Quantitative criteria commonly used to evaluate strategies are financial ratios, which strategists use to make three critical comparisons 1) comparing the firm's performance over different time periods, 2) comparing the firm's performance to that of competitors and 3) comparing the firm's performance to industry averages Some particularly useful key financial ratios used as criteria for strategy evaluation are 1) ROI, 2) ROE, 3) profit margin, 4) market share, 5) debt to equity, 6) earnings per share, 7) sales growth and 8) asset growth 108) 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 It should answer the following questions How well is the firm improving and creating value along measures such as innovation, technological leadership, product quality, operational process efficiencies, and so on? How well is the firm sustaining and even improving upon its core competencies and competitive advantages? How satisfied are the firm’s customers? 109) Please refer to the entire discussion on pages 361-362 under Characteristics of an Effective Evaluation System 110) The suggested seven-step process of effective contingency planning is as follows 1) identify both beneficial and unfavorable events that could possibly derail the strategy or strategies; 2) specify trigger points and calculate when contingent events are likely to occur; 3) assess the impact of each contingent event; 4) develop contingency plans; 5) assess the counter impact of each contingency plan; 6) determine early warning signals for key contingent events and monitor them; and 7) for contingent events with reliable early warning signals, develop advance action plans to take advantage of the available lead time 111) 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 CPA at Arthur Andersen public accounting firm The National Audit Court and the Central Autiting Organization are examples of government auditors in the Arab world 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 112) The Middle East and North Africa is considered one of the most vulnerable regions to climate change The 2007 Intergovernmental Panel on Climate Change (IPCC) report estimates an increase in temperature in the Middle East and North Africa up to degrees Celsius in the next fifteen to twenty years, and over degrees Celsius by the end of the century The projected higher temperature and reduced precipitation is expected to have a combined effect that will increase the likelihood of droughts The vulnerability of the region to climate change is aggravated by the significant dependence on climate-sensitive agriculture, the concentration of population and economic activity in flood-prone urban coastal zones, and the presence of conflict-ridden areas where climateinduced resource scarcity could escalate violence and political instability even beyond the region's boundaries ... criteria are geared to long-term objectives rather than annual objectives 23) 24) Measuring organizational performance requires making changes to reposition a firm competitively for the future... compare expected results to actual results 18) 19) Criteria for evaluating strategies should be measurable and easily verifiable 19) 20) Specific financial ratios are rarely used criteria... distinctiveness, advantage and feasibility are Richard Rumelt's four criteria for evaluating a strategy 7) _ 8) Strategy evaluation is becoming increasingly easier with the passage of time, given the