Ch.12 - Evaluation of strategies and performance measurement

Question 1

What should be evaluated on the strategy before accepted?

Answer 1

 Suitability – consistency of strategy (internally and externally)
 Acceptability – risk and return perspectives for stakeholders
 Feasibility – within resources and capability of the organisation

Question 2

What are financial performance indicators?

Answer 2

• revenue growth, profit margins, increase in profits, increase in costs, revenue per store/employee, divisional performance measure (ROI/RI)

Question 3

What are financial position indicators?

Answer 3

• market share, average selling price per unit, average cost per unit, average profit per unit, revenue growth vs market/competitor

Question 4

What are limitations of financial performance/position indicators?

Answer 4

o	Historical
o	Reports internal performance
o	Encourage short-term decision-making
o	Easily manipulated
o	Does not consider the whole picture

Question 5

How can we measure non-financial indicators?

Answer 5

• using BSC (balanced scorecard)

Question 6

What is balanced scorecard?

Answer 6

• helps to measure non-financial indicators of the business

Strategic vision depends on:
o	Financial perspective
o	Customer perspective
o	Internal business/processes perspective
o	Innovation and learning perspective

Question 7

What is benchmarking?

Answer 7

• comparing results internally or against other organisation to identify where improvements can be made

 Internal – against last year or between branches
 Competitive – against competitors, sectors, industry
 Activity (best in class) – comparisons with best practice
 Generic – against conceptually similar, but not identical, process