Evaluation of strategies and performance Flashcards
Suitability, Acceptability, Feasibility
Suitability - strategic logic and fit
Acceptability - relates to people’s expectations i.e. risks + returns
Feasibility - can it be implemented? e.g. resources, time, tech
Critical success factors
number of key goals vital to the success of an organisation
Steps in setting up a strategic control system
Step1: review strategy progress Step2: identify milestones Step3: set target achievement levels Step4: monitoring process Step5: reward
Ways to measure performance
- Financial performance - growth, profitability, liquidity and gearing
- Resource - effectiveness, economy + efficiency
- Competitive advantage - CSF, measure achievement + KPIs
Measures of growth
~ % sales growth
~ market share
~ sales per site/e’ee/unit
Measures of profitability
Sales margins e.g. ~ gross profit margin ~ net profit margin ~ mark up ~ return on capital employed
Measures of liquidity and gearing: short-term
~ current ratio
~ turnover ratio
~ debtor days
~ creditor days
Measures of liquidity and gearing: long-term
~ gearing ratio
~ interest cover
Economy
measure of actual resources used
Efficiency
measure of productivity
Effectiveness
measure of impact achieved and outputs considered
Divisional performance measurement can be measured using…
~ return on capital employed a.k.a. return on investment
~ residual income
Return on capital employed (ROCE) a.k.a. ROI is popular becasue
~ enables comparisons between divisions of different sizes
~ understood by management
~ quick and cheap to calc
Residual income (RI)
~ avoids dysfunctional consequences of ROCE/ROI
~ absolute amount rather than a percentage
Balanced scorecard
~ customers: what do they value from us?
~ internal business/processes
~ innovation and learning
~ financial: how do we create value?
