Evaluation of strategies & performance measurement Flashcards
Checklist for assessing options
Suitability -
does it exploit company strengths?
rectify weaknesses?
neutralise environmental threats?
help the firm to seize opportunities ,satisfy the goals of the organisation?
fill the gap identified by gap analytics?
Acceptability - (eg shareholders)
Consideration of returns, risk, stakeholder analysis
Feasibility is there enough money? Is there the ability to deliver? can we deal with competitor responses? Do we have tech? materials? time?
Strategic control systems
- mission statement
- objectives
- critical success factors
- KPIs (financial and non financial)
- Monitoring and feedback
Budgets need the following:
- senior management buy in
- accountability with clear responsibilities
- Challenging but achievable
- Regular data collecting and reporting
- Targeted reporting and short reporting periods
- Timely reporting
- Provokes change
CSFs / KPIs for control
- Business strategy (eg differentiation)
- CSF (eg reduce overheads, customer service)
- KPI (eg customer feedback, cost reduction)
Measuring performance
Measures of growth
- sales revenue
- market share
- profitability
- number of units
- number of outlets
- number of employees
- number of countries
Measures of profitability
- Year on year increase
- Gross profit margin
- Net profit margin
- ROCE
Measures of liquidity / gearing
- Availability of short term cash
- Debtor / creditor days
- gearing ratio
- Interest cover
3 Es
Economy, efficiency, effectiveness
What is the downside of ROCE (3)
It can lead to decisions being turned down even though they are profitable
Short termist - based on annual profit figures disregard future earnings. A cash cow may have high ROCE whereas a star a low one.
Discourage investment
Balanced scorecard - what are the four elements
Financial
Customer
Internal Business
Innovation and learning
Balanced scorecard - Financial measures
Return on investment Profitability Revenue growth / revenue mix Cost reduction Cash flow
Balanced scorecard - Customer
Market share Customer acquisition Customer retention Customer profitability Customer satisfaction On time delivery
Balanced scorecard - Internal usiness
Quality and rework rates
Cycle time / production rate
Capacity utilisation
Innovation and learning
Employee satisfaction Employee retention Employee productivity Revenue per employee & revenue from new services Time taken to develop new products
Problems with balanced scorecard
Conflicting measures
Selecting measures
Expertise
Interpretation
For which type of organisation is 3 Es particularly relevant?
Not for profit!
