O must find with supporting functional strategies o

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o Must find with supporting functional strategies o Must be able to fit across functional areas within the organization 4. Are the Risks acceptable Assessing risk o Start by identifying the major environmental and internal uncertainties o This will help managers take preemptive steps to reduce the probability of bad things happening o When there is some uncertainty, management must prepare a contingency plan 5. Will the financial forecasts be achieved and will it increase shareholder value Increasing overall shareholder value should be valued fairly high when it comes to alternatives. The premise is that the shareholder price is dependent on the anticipated cash inflow the company expects to earn. If the alternative provides growing return on assets, return on equity etc., the shareholders will want to buy the shares, and this increase in demand will push price up 16
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BU481 – Midterm #2 Questions- List 1 & 2 2010 5 Tests Diamond-E Analysis Evaluates each alternative relative to how successful it will be with regards with competitive advantage sustainability, financial performance Diamond E evaluates each option with regards to the gaps relative to the organization management preferences, resources and environment Fairly quantifiable Can be very subjective and qualitative Measures what the alternative will achieve from an external perspective Measures what the alternative will not achieve from an internal perspective Issues with strategic development (The Achilles Heel of Strategy Formulation Anchoring – decision makers tend to anchor on a particular outcome they believe will occur. This expected outcome dominates their thinking and suppresses consideration of uncertainties Selective perception : several biasing elements work together to foster selective perception. For example, people tend to structure problems in light of their past experience and training Illusion of control : Planning activities may give decision makers an illusion that they can master and control their environment. At the same time, decision makers have a tendency to attribute success to their own efforts and blame failures on external events and “bad luck” Availability: Emphasis is usually given to facts and opinions that are easy to retrieve. Often, these are hard data about past successes, which are given greater weight than soft assessment of future adversity In Conclusion: a rigorous strategy review: recognizes that the quality of strategic thinking is dependent on the quality of the underlying assumptions and uses the tough questions to identify the critical assumptions and challenge their validity 5. Accordingly to the “Evaluating Strategic Alternatives”, please describe the four functions of a strategic review? Functions of a Strategic Review 1. Provide top management with a sound basis of resource allocation decision and for negotiation of performance objectives 2. Focus the business team on the drivers of profitability and shareholder value. If, instead, the
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