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286 PART 4 • STRATEGY EVALUATION

Doing Great in a Weak Economy. How?

Family Dollar Stores

ounded in 1959 by the father of CEO Howard Levine,
FFamily Dollar Stores (FDO) is doing great in the ongo-
ing recession as cash-strapped consumers hunt for bar-
gains. The company’s second-quarter 2009 results
exceeded expectations: Sales were up 8.7 percent from
last year to $2 billion. Pro-forma earnings are expected
to be between 59 and 61 cents per share, safely ahead
of the consensus estimate of 50 cents. Family Dollar’s
same-store sales, a key retail metric, were up 6.4 percent
the second quarter of 2009. FDO’s fiscal 2009 3rd quar-
ter earnings increased another 36 percent.
Family Dollar’s earnings held up well throughout the
global recession, beating estimates in each of the last
four quarters. The company was one of three S&P 500
companies to have a rising stock price in 2008. For fiscal operates about 6,600 stores in some 45 states and the
2008, FDO’s sales increased from $6.8 billion to District of Columbia. Consumables (food, health and
$6.9 billion. The company’s net income for 2008 was beauty aids, and household products) account for about
$233 million. 60 percent of sales; the stores also sell apparel, shoes,
The nation’s number two dollar store (behind Dollar and linens. Family Dollar emphasizes neighborhood
General), Family Dollar targets women shopping for a stores near its low- and middle-income customers in rural
family that earns less than $30,000 a year. Family Dollar and urban areas. Most merchandise is less than $10.

The best formulated and best implemented strategies become obsolete as a firm’s external
and internal environments change. It is essential, therefore, that strategists systematically
review, evaluate, and control the execution of strategies. This chapter presents a framework
that can guide managers’ efforts to evaluate strategic-management activities, to make sure
they are working, and to make timely changes. Management information systems being
used to evaluate strategies are discussed. Guidelines are presented for formulating, imple-
menting, and evaluating strategies. Family Dollar Stores evaluates strategies well.

The Nature of Strategy Evaluation

The strategic-management process results in decisions that can have significant, long-
lasting consequences. Erroneous strategic decisions can inflict severe penalties and can be
exceedingly difficult, if not impossible, to reverse. Most strategists agree, therefore, that
strategy evaluation is vital to an organization’s well-being; timely evaluations can alert
management to problems or potential problems before a situation becomes critical.
Strategy evaluation includes three basic activities: (1) examining the underlying bases of a
firm’s strategy, (2) comparing expected results with actual results, and (3) taking corrective
actions to ensure that performance conforms to plans. The strategy-evaluation stage of the
strategic-management process is illustrated in Figure 9-1.