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QUESTION: DISCUSS THE IMPORTANCE OF EXTERNAL EVALUATION AND

EXPLAIN THE IMPORTANT ELEMENTS IN THIS EVALUATION?

STRATEGY EVALUATION
Strategic evaluation is the assessment process that provides executives and
managers performance information about programs, projects and activities
designed to meet business goals and objectives.
Strategy Evaluation is as significant as strategy formulation because it throws light
on the efficiency and effectiveness of the comprehensive plans in achieving the
desired results. Strategic Evaluation is the final phase of strategic management.
Significance of strategy evaluation
The significance of strategy evaluation lies in its capacity to co-ordinate the task
performed by managers, groups, departments etc., through control of performance.
Strategic Evaluation is significant because of various factors such as developing
inputs for new strategic planning, the urge for feedback, appraisal and reward,
development of the strategic management process, judging the validity of strategic
choice etc.
Types of strategy evaluation
a) Internal evaluation: This is evaluation that is carried out by someone from
the actual project team. Clearly, such an evaluator has the advantage of
understanding fully the thinking behind the development, together with an
appreciation of any problems that may have arisen, and should also
command the trust and cooperation of the other members of the team. On
the other hand, such an evaluator may find it difficult to make any criticisms
of the work carried out, and, because of their close involvement with the
project, may be unable to suggest any innovative solutions to such problems
that are identified. Such an internal evaluator will know only too well how the
members of the group have struggled to produce their course, curriculum or
package, and may shrink from the thought of involving them in more work.
b) External evaluation: This is evaluation that is carried out by someone who
is (or was) not directly involved in the development or operation of the
system being evaluated, i.e., by someone from out with the project team.
i.
Advantages:
- Bringing objectivity,
- Lack of vested interest, and
- The ability to look at matters from a fresh perspective.
ii.
Disadvantages:
- Are related to relative value systems and to the lack of involvement the
evaluator has had in project-related decisions.
-

IMPORTANCE OF EXTERNAL EVALUATION


Prediction is very difficult, especially about the future.

-- Neil Bohr
The external factors include competitors, changes in demand, technology,
economic changes, demographic shifts, and governmental actions. Increasing
turbulence in markets and industries around the world means the external
audit has become an explicit and vital part of the strategic management
process.
Most often the external evaluation is required for funding purposes or to
answer questions about the program's long-term impact by looking at
changes in demographic indicators such as graduation rate or poverty level.
In addition, occasionally a manager may request an external evaluation to
assess programmatic or operating problems that have been identified but
that cannot be fully diagnosed or resolved through the findings of internal
evaluation.
EXTERNAL AUDIT
External audit is the identification and evaluation of trends and events
beyond control of single firm. The purpose of external audit is development of
finite list of opportunities and avoiding the threats.
Why Does the External Environment Matters?
Understanding the environment that surrounds an organization is important
to the executives in charge of the organizations. There are several reasons for
this.
a) First, the environment provides resources that an organization needs in
order to create goods and services. In the seventeenth century, British
poet John Donne famously noted that no man is an island. Similarly, it is
accurate to say that no organization is self-sufficient. As the human body
must consume oxygen, food, and water, an organization needs to take in
resources such as labor, money, and raw materials from outside its
boundaries. Subway, for example, simply would cease to exist without the
contributions of the franchisees that operate its stores, the suppliers that
provide food and other necessary inputs, and the customers who provide
Subway with money through purchasing its products. An organization
cannot survive without the support of its environment.
b) Second, the environment is a source of opportunities and threats for an
organization. Opportunities are events and trends that create chances to
improve an organizations performance level. Threats are events and
trends that may undermine an organizations performance. Executives
must also realize that virtually any environmental trend or event is likely
to create opportunities for some organizations and threats for others.
c) Third, the environment shapes the various strategic decisions that
executives make as they attempt to lead their organizations to success.
The environment often places important constraints on an organizations
goals, for example. A firm that sets a goal of increasing annual sales by 50
percent might struggle to achieve this goal during an economic recession
or if several new competitors enter its business. Environmental conditions
also need to be taken into account when examining whether to start doing
business in a new country, whether to acquire another company, and
whether to launch an innovative product, to name just a few.

IMPORTANT ELEMENTS IN EXTERNAL EVALUATION


THE ELEMENTS OF THE GENERAL ENVIRONMENT: PESTEL ANALYSIS
An organizations environment includes factors that it can readily affect as
well as factors that largely lay beyond its influence. Because the general
environment often has a substantial influence on an organizations level of
success, executives must track trends and events as they evolve and try to
anticipate the implications of these trends and events.
PESTEL analysis is one important tool that executives can rely on to organizes
factors within the general environment and to identify how these factors
influence industries and the firms within them. PESTEL is an anagram,
meaning it is a word that created by using parts of other words. In particular,
PESTEL reflects the names of the six segments of the general environment:
(1) political, (2) economic, (3) social, (4) technological, (5) environmental,
and (6) legal.
1) P is for Political
The political segment centers on the role of governments in shaping
business. This segment includes elements such as tax policies, changes in
trade restrictions and tariffs, and the stability of governments.
2) E is for Economic
The economic segment centers on the economic conditions within which
organizations operate. It includes elements such as interest rates, inflation
rates, gross domestic product, unemployment rates, levels of disposable
income, and the general growth or decline of the economy.
3) S is for Social
Social factors include trends in demographics such as population size, age,
and ethnic mix, as well as cultural trends such as attitudes toward obesity
and consumer activism.
4) T is for Technological
The technological segment centers on improvements in products and
services that are provided by science. Relevant factors include, for example,
changes in the rate of new product development, increases in automation,
and advancements in service industry delivery. One key feature of the
modern era is the ever-increasing pace of technological innovation.
5) E is for Environmental
The environmental segment involves the physical conditions within which
organizations operate. It includes factors such as natural disasters, pollution
levels, and weather patterns.
6) L is for Legal
The legal segment centers on how the courts influence business activity.
Examples of important legal factors include employment laws, health and
safety regulations, discrimination laws, and antitrust laws.
EVALUATION TECHNIQUES

1) COMPETITIVE ANALYSIS: PORTERS FIVE FORCE MODEL


It is a widely used approach for developing strategies in many industries.
It is an important part of an external audit, identifying rival firms and
determining their strengths, weaknesses, capabilities, opportunities,
threats, objectives and opportunities. The five forces include:
a) Rivalry among competitive firms: Is usually the most powerful of
the five competitive firms. The strategies pursued by one firm can be
successful only to the extent that they provide competitive advantage
over the strategies pursued by rival firms.
b) Potential entry of new competitors: Whenever new firms can
easily enter a particular industry, the intensity of competitiveness
among firms increase.
c) Potential development of substitute products: In many
industries, firms are in close competition with producers of substitute
products in other industries.
d) Bargaining power of supplies: The bargaining power of suppliers
affects the intensity of competition in an industry, especially when
there is large number of suppliers.
e) Bargaining power of consumers: When customers are
concentrated, large, or buy in volume, their bargaining power
represents a major force affecting intensity of competition in an
industry.
2) THE EXTERNAL FACTOR EVALUATION (EFE) MATRIX
EFE matrix allows strategists to summarize and evaluate economic, social,
cultural, demographic, environmental, political, governmental, legal,
technological and competitive information. There are around 15-20
factors, rated form 1-4 (average is 2.5), 1 being the lowest and 4 being
the highest.
3) COMPETITIVE PROFILE MATRIX
It identifies a firms major competitors and its particular strengths and
weaknesses in relation to a sample firms strategic position. Critical
success factors in a CPM include both external and internal issues. The
ratings and total weighted scores are compared to a sample firm.
4) COMPETITIVE INTELLIGENCE PROGRAMS
Competitive intelligence, as formally defined by the society of Competitive
Intelligence Professionals (SCIP), is a systematic and ethical process for
gathering and analyzing information about the competitions activities and
general business trends to further a businesss own goal.
Firms need an effective competitive intelligence program. The three basic
missions of a CI program are (1) to provide a general understanding of an
industry and its competitors, (2) to identify areas in which competitors are
vulnerable and to assess the impact strategic actions would have on

competitors, and (3) to identify potential moves that a competitor might


make that would endanger a firms position in the market.