Habesha beer strategies evaluation based on rumelt criteria.
Introduction
This assignment is provided to evaluate an organization using Richard Rumelt’s four criteria in
strategy evaluation, namely “consistency, consonance, feasibility, and advantage”. To
accomplish this task the team selected ‘Habesha beer for the evaluation.
Habesha Beer is made exclusively from Ethiopian yeast, barley, and hops; a rich mix of natural
ingredients that is infused with the purity of the highland ground water of Debre Birhan. By
following a high-standard brewing process, Habesha Breweries is able to guarantee a rich,
golden beer that is very aptly nicknamed ‘Cold Gold’.
The Brewery works very closely with local farmers, helping them grow better quality barley,
which in turn helps their businesses prosper. Providing them with high-quality seeds increase
their yield and ensures demand for the grown barley. Such handpicked ingredients are what
makes the taste of Habesha beer second to none.
Now, like we said at the start, Habesha is Ethiopia’s spirit personified in beer. And, through the
many distinctions and nuances they have artfully infused, the people behind Habesha have
managed to create a truly classy lager that delivers on the vision set out for it.
Named after its creator, Richard Rumelt, the Rumelt evaluation method attempts to simplify
the process using four criteria to assess whether a strategy is efficient, effective and aligned
with a business’s mission and goals (Lohrey, 2019).
The Habesha Brewery is worked by 300 individuals representing various ethnicities and social
backgrounds, and the beer that they make is in turn, a representation of this diversity that is
quintessentially Ethiopian. And, when you craft a brew that is a highlight of a nation and its
culture, you can be assured that its makers put in their best efforts to make it a phenomenal
one.
STRATEGIC EVALUATION Habesha beer
Review Underlying Bases of Strategy
first activity in strategy evaluation is the review of underlying bases of
strategy which includes the preparation of revised External Factor Evaluation
(EFE) matrix and Internal Factor Evaluation (IFE) matrix and compare it with
the existing matrices.
The proposed financing package is part of an EUR 50mln IFC-led facility and will support the
company’s EUR 118 million capacity expansion program which will be complemented by an
advisory services program to support local barley farmers in the country.
Reviewing the bases of strategy will give the organization an idea
whether there have been significant changes in the external and internal
factors that can prevent it from achieving long-term and short-term
objectives.
Measuring Organizational Performance
This is a category B+ project according to FMO E&S Categorization. The project is expected to
generate limited and site-specific E&S impacts. These can be avoided or mitigated through
implementing a time-bound Environmental and Social Action Plan. Material E&S risks and
impacts include those associated with the need for additional raw water to allow for the
expansion in production and to ensure that by consuming that water Habesha does not
adversely impact other water users. Also, there is a need to ensure that either the physical or
economical resettlement of the four households from the land required for the plant expansion
is undertaken according to the requirements of the IFC performance standards and that the
livelihoods of those impacted are restored to at least the level they were before being
impacted. Applicable IFC PS are 1-4 and 5. IFC PS 6, 7 and 8 are not applicable as the land used
to build the brewery is already cultivated for a long time. The brewery is not involved in primary
production of agricultural commodities (i.e. there are no impacts to biodiversity and it buys its
barley from other growers). Neither any cultural heritage site can be found on the land required
for construction nor will there be any on the additional land that is required for the expansion.
No Indigenous Peoples are found within the project’s area of influence.
this is the second activity which includes the comparison of expected and
actual progress towards meeting objectives stated by the organization.
Strategy evaluation is based on both quantitative and qualitative
criteria. Depending on a particular organization’s size, industry, strategies,
and management philosophy the exact set of criteria for evaluating
strategies are selected (David, 2011).
According to David (2011), quantitative criteria commonly used to evaluate
strategies are financial ratios, which strategists use to make three critical
comparisons:
Comparing the firm’s performance over different time periods.
Comparing the firm’s performance to competitors.
Comparing the firm’s performance to industry averages.
Some key financial ratios that are particularly useful as criteria
for strategy evaluation of Habesha beer:
Return of Investment
It is used to evaluate the efficiency of an investment or to
compare the efficiencies of several different investments.
Return on Equity
It is an indicator of how effective management is at using equity
financing to fund operations and grow the company.
Profit margin
Profit margin gauges the degree to which a company or a
business activity makes money, essentially by dividing income by
revenues.
Profit margin
Profit margin gauges the degree to which a company or a
business activity makes money, essentially by dividing income by
revenues.
Market Share
This metric is used to give a general idea of the size of a
company in relation to its market and its competitors.
Debt to equity
This measures how your organization is funding its growth and
how effectively you are using shareholder investments.
However, the use of quantitative criteria carries with it the following
potential problems: geared to annual objectives, different accounting
methods can provide different results and intuitive judgements are involved.
For these and other reasons, the qualitative criteria in evaluating strategies
are also important.
Taking Corrective Actions
This is the final strategy evaluation activity which requires making
changes to competitively reposition a firm for the future. This action is taken
when there are significant differences that occurred based from the strategy
evaluation activities one and two that were done.
Alteration of an organization’s structure, replacement of key
individuals, selling divisions or revising mission are some examples of
changes that may be needed. Other changes could be the establishment or
revision of objectives, policies or different allocation of resources. However,
corrective actions do not necessarily mean that existing strategies should be
abandoned or even new strategies must be formulated (David, 2011).
Corrective actions place an organization in a better position to capitalize
upon internal strengths, to take advantage of key external opportunities,
to avoid, reduce, or mitigate external threats, and to improve internal
weaknesses.
Corrective actions should have a proper time horizon and an appropriate
amount of risk.
They should be internally consistent and socially responsible.
Perhaps most important, corrective actions strengthen an organization’s
competitive position in its basic industry.
BALANCED SCORECARD
According to Tarver (2020), a balanced scorecard is a strategic
performance management tool used:
To identify and improve various internal business functions and their
resulting outcomes;
To measure and provide feedback to organization;
To reinforce good behavior in an organization by isolating four
separate areas needed to be analyzed (learning and growth, internal
business processes, customers perspectives, and financial
performance);
To attain objectives, measurements, initiatives, and goals that result
from the four primary functions of a business
The Four Primary Functions of a company
Learning and growth
Can we continue to improve and create value?
Analyzed through the investigation of the company’s ability to
penetrate new markets and increase shareholder value through
launching of innovative products, creating more value for
customers, and improving operating efficiencies
Internal business processes
What must we excel at?
Evaluated by identifying and measuring the company’s core
competencies and the operational processes that greatly affect
customer satisfaction, such as factors that affect cycle time,
quality, employee skills and productivity.
Customer perspectives
How do customers see us?
Collected to gauge customer satisfaction with:
Time: lead time measures time required for the company to meet
customers’ needs
Quality: measures defect level of incoming products as perceived and
measured by the customer
Performance and service: measures how the company’s products or
services contributing to creating value for its customers
Cost
Financial performance
How do we look to shareholders?
Indicates whether the company’s strategy, implementation, and
execution are contributing to bottom-line improvement.
Financial goals are typically related with profitability, growth, and
shareholder value
The Balanced Scorecard analysis requires that firms seek answers to
the following questions and utilize that information, in conjunction with
financial measures, to adequately and more effectively evaluate strategies
being implemented:
How well is the firm continually improving and creating value along
measures
such as innovation, technological leadership, product quality,
operational process efficiencies, and so on?
How well is the firm sustaining and even improving upon its core
competencies and competitive advantages?
How satisfied are the firm’s customers?
Benefits of the Balanced Scorecard to the Business Enterprise
It reminds executives the importance to track quality and service in
addition to tracking financial metrics.
A clear, concise way to communicate priorities and goals to
employees, customers, suppliers, and other stakeholders is provided in
the strategy map.
An explicit linkage from enterprise strategy to day-to-day activities is
created.
A set of clear metrics that is important to rank projects into priority
sequence and enterprise products by importance is provided to
facilitate business planning.
It provides a framework that is helpful in monitoring and measurement
of progress towards strategic objectives.
CHARACTERISTICS OF AN EFFECTIVE EVALUATION SYSTEM OF THE COMPANY
Consistency:
The organization develop its strategies based on the need of the community
and target right beneficiaries each of the sub sector of the interventions. The
key staff periodically review and design different strategies being employed
in each of intervention areas and other staff in each of the
departments/teams inputs incorporated. Staff have same spirit and
developed common understanding on the planned and implementation of
different intervention in each of the sectors. New projects designed,
implemented and monitored and evaluated by involvement of staff from
each department and done transparently. Conflict among teams in this
regard did not happen. Responsibilities shred among teams by their lead and
the operation and program team work integrated for the effectiveness and
efficiency of the interventions.
Adaptability
The organization mission initially was focused interventions on beer
manufacturing strategy-evaluation system to be effective and successful
must meet specific requirements. These requirements are the essential
characteristics of an effective evaluation system. We discuss below the
important requirements of an ideal strategy-evaluation system:
Compitstive advantage
Staffs develop innovative ideas and different technology that were
incorporated in the planning and implementation of different interventions in
working areas of the organization. The key staff from different position share
these types of innovation ideas through video conferences, meetings, etc.
Economical
The activities related to evaluation of strategy must be economical. If they
are not cost-effective, wastage would creep up. A balance needs to be
maintained in obtaining information –not too much or not too little. Very
often, too much data and too many controls do more harm than good
Meaningful
The strategy-evaluation activities must be meaningful in the sense that they
have to be related specifically to the objectives against which strategy has
been adopted.
Providing timely information
The strategy-evaluation system should be established in such a way that it
can provide information to relevant managers on time. Untimely delivery of
information may mean ‘no information’ as because they cannot be used
whenever they were needed.
Providing a true picture of events
The strategy-evaluation activities should be able to provide true picture of
what is happening in the organization regarding the implementation of
strategy
Should not dominate decisions.
It should foster mutual understanding, trust and common sense.
Simple, not too cumbersome, and not too restrictive.
Complex systems often confuse people and accomplish little.
CONTINGENCY PLANNING OF THE COMPANY
A contingency plan can be referred to as "Plan B" or back up that helps
the organization respond effectively to significant unforeseen events that
may or may not happen. It is also be used as an alternative for action if
expected results fail to materialize.
Planning ways to deal with unfavorable and favorable events before
they occur is a basic premise of good strategic management. Regardless of
careful strategy formulation, implementation, and evaluation, unforeseen
circumstances can make strategies obsolete. To minimize potential threats,
developing contingency plans are added as part of the organizations'
strategy evaluation process.
However, the insurance of contingency plans is only required for high-
priority areas. Covering all bases by planning for all possible contingencies is
not advisable, but in any case, contingency plans should be kept as simple
as possible.
An appropriate contingency plan can be executed in a timely way when
strategy-evaluation activities reveal the need for a significant change
quickly. Contingency plans can promote a strategist's ability to respond
promptly to key changes in an organization's current strategy's internal and
external bases.
Conclusion
The term "strategy" has been so widely used for different purposes that it has lost any clearly
defined meaning. For our purposes a strategy is a set of objectives, policies, and plans that,
taken together, define the scope of the enterprise and its approach to survival and success.
Alternatively, we could say that the particular policies, plans, and objectives of a business
express its strategy for coping with a complex competitive environment.
One of the fundamental tenets of science is that a theory can never be proven to be absolutely
true. A theory can, however, be declared absolutely false if it falls to stand up to testing.
Similarly, it is impossible to demonstrate conclusively that a particular business strategy is
optimal or even to guarantee that it will work. One can, nevertheless, test it for critical flaws.
Of the many tests which could be justifiably applied to a business strategy, most will fit within
one of these broad criteria:
• Consistency: The strategy must not present mutually inconsistent goals and policies.
• Consonance: The strategy must represent an adaptive response to the external environment
and to the critical changes occurring within it.
• Advantage: The strategy. must provide for the creation and/or maintenance of a competitive
advantage in the selected area of activity.
• Feasibility: The strategy must neither overtax available resources nor create unsolvable sub
problems.
A strategy that fails to meet one or more of these criteria is strongly suspect. It fails to perform
at least one of the key functions that are necessary for the survival of the business.
Experience within a particular industry or other setting will permit the analyst to sharpen these
criteria and add others that are appropriate to the situation at hand. As process, strategy
evaluation is the outcome of activities and events which are strongly shaped by the firm's
control and reward systems, its information and planning systems, its structure, and its history
and particular culture. Thus, its performance is, in practice, tied more directly to the quality of
the firm's strategic management than to any particular analytical scheme. In particular,
organizing major units around the primary strategic tasks and making the extra effort required
to incorporate measures of strategic success in the control system may play vital roles in
facilitating strategy evaluation within the firm. Ultimately, a firm's ability to maintain its
competitive position in a world of rivalry and change may be best served by managers who can
maintain a dual view of strategy and strategy evaluation-they must be willing and able to
perceive the strategy within the welter of daily activity and to build and maintain structures and
systems that make strategic factors the object of current activity. 10
