Course Code: 19MBA509A

Course Title: Strategic Management

Module Leaders :
Mr. Rajeev Prasad
rajeev.ms.mc@msruas.ac.in

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 At the end of this session, student will be able to:

– Explain the practical framework for

evaluating strategies
– Discuss the process and techniques used for
strategic evaluation
– Describe the concept of Return On Investments

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 Content

Strategic Evaluation and Control:

₋ Concept

₋ Purpose of Strategic Evaluation and

Analysis

₋ Gap Analysis

₋ Strategic Control

₋ Return On Investments (ROI)

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 Strategic Evaluation and Control

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 Strategy Evaluation And Control

• The final stage in strategic management is strategy evaluation

and control
• All strategies are subject to future modification
because internal and external factors are constantly changing
• In the strategy evaluation and control process
managers
determine whether the chosen
strategy is achieving
organization's objectives
the

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 Strategy Evaluation And Control Contd..

• The fundamental strategy evaluation and control activities are:

1. Reviewing internal and external factors that are the bases

for current strategies

2. Measuring performance

3. Taking corrective actions

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 Strategy Evaluation And Control Contd..
• Strategic evaluation and control constitutes the final phase
of strategic management
• Strategic evaluation operates at two levels:

1. Strategic Level- Wherein we are concerned more with the

consistency of strategy with environment

2. Operational Level: Wherein the effort is directed at assessing ho

w well the organisation in pursuing a given strategy

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 Nature of Strategic Evaluation

• Test the effectiveness of the strategy

• Strategists formulate the strategy to achieve a set of objectives and
then implement the strategy
• To check whether the strategy being implement will guide
the organisation towards its objectives
• Performs the crucial task of keeping the organisation on the right
track
• In its absence, there would be no way to find whether or not the
strategy is producing the desired effect
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 Purpose of Strategic Evaluation

• The purpose of strategic evaluation is to evaluate the

effectiveness
of strategy in achieving organizational objectives

Definition of Strategic Evaluation:

“Strategic Evaluation could be defined as the

process of determining the effectiveness of a given
strategy in achieving the organizational objectives and
taking
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corrective action wherever required”
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 Purpose of Strategic Evaluation Contd..
• The purpose of Strategic Evaluation is to answer the
following questions:
 Are the premises made during the strategy formulation
proving to be correct?
 Is the strategy guiding the organization towards its
intended
objectives?
 Are the organization and its managers doing things which have
to be done?
 Is there a need to change and reformulate the strategy?
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 Purpose of Strategic Evaluation Contd..

 Are the time schedules being adhered to?

 How is the organisation performing?

 Are the resources being used properly?

 What needs to be done to ensure that resources are

utilized properly and objectives met?

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 Importance of Strategy Evaluation

• Strategy evaluation helps to keep a check on the validity of a

strategic choice
• An ongoing process of evaluation would provide feedback on the
continued relevance of the strategic choice made during the
formulation stage. This is because of efficiency of strategic
evaluation to determine the effectiveness of strategy
• During the course of strategy implementation, managers are
required to take scores of decisions

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 Importance of Strategy Evaluation Contd..

• Strategic evaluation can help to asses whether the decisions match

the intended strategy requirements
• In the absence of such evaluation, managers would not know
explicitly how to exercise such discretion
• Strategic evaluation, through its process of control, feedback,
rewards and review helps in a successful culmination of the
strategic management process
• Gives enough information that can be useful in new strategic
planning
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 Participants in Strategic Evaluation

• Shareholders • External and Internal Auditors

• Board of Directors • Audit and

• Chief Executives Executive Committees

• Profit Centre Heads • Corporate Planning Staff

• Financial Controllers or Department

• Company Secretaries • Middle-level Managers

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 Barriers in Evaluation

• Limits of control

• Difficulties in measurement

• Resistance to evaluation

• Rely on short-term implications of activities

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 Process of Strategic Evaluation

1. Fixing benchmark of performance

– While fixing benchmark, Strategists encounter questions such
as- what benchmarks to set, how to set them and how to
express them
– In order to set the benchmark performance to be set, it is
essential to discover the special requirements for performing
the main task
– The organization can use both quantitative and qualitative
criteria for comprehensive assessment of performance
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 Process of Strategic Evaluation Contd..

• Quantitative criteria includes determination of net profit, Return On

Investments (ROI) , earning per share (EPS) , cost of production,
rate of employee turnover, etc
• Among quantitative factors are subjective evaluation of factors such
as skills and competencies, risk taking potential, flexibility, etc.

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 Process of Strategic Evaluation Contd..

2. Measurement of performance
– The standard performance is a bench mark with the actual
performance is to be compared
– The reporting and communication system help in measuring the
performance
– For measuring the performance, financial statements like
balance sheet, profit and loss account must be prepared on an
annual basis
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 Process of Strategic Evaluation Contd..

3. Analyzing Variance:
– While measuring the actual performance and comparing it with
standard performance, there must be variances which must be
analyzed
– The strategies must mention the degree of tolerance limits
between which the variance between actual and standard
performance may be accepted

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 Process of Strategic Evaluation Contd..

4. Taking Corrective Action:

– Once the deviation in performance is identified, it is essential
ton plan for a corrective action
– If the performance is consistently less than the desired
performance, the strategists must carry a detailed analysis of
the factors responsible for such performance

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 Techniques in Strategic Evaluation

1. Gap Analysis:
– The gap analysis is one strategic evaluation technique used to
measure the gap between the organization’s current position
and its desired position
– It is used to evaluate profit and production, marketing, research
and development and management information systems
– A variety of financial data is analyzed and compared to other
businesses within the same industry to evaluate the gap

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 Gap Analysis

• Gap Analysis is the comparison of actual

performance with potential or desired
performance
• It is the 'current state' the 'desired future state'.
An important aspect of Gap Analysis is identifying
what needs to be done in a Project
• Gap analysis can be used in many areas, such as:
Sales, Financial performance

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 Gap Analysis

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 Gap Analysis

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 Techniques in Strategic Evaluation Contd..

2. SWOT Analysis:

– SWOT Analysis is common strategic

another evaluation
technique used. It evaluates the organization’s Strength,
Weakness, Opportunities and Threats
– Strength and weaknesses are internal factors while
opportunities and threats are external factors
– SWOT is essential in determining how best to focus resources to
take advantage of strength and opportunities and combat
weaknesses and threats
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 Techniques in Strategic Evaluation Contd..

3. PEST Analysis:
– PEST Analysis identifies Political, Economic, Social and
Technological factors that may impact the organizations ability
to achieve objectives
– Political Factors include such aspects as impending legislations

– Economic factors include all shifts in the economy

– Technological pressures are also inevitable

– All PEST are external factors

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 Techniques in Strategic Evaluation Contd..

4. Benchmarking:
– Benchmarking is a strategic evaluation technique that’s often
used to evaluate how close the organization has come to its
final objectives as well as how far it has left to go
– Organizations may benchmark themselves against other
organizations within the same industry or they may benchmark
themselves against their own prior situation
– A variety of performance measures may be evaluated regularly

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 Strategic Control

• Strategic control takes into account the changing assumptions that

determine a strategy
• Continually evaluate the strategy as being implemented

• Take necessary steps to adjust strategy to new requirements

• In this manner, strategic controls are early warning systems and

differ from post-action controls which evaluate only after the
implementation has been completed

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 What Are The Three Major Phases Of
Strategic Control?

There are three basic steps to strategic

control process:
1. Measurement organizational
performance
2. Comparing organizational performance to goals
and standards and
3. Taking corrective action

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 The Five Stages Of The Process Implementation
And Strategy Monitoring

• Clarify Your Vision ( The purpose of goal-setting is to

clarify the vision for your business )
• Gather and Analyze Information
• Formulate a Strategy
• Implement Your Strategy
• Evaluate and Control

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 Strategic Control Contd..

• Types of Strategic controls are:

1. Premise Control

2. Implementation Control

3. Strategic Surveillance

4. Special alert control

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 1. Premise Control
• Premise control is necessary to identify the key assumptions and
keep track of any change in them so as to assess their impact on
strategy and its implementation
• Premise control serves the purpose of continually testing
assumptions to find out whether they are still valid or not
• Enables strategists to take corrective actions at the right time rather
than continuing the strategy having wrong assumptions
• Premise control can be done by corporate planning staff who can
identify key assumptions and check the validity
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 2. Implementation Control

• Implementation control may be put into practice through

the identification and monitoring of strategic thrusts such as:

1. Assessment of the marketing success of a new product after pre-

testing

2. Checking the feasibility of a diversification programme

after
making initial attempts at seeking technological collaboration

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 3. Strategic Surveillance

• Strategic surveillance can be done through a broad-based,

general monitoring on the basis of selected information
sources to uncover events that are likely to affect the
strategy of an organisation

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 4. Special Alert Control

• Special alert control is based on a trigger mechanism for

rapid response and immediate reassessment of strategy in
the light of sudden and unexpected events

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 What Are other Different Types Of
Organisation Control?

1. Feedback control
2. Concurrent control and
3. Feed forward control

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 Feedback Control

• Feedback control is a process that managers can

use to evaluate how effectively their teams meet
the stated goals at the end of a production process

• Feedback control evaluates the team's progress by

comparing the output the team was planning on
producing to what was actually produced

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 Concurrent Control

• Concurrent control takes place while an activity is

in progress
• It involves the regulation of ongoing activities that
are part of transformation process to ensure that
they conform to organizational standards
• Concurrent control is designed to ensure that
employee work activities produce the correct
results

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 Feed Forward Control

• Feed forward control is a mechanism in a system

for preventing problems before they occur by
monitoring performance inputs and reacting to
maintain an identified level
• It is now increasingly recognized that control must
be directed towards the future to be effective

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 Feed Forward Control

• A feed forward, sometimes written feed forward,

is an element or pathway within a control system
that passes a controlling signal from a source in its
external environment to a load elsewhere in its
external environment
• This is often a command signal from an external
operator

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 Summary

• The final stage in strategic management is strategy evaluation and

control. In the strategy evaluation and control process managers
determine whether the chosen strategy is achieving the
organization's objectives
• The purpose of strategic evaluation is to evaluate the effectiveness
of strategy in achieving organizational objectives
• The gap analysis is one strategic evaluation technique used to
measure the gap between the organization’s current position and
its desired position
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 Summary Contd..

• Gap Analysis is used to evaluate profit and production, marketing,

research and development and management information systems
• SWOT Analysis is another common strategic evaluation technique
used as a part of the strategic management process. It evaluates
the organization’s Strength, Weakness, Opportunities and Threats
• PEST Analysis identifies Political, Economic, Social and Technological
factors that may impact the organizations ability to achieve
objectives

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 Summary Contd..
• Benchmarking is a strategic evaluation technique that’s often used
to evaluate how close the organization has come to its final
objectives as well as how far it has left to go
• Strategic control takes into account the changing assumptions that
determine a strategy

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