CHAPTER- 6
STRATEGY EVALUATION
AND CONTROL
Introduction
• "Unless strategy evaluation is performed
seriously and systematically, and unless
strategists are willing to act on the results,
energy will be used up defending
yesterday. No one will have the time,
resources, or will to work on exploiting
today, let alone to work on making
tomorrow.“ —Peter Drucker
Introduction….
“You can’t manage what you don’t measure.’’
Peter Drucker.
“If you can't measure it you can’t control it.” M.
Whitman
• Strategic E and C is the final stage of Strategic
management Process
• Evaluation and control mechanisms are set in
place to inform every stage of the strategic
management process.
Introduction……
• They are a means of collecting whatever
information we may need to compare plans
against actual events, to ensure that things are
working well, and to anticipate, or correct, any
faults or weaknesses in the system.
• Effective evaluation and control can tell us what
we are doing well and what we are not.
• Strategy evaluation make sure whether the
organizational strategy as well as its
implementation meets the organizational
objectives.
Introduction……
• Strategy evaluation is concerned with appraising
the overall impact and appropriateness of the
strategy.
• It emphasis measurement of results.
• Strategic Control emphasizes actions in the light
of gap that exists between intended results and
actual results in s strategic action.
Strategy Evaluation-3 Basics
• Examining the underlying basis of the
firm’s strategy (appraising internal &
external factors that are the root )
• Comparing actual to expected results
(Measuring performance)
• Taking corrective action to address
performance gaps
Corrective Action Questions
Is the deviation a chance fluctuation?
Are the processes being carried out
correctly?
Are the processes appropriate to
achievement of the desired result?
Who is the best person to take action?
General Principle of Strategy Evaluation
• Richard Rumelt has proposed four criteria
with which to evaluate a given strategy.
These are:
1) Consistency
2) Consonance=fit or harmony
3) Feasibility
4) Advantage
Consistency
A strategy should not present inconsistent
goals and policies
• If managerial problems continue despite changes in
personnel and are issue based, then strategies may be
inconsistent.
• If success for one department means failure for another
department, then strategies may be inconsistent.
• If policy problems/issues continue to be brought to the
top for resolution, then strategies may be inconsistent.
Consonance
Strategists need to examine sets of trends as well
as individual trends in evaluating strategies.
• Strategy must represent an adaptive response to the
external environment and critical changes occurring
within it.
• Most trends are the result of interactions among other
trends.
• Difficult in matching key internal and external factors in
formulation of strategy.
Feasibility
Strategy must neither overtax available resources
nor create unsolvable sub problems.
• Can the strategy be attempted within the physical,
human and financial resources of the enterprise?
• Limitation on strategic choice imposed by individual and
organizational capabilities must be considered.
• Important to examine whether in the past the
organization has demonstrated the capabilities, abilities,
competencies, skills, and talents to carry out strategy.
Advantage
A strategy must provide for the creation and/or maintenance
of a competitive advantage in a selected area of activity.
• Competitive advantages normally are the result of
superiority in one of three areas:
1) Resources 2) Skills 3) positions
Importance of Strategic E and C
• Strategic Evaluation can help to assess whether
decision matches the intended strategy
requirement
• Strategic Evaluation, through the process of
control, reward, feedback, and review helps in
successful culmination of strategic management
process
• The process of strategic evaluation provides a
considerable amount of information and
experience to strategists that can be useful in
new strategic planning.
Participants in Strategic Evaluation
• Shareholders
• Board of Directors
• Chief Executives
• Financial controllers
• Company Secretaries
• External & Internal Auditors
• Corporate planning staff or Department
• Middle level Managers
• Lower level managers
Stage of Control
• Depending on the stages at which controls
exercised, it may be of three types:
1)Control of inputs that are required in an action,
known as feed forward control
2) Control at different stages of action process,
known as concurrent, real-time, or setting control
3) Post action control based on feed back from the
completed action, known as feed back control
Process of Evaluating Strategies
• Should initiate managerial questioning of
expectations and assumptions
• Should trigger a review of objectives and
values
• Should stimulate creativity in generating
alternatives and criteria of evaluation
Evaluation and Control Process
I. Review Underlying Bases Evaluation Framework
Differences? Yes
NO
III.
II. Measure Firm Performance Take
Corrective
Yes Actions
Differences?
NO
Continue present course 18
I. Review Bases of Strategy
• Develop a Revised Evaluation Framework
Matrix:
• How have competitors reacted to our
strategies?
• How have competitors’ strategies changed?
• Have major competitors’ strengths and
weaknesses changed?
I. Review Bases of Strategy
• Why are competitors making certain strategic
changes?
• Why are some competitors’ strategies more
successful than others?
• How satisfied are our competitors with their
present market positions and profitability?
I. Review Bases of Strategy
• How far can our major competitors be pushed
before retaliating?
• How could we more effectively cooperate with
our competitors?
I. Review Bases of Strategy
Key Questions in Evaluating Strategy:
• Are our internal strengths still strengths?
• Have we added other internal strengths?
• Are our internal weaknesses still weaknesses?
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I. Review Bases of Strategy
• Do we now have other internal weaknesses?
• Are our external opportunities still
opportunities?
• Are there now external opportunities?
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I. Review Bases of Strategy
• Are our external threats still threats?
• Are there now other external threats?
• Are we vulnerable to a hostile takeover?
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II. Measure Performance
• Compare the firm’s performance over
different time periods.
• Compare the firm’s performance to
competitors.
• Compare the firm’s performance to
industry averages.
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II. Measure Performance
Quantitative Analysis
Return on investment/ROI
Return on equity/ROE
Profit margin/PM
Market share
Debt to equity
Earnings per share/EPS
Sales growth
Asset growth
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II. Measure Performance
Qualitative Analysis
Is the strategy internally consistent?
Is the strategy consistent with the environment?
Is the strategy appropriate in view of available
resources?
Does the strategy involve an acceptable degree
of risk?
Does the strategy have an appropriate time
framework?
Is the strategy workable?
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III. Take Corrective Action
Making changes to reposition a firm
competitively for the future
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Strategy-Evaluation Assessment Matrix
Have major Have major
changes changes
occurred in occurred in Has the firm
the firm’s the firm’s progressed
internal external satisfactorily toward
strategic strategic achieving its stated
position? position? objectives? Result
No No No Corrective actions
Yes Yes Yes Corrective actions
Yes Yes No Corrective actions
Yes No Yes Corrective actions
Yes No No Corrective actions
No Yes Yes Corrective actions
No Yes No Corrective actions
No No Yes Continue course29
Corrective Actions Possibly Needed to Correct
Unfavorable Variances
1. Alter the firm’s structure.
2. Replace one or more key individuals.
3. Divest a division.
4. Alter the firm’s vision or mission.
5. Revise objectives.
6. Alter strategies.
7. Devise new policies.
8. Install new performance incentives.
9. Raise capital with stock or debt.
10. Add or terminate salespersons, employees, or managers.
11. Allocate resources differently.
12. Outsource (or rein in) business functions.
Strategy Review
Characteristics of an effective system
• Evaluation activities must be economical.
• Evaluation activities must be meaningful.
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Strategy Review
Characteristics of an effective system
• Evaluation activities must provide timely
information.
• Evaluation system should be designed to
provide a true picture of what is
happening.
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Strategy Review
Characteristics of an effective system
• Information derived from evaluation process
should facilitate action.
• Evaluation process should not dominate
decisions.
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Strategy Review
Contingency Planning
• Identify both beneficial and unfavorable events
that could possibly derail /disrupt the strategy or
strategies.
• Specify trigger points. Calculate about when
contingent events are likely to occur.
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Strategy Review
Contingency Planning
• Assess the impact of each contingent event.
Estimate the potential benefit or harm of
each contingent event.
• Develop contingency plans. Ensure that
they are compatible with current strategy
and are economically feasible.
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The Challenge of Evaluation…
• The major issues which make evaluation difficult
with which the analyst must come to grips are the
following:
Each business strategy is unique
Strategy is centrally concerned with the selection
of goals and objectives
Formal systems of strategic review, while
appealing in principal, can create explosive
conflict situations
Now ,I believe you can be
strategists!
06.09.21 37
The End of the
Course from my
side!
I Thank You All!
