STRATEGY EVALUATIONIntroduction Strategy 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 or we can say that the particular policies, plans and objectives of a business express its strategy for coping with a complex competitive environment. Strategy consists of competitive moves & business approaches to produce successful performance. It is a Management's "game plan" for Running the business strengthening firm's competitive position, satisfying customers and achieving performance targets Strategy Evaluation Strategy evaluation is an appraisal of how well a business performs. Has it grown? Is the profit rate normal or better? Thus strategy evaluation is an attempt to look beyond the obvious facts regarding the short term health of a business and appraise instead those more fundamental factors and trends that govern success in the chosen field of endeavor The best formulated and implemented strategies become obsolete as a firm's external and internal environments change. It is essential, therefore, that strategist systematically review, evaluate, and control the execution of strategies. 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) reviews the basic factors on which strategy was formulated and checks that does there is any change in those factors. (2) Compare the actual performance with budget performance, and (3) taking corrective actions to ensure that performance conforms to plans. Adequate and timely feedback is the cornerstone of effective strategy evaluation. Strategy evaluation can be no better than the information on which it operates. Too much pressure from top managers may result in lower managers coming up with numbers they think will be satisfactory. Strategy evaluation can be a complex and sensitive undertaking. Too much emphasis on evaluating strategies may be expensive and counterproductive. No one likes to be evaluated too closely! The more managers attempt to evaluate the behavior of others, the less control they have. Yet, too little or no evaluation can create even worse problems. Strategy evaluation is essential to ensure that stated objectives are being achieved. In many organizations, strategy evaluation is simply an appraisal of how well an organization has performed. Have the firm's assets increased? Has there been and increase in profitability? Have sales increased? Have productivity levels increased? Some enterprises argue that their strategy must have been correct if the answers to these types of questions are affirmative. Well, the strategy or strategies may have been correct, but this type of reasoning can be misleading, because strategy evaluation must have both a long-run and short-run focus. Strategies often do not affect short-term operating results until it is too late to make needed changes. It is impossible to demonstrate conclusively that a particular strategy is most favorable or even to guarantee that it will work. One can, however, evaluate it for serious faults. There are four criteria that could be used to evaluate a strategy: consistency, consonance, feasibility, and advantage. Consonance and advantage are mostly based on a firm's external analysis, whereas consistency and feasibility are largely based on an internal analysis. Strategy evaluation is important because organizations face dynamic environments in which key external and internal factors often change quickly and dramatically. Success today is no guarantee for success tomorrow! An organization should never be reassured complacency with success. Countless firms have prospered one year only to struggle for survival the following year. Strategy evaluation is becoming increasingly difficult with the passage of time, for many reasons. Domestic and world economies were more stable in years past, product life cycles were longer, product development cycles were longer, technological advancement was slower, and change occurred less often, there were fewer competitors, foreign companies were weak, and there were more regulated industries. Other reasons why strategy evaluation is more difficult today include the following trends: 1. A dramatic increase in the environment's complexity 2. The increasing difficulty of predicting the future with accuracy 3. The increasing number of variables 4. The rapid rate of obsolescence of even the best plans 5. The increase in the number of both domestic and world events affecting organizations 6. The decreasing time span for which planning can be done with any degree of certainty |
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