Strategic Evaluation& ControlPresented By:Malvi Sharma, Manav Jamwal,Manik Kudyar & Pardeep VermaCentral University of Jammu
Strategic Management Process Strategic Evaluation is defined as the process of determining theeffectiveness of a given strategy in achieving the organizationalobjectives and taking corrective action wherever required. Strategy evaluation is the final step of strategy management process.The key strategy evaluation activities are: appraising internal andexternal factors that are the root of present strategies, measuringperformance, and taking remedial / corrective actions. Evaluationmakes sure that the organizational strategy as well as it’simplementation meets the organizational objectives.
Nature of Strategic Evaluation Nature of the strategic evaluation and control process is to test theeffectiveness of strategy. During the strategic management process, the strategists formulate thestrategy to achieve a set of objectives and then implement thestrategy. There has to be a way of finding out whether the strategy beingimplemented will guide the organisation towards its intendedobjectives. Strategic evaluation and control, therefore, performs thecrucial task of keeping the organisation on the right track. In the absence of such a mechanism, there would be no means forstrategists to find out whether or not the strategy is producing thedesired effect.
Through the process of strategic evaluation and control,the strategists attempt to answer set of questions, asbelow. Are the premises made during strategy formulation provingto be correct? Is the strategy guiding the organization towards its intendedobjectives? Are the organization and its managers doing things whichought to be done? Is there a need to change and reformulate the strategy? How is the organization performing? Are the time schedules being adhered to? Are the resources being utilized properly? What needs to be done to ensure that resources are utilizedproperly and objectives met?
Importance of Strategic Evaluation Strategic evaluation can help to assess whether the decisionsmatch the intended strategy requirements. Strategic evaluation, through its process of control, feedback,rewards, and review, helps in a successful culmination of thestrategic management process. The process of strategic evaluation provides a considerableamount of information and experience to strategists that can beuseful in new strategic planning.
Participants in Strategic Evaluation Shareholders Board of Directors Chief executives Profit-centre heads Financial controllers Company secretaries External and Internal Auditors Audit and Executive Committees Corporate Planning Staff or Department Middle-level managers
Process of Strategic Evaluation1) Fixing benchmark of performance While fixing the benchmark, strategists encounter questionssuch as - what benchmarks to set, how to set them and how toexpress them. In order to determine the benchmark performance to be set, itis essential to discover the special requirements for performingthe main task. The organization can use both quantitative and qualitativecriteria for comprehensive assessment of performance. Quantitative criteria includes determination of net profit, ROI,earning per share, cost of production, rate of employee turnoveretc. Among the Qualitative factors are subjective evaluation offactors such as - skills and competencies, risk taking potential,flexibility etc.
2) Measurement of performance The standard performance is a bench mark with which the actual performance is to becompared. The reporting and communication system help in measuring the performance. For measuring the performance, financial statements like - balance sheet, profit and lossaccount must be prepared on an annual basis.3) Analyzing Variance While measuring the actual performance and comparing it with standard performancethere may be variances which must be analyzed. The strategists must mention the degree of tolerance limits between which the variancebetween actual and standard performance may be accepted.4)Taking Corrective Action Once the deviation in performance is identified, it is essential to plan for a correctiveaction. If the performance is consistently less than the desired performance, the strategists mustcarry a detailed analysis of the factors responsible for such performance.
Techniques of Strategic Evaluation1)Gap Analysis The gap analysis is one strategic evaluation technique used tomeasure the gap between the organization’s current position and itsdesired position. The gap analysis is used to evaluate a variety of aspects of business,from profit and production to marketing, research and developmentand management information systems. Typically, a variety of financial data is analyzed and compared toother businesses within the same industry to evaluate the gapbetween the organization and its strongest competitors.
2) SWOT Analysis The SWOT analysis is another common strategic evaluationtechnique used as a part of the strategic management process. TheSWOT analysis evaluates the organization’s strengths, weaknesses,opportunities and threats. Strengths and weaknesses are internal factors, while opportunitiesand threats are external factors. This identification is essential in determining how best to focusresources to take advantage of strengths and opportunities andcombat weaknesses and threats.
3) PEST Analysis Another common strategic evaluation technique is the PESTanalysis, which identifies the political, economic, social andtechnological factors that may impact the organization’s ability toachieve its objectives. Political factors might include such aspects as impending legislationregarding wages and benefits, financial regulations, etc Economic factors include all shifts in the economy, while socialfactors may include demographics and changing attitudes.Technological pressures are also inevitable as technology becomesmore advanced each day. These are all external factors, which are outside of theorganization’s control but which must be considered throughoutthe decision making process.
4) Benchmarking Benchmarking is a strategic evaluation technique that’s often usedto evaluate how close the organization has come to its finalobjectives, as well as how far it has left to go. Organizations may benchmark themselves against otherorganizations within the same industry, or they may benchmarkthemselves against their own prior situation. A variety of performance measures, as well as policies andprocedures, may be evaluated regularly to identify whereadjustments are necessary to maintain the sustainable competitiveadvantage.
Strategic ControlStrategic controls take into account the changingassumptions that determine a strategy, continuallyevaluate the strategy as it is being implemented, andtake the necessary steps to adjust the strategy to thenew requirements.Most commentators would agree with the definition ofstrategic control offered by Schendel and Hofer:"Strategic control focuses on the dual questionsof whether: (1) the strategy is being implementedas planned; and (2) the results produced by thestrategy are those intended.“
Types of Strategic ControlThe types of strategic controls are: Premise control Implementation control Strategic surveillance Special alert control
1)Premise Control Every strategy is based on certain planning premises orpredictions. Premise control has been designed to check systematically andcontinuously whether or not the premises set during theplanning and implementation process are still valid. It involves the checking of environmental conditions. Premisesare primarily concerned with two types of factors:a. Environmental factors (for example, inflation, technology,interest rates, regulation, and demographic/social changes).b. Industry factors (for example, competitors, suppliers,substitutes, and barriers to entry)
2) Implementation Control Implementing a strategy takes place as a series of steps, activities,investments and acts that occur over a lengthy period. The two basis types of implementation control are:a. Monitoring strategic thrusts (new or key strategic programs): Twoapproaches are useful in enacting implementation controls focused onmonitoring strategic thrusts: (1) one way is to agree early in the planningprocess on which thrusts are critical factors in the success of the strategy orof that thrust; (2) the second approach is to use stop/go assessmentslinked to a series of meaningful thresholds (time, costs, research anddevelopment, success, etc.) associated with particular thrusts.b. Milestone Reviews: Milestones are significant points in thedevelopment of a programme, such as points where large commitments ofresources must be made. A milestone review usually involves a full-scalereassessment of the strategy and the advisability of continuing orrefocusing the direction of the company.
3) Strategic Surveillance Strategic surveillance is designed to monitor a broad range ofevents inside and outside the company that are likely tothreaten the course of the firms strategy. The basic idea behind strategic surveillance is that some form ofgeneral monitoring of multiple information sources should beencouraged, with the specific intent being the opportunity touncover important yet unanticipated information. Strategic surveillance appears to be similar in some way to"environmental scanning." Strategic surveillance is designed tosafeguard the established strategy on a continuous basis.
4) Special Alert Control Another type of strategic control is a special alert control. "A special alert control is the need to thoroughly, and oftenrapidly, reconsider the firms basis strategy based on a sudden,unexpected event." The analysts of recent corporate history are full of suchpotentially high impact surprises (i.e., natural disasters,chemical spills, plane crashes, product defects, hostile takeoversetc.). An example of such event is the acquisition of your competitorby an outsider. Such an event will trigger an immediate andintense reassessment of the firms strategy. Form crisis teams tohandle your companys initial response to the unforeseenevents.
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