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STRATEGY

EVALUATION

by: Bienvenido D.
Mendoza III, RN

Organizations are most vulnerable when they are at the peak of


their success
- R.T. Lenz

Importance of Strategy
Evaluation
Strategy Evaluation helps in checking of the validity of a strategic choice.
An ongoing process of evaluation would, in fact, provide feedback on the continued
relevance of the strategic choice made during the formulation phase. This is due to the
efficacy of strategic evaluation to determine the effectiveness of strategy.
Strategy Evaluation can help to assess whether decisions match the intended strategy
requirement.
Strategy evaluation, through its process of control, feedback, rewards, and review,
helps in a successful culmination of the strategic management process.

Importance of Strategy
Evaluation
In the absence of such evaluation process, managers would not know explicitly how to
exercise such discretion.
The process of strategic evaluation provides a considerable amount of information and
experience to strategists that can be useful in new strategies.

Evaluation and Control


Process
Five-Step Feedback Model:

Evaluation and Control


Process
Strategy Evaluation is operated at two levels:
1. Strategic Control - we are concerned more about the consistency of strategy with
the environment.
2. Operational Control - the effort is given towards assessing how well the
organization is pursuing a given strategy.

Criteria for Evaluating


Strategies
Rummelt's 4 Criteria:
1. Consistency

2. Consonance
3. Advantage
4. Feasibility

Strategy must not present mutually inconsistent goals and policies.

Criteria for Evaluating


Strategies
Rummelt's 4 Criteria:
1. Consistency
2. Consonance

3. Advantage
4. Feasibility

The strategy must represent an adaptive response to the external


environment and to the critical changes occuring within it.

Criteria for Evaluating


Strategies
Rummelt's 4 Criteria:
1. Consistency
2. Consonance
3. Advantage

4. Feasibility

A strategy must provide for the creation and/or maintenance of


competitive advantage in a selected area of the activity.

Criteria for Evaluating


Strategies
Rummelt's 4 Criteria:
1. Consistency
2. Consonance
3. Advantage
4. Feasibility

A strategy must neither overtax available resources nor create


unsolvable sub-problems. The final broad test of strategy is its feasibility,
that is, can the strategy be attempted within the physical, human and
financial resources of the enterprise?

Strategy Evaluation should...


initiate managerial questioning of expectations and assumptions.
trigger a review of objectives and values.
stimulate creativity in generating alternatives and criteria of evaluation.

Strategy Evaluation
Framework

Techniques in Strategy
Evaluation
1. Gap Analysis
- it is used to measure the gap between the organization's current position and its desired position.
- it is used to evaluate a variety of aspects of business, from profit and production to marketing,
research and development, and management information system.
- Typically, a variety of financial data is analyzed and compared to other businesses within the same
industry to evaluate the gap between the organization and its strongest competitors.

Techniques in Strategy
Evaluation
2. SWOT Analysis
- another common strategic evaluation technique used as a part of the strategic management
process.
- it evaluates the organization's strengths, weaknesses, opportunities, and threats.
- Strengths and weaknesses: Internal factors; Opportunities and threats: External factors.
- The identification is essential in determining how best to focus resources to take advantage of
strengths and opportunities and combat weaknesses and threats.

Techniques in Strategy
Evaluation
3. PEST Analysis
- identifies Political, Economic, Social, and Technological factors that may impact the organization's
ability to achieve its objectives.
- These are all external factors, which are outside of the organization's control, but which must be
considered throughout the decision-making process.
Political factors: includes such aspects as impending legislation regaring wages and benefits,
financial regulations, etc.
Economic factors: include all shifts in the economy
Social factors: includes demographics and changing attitudes
Technological factors: advancements in technology

Techniques in Strategy
Evaluation
4. Benchmarking
- 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 or 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, as well as policies and procedures, may be evaluated regulary
to identify where adjustments are necessary to maintain the sustainable competitive advantage.

Techniques in Strategy
Evaluation
5. The Balanced Scorecard
- The Balanced Scorecard translates Mission and Vision Statements into a comprehensive set of
objectives and performance measures that can be quantified and appraised.
- A process that allows firms to evaluate strategies from four key perspectives:
1. Financial performance (such as revenues, earnings and return on capital)
2. Customer knowledge (market share and customer satisfaction measures)
3. Internal business process (productivity rates and quality measures)
4. Learning and growth (percent of revenue from new products and rate of improvement index)

4 KEY PERSPECTIVES:
1. The Financial Perspective
Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding
data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there
is more than enough handling and processing of financial data. With the implementation of a corporate
database, it is hoped that more of the processing can be centralized and automated. But the point is that
the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives.
There is perhaps a need to include additional financial-related data, such as risk assessment and costbenefit data, in this category.

4 KEY PERSPECTIVES:
2. The Customer Perspective
Recent management philosophy has shown an increasing realization of the importance of customer focus
and customer satisfaction in any business. These are leading indicators: if customers are not satisfied,
they will eventually find other suppliers that will meet their needs. Poor performance from this perspective
is thus a leading indicator of future decline, even though the current financial picture may look good.
In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and
the kinds of processes for which we are providing a product or service to those customer groups.

4 KEY PERSPECTIVES:
3. The Business Process Perspective
This perspective refers to internal business processes. Metrics based on this perspective allow the
managers to know how well their business is running, and whether its products and services conform to
customer requirements (the mission). These metrics have to be carefully designed by those who know
these processes most intimately; with our unique missions these are not something that can be developed
by outside consultants.

4 KEY PERSPECTIVES:
4. The Learning & Growth Perspective
This perspective includes employee training and corporate cultural attitudes related to both individual and
corporate self-improvement. In a knowledge-worker organization, people -- the only repository of
knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming
necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into place to
guide managers in focusing training funds where they can help the most. In any case, learning and growth
constitute the essential foundation for success of any knowledge-worker organization.

4 KEY PERSPECTIVES:
4. The Learning & Growth Perspective (cont...)
Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors
and tutors within the organization, as well as that ease of communication among workers that allows them
to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige
criteria call "high performance work systems."

Techniques in Strategy
Evaluation
6. PERT & CPM
- The Programme Evaluation Review Technique (PERT) & Critical Path Method (CPM) are
developed in order to plan and control activities.
- it helps management to know:
When will the project be completed?
When will each individual part of the project start and finish?
Of the many parts of a project, which ones should be completed on-time to avoid delays?
Can resources be shifted from non-critical to the critical parts without affecting the overall
project's completion time?

Techniques in Strategy
Evaluation
6. PERT & CPM (cont...)
- CPM was developed for the purpose of scheduling.
- It is concerned with the reconciliation, enumerated the relationship between applying more
resources to shorten the duration of a given project and the increased cost of these resources.
- Nevertheless, the truth is that CPM is different from PERT in a way that the former cost-based
while the latter is time-based.

Techniques in Strategy
Evaluation
6. PERT & CPM (cont...)

Conclusion
You can't manage what you don't
measure
- Peter Drucker

Thank you!!!