Strategy evaluation

the appraisal of plans and the results of plans that

centrally concern or affect the basic mission of an

enterprise. Its special focus is the separation between
obvious current operating results and those factors
which underlie success or failure in the chosen domain
of activity. Its result is the rejection, modification, or
ratification of existing strategies and plans.

Strategy evaluation answers these

three questions:
Are the objectives of the business appropriate?

Are the major policies and plans appropriate?

Do the results obtained to date confirm or refute

critical assumptions on which the strategy rests?

Criteria of Strategy Evaluation

Consistency: The strategy must not present mutually

inconsistent goals and policies.

Consonance: The strategy must represent an adaptive
response to the external environment and to the
critical changes occurring within it.
Advantage: The strategy. must provide for the
creation and/or maintenance of a
competitive
advantage in the selected area of activity.
Feasibility: The strategy must neither overtax
available resources nor create
unsolvable sub
problems.

Consistency
The strategy must not entail mutually inconsistent

goals and policies.

Are the business's internal operations (e.g.,
purchasing, operations, marketing and sales, service)
and resource allocation processes consistent with each
other?
Are the business's internal operations consistent with
business objectives and market economics?

Consonance
The strategy must match and adapt the business to its

environment (both its market and the broader nonmarket environment).

 Why does the business exist in its current form?

Who and where are our customers and potential

customers? How many customers are there?

Are the boundaries of the business appropriate?
What are the fundamental economic forces at work in our
market?
How does the business unit create economic value, i.e.,
what is its value-creation proposition?
What are the drivers of consumer willingness to pay
(benefit drivers)?
What are the drivers of costs (cost drivers)?
What are the different customer segments we serve and
what are the benefit and cost drivers within each segment?
Which activities make money for the business?

Advantage
A good strategy must provide for the creation and

sustainability of a competitive advantage. A firm with a

competitive advantage will always capture some of the
economic value it creates.
Does the business create more economic value than its
competitors in its served markets?

Feasibility
The strategy must not overtax the business unit's

available resources.
Does the business have access to the financial
resources that are needed to carry out its activities?
Does the business possess problem-solving capabilities
to carry out the strategy?
Can managers in the business integrate and coordinate
the disparate activities needed to carry out the
strategy?
Does the strategy challenge and motivate personnel in
the organization?

Performance gap
The difference between the current situation and the

intended situation. Performance gap analysis helps a

business identify how far it has come toward reaching
its goals and how far it still needs to go to attain them,
with the objective of developing a concrete strategy to
close any existing gap.

Adjusting business strategy

a business must adjust their business strategy to cope up

with the changes in the present time. Long-lasting

business are successful because they go with the flow.
a firm must identify all factors in the business strategy that
must be changed for it to be flexible.
Research suggests that firms avoid excessive differentiation
or conformity by using industry competitors as reference
targets in a process called strategic adjustment. To date
explanations of strategic adjustment have focused on the
influence of one of two sources: (1) firms base targets on
the collective strategic decisions of other firms in the
industry; and (2) firms base targets on the strategic
decisions of the market leader.

Changing bussiness strategy

Changing business strategies typically involves

analyzing your current business practices and

determining where and when adjustments are
required. Adapting your business model involves risks,
so plan ahead and examine alternatives before taking
any action to modify your companys strategic plan.
Introduce changes slowly and be prepared to return to
your previous strategies if your new strategies dont
pan out for your business.

 Step 1
Examine your key performance indicators. Look at

revenue, sales and other metrics. If sales are down or

customer satisfaction lags, conduct focus groups or
surveys to get more information. Changing customer
requirements could dictate major restructuring by
your company in order to remain competitive. Review
industry benchmarks to see if there might be a longterm industry shift that may impact your business.

 Step 2
Introduce a new initiative. Expand a current product

line or market it in a totally new way. For example, sell

your products through an online store instead of a
more traditional retail business. Look for new
customers who may not currently be targeted as
consumers of your product. Investigate new forms of
communicating with customers such as social media
technology.

 Step 3

Ask your employees, suppliers and partners for their

input. Find out what they hear firsthand from

customers and competitors. Adjust your business
strategies to exploit opportunities. For example,
change your hours of operation or pricing model if
those actions can help you remain competitive.

 Step 4
Conduct market research. Get details about salaries,

reorganizations and cost-cutting measures at other

companies producing similar products and services in
your industry.
Step 5

Communicate and train your employees on new

business strategies. For example, if your company

shifts its focus to place more emphasis on customer
support, ensure your policies and procedures reflect
this new strategic direction.

 Step 6
Rate your employees on the critical skills needed to adapt

to achieving the new business strategies. Identify

performance gaps and, if necessary, recruit, interview and
hire new personnel who possess these skills. Provide
opportunities for these new employees to coach and
mentor existing personnel on new technology, techniques
and practices to help your company succeed.
Step 7
Evaluate your business strategy adjustment six months

after you make the changes and then again after a year.
Analyze the results and impact on operational metrics.
Expand programs that show promise. Cut back or refine
programs that produce less stellar results.

Adding Business Strategy

To add a business strategy, you must formulate a new

business strategy and make sure that it will not be in

conflict with your current business strategy.

Life cycle approach

 The life-cycle concept has long been recognized as a

valuable tool or analyzing the dynamic evolution of

products in the market place. It is derived from the
fact that a product's sales volume follows a typical
pattern that can readily be charted as a four-phase
cycle known as embryonic, growth, maturity, and
aging.

 As shown in Figure 1, profits are negative throughout

all or most of the embryonic phase, but tend to

increase sharply during the growth phase, prior to
leveling off and subsequent steady decline at the
maturity phase, when normally competitive pressure
begins to erode profit margins. At the very end of the
aging phase, profits could even turn negative, if there
is not a timely disinvestment of the business or
product.

 There are eight external factors which are key

descriptors of the evolutionary stage in which a

business resides within its life cycle. These descriptors
are: market growth rate, market growth potential,
breadth of the product lines, number of competitors,
distribution of market share among competitors,
customer loyalty, entry barriers, and technology.

Profit Impact of Market Strategy

(PIMS) database
yields solid evidence in support of both common sense

and counter-intuitive principles for gaining and

sustaining competitive advantage.
a comprehensive, long-term study of the performance
of strategic business units (SBUs) in 3,000 companies
in all major industries. The PIMS project began at
General Electric in the mid-1960s. It was conducted at
Harvard University between 1972 and 1974.

 It was developed with the intention of providing

empirical evidence of which business strategies lead to

success, within particular industries. Data from the
study is used to craft strategies in strategic
management and marketing strategy. The study
identified several strategic variables that typically
influence profitability. Some of the most important
strategic variables studied were market share, product
quality, investment intensity, and service quality,

PIMS seeks to address three basic

questions:
What is the typical profit rate for each type of

business?
Given current strategies in a company, what are the
future operating results likely to be?
What strategies are likely to help improve future
operating results?

Principal areas of information that

PIMS holds on each business:
characteristics of the business environment

competitive position of the business

structure of the production process
how the budget is allocated

strategic movement
operating results.

Conclusions drawn by PIMS

Variables which are most important:
a strong market position
high quality of product
lower costs
lower requirement for capital investment
And
market share
image
investment intensity
market growth
life cycle stage

Qualitative Factors in the Strategy

Qualitative factors may include: (1) effect on employee

morale, schedules and other internal elements; (2)

relationships with and commitments to suppliers; (3)
effect on present and future customers; and (4) longterm future effect on profitability.

Strategic control
involves tracking a strategy as it's being implemented.

It's also concerned with detecting problems or changes

in the strategy and making necessary adjustments. As
a manager, you tend to ask yourself questions, such as
whether the company is moving in the right direction,
or whether your assumptions about major trends and
changes in the company's environment are correct.
Such questions necessitate the establishment of
strategic controls.

Premise Control
Every strategy is based on certain planning premises or

predictions. Premise control is designed to check

methodically and constantly whether the premises on
which a strategy is grounded on are still valid. If you
discover that an important premise is no longer valid,
the strategy may have to be changed. The sooner you
recognize and reject an invalid premise, the better.
This is because the strategy can be adjusted to reflect
the reality.

Special Alert Control

A special alert control is the rigorous and rapid

reassessment of an organization's strategy because of

the occurrence of an immediate, unforeseen event. An
example of such event is the acquisition of your
competitor by an outsider. Such an event will trigger
an immediate and intense reassessment of the firm's
strategy. Form crisis teams to handle your company's
initial response to the unforeseen events.

Implementation Control
Implementing a strategy takes place as a series of steps,

activities, investments and acts that occur over a lengthy

period. As a manager, you'll mobilize resources, carry out
special projects and employ or reassign staff.
Implementation control is the type of strategic control that
must be carried out as events unfold. There are two types of
implementation controls: strategic thrusts or projects, and
milestone reviews. Strategic thrusts provide you with
information that helps you determine whether the overall
strategy is shaping up as planned. With milestone reviews,
you monitor the progress of the strategy at various intervals
or milestones.

Strategic Surveillance
Strategic surveillance is designed to observe a wide

range of events within and outside your organization

that are likely to affect the track of your organization's
strategy. It's based on the idea that you can uncover
important yet unanticipated information by
monitoring multiple information sources. Such
sources include trade magazines, journals such as The
Wall Street Journal, trade conferences, conversations
and observations.