Strategic Evaluation

& Control
 Strategic Management Process

 Strategic Evaluation is defined as the process of

determining the effectiveness of a given strategy in
achieving the organizational objectives and taking
corrective action wherever required.
 Strategy evaluation is the final step of strategy
management process. The key strategy evaluation
activities are: appraising internal and external factors
that are the root of present strategies, measuring
performance, and taking remedial / corrective actions.
Evaluation makes sure that the organizational strategy
as well as it’s implementation meets the organizational
objectives.
 Nature of Strategic Evaluation

 Nature of the strategic evaluation and control process

is to test the effectiveness of strategy.
 During the strategic management process, the
strategists formulate the strategy to achieve a set of
objectives and then implement the strategy.
 There has to be a way of finding out whether the
strategy being implemented will guide the
organisation towards its intended objectives. Strategic
evaluation and control, therefore, performs the crucial
task of keeping the organisation on the right track.
 In the absence of such a mechanism, there would be
no means for strategists to find out whether or not the
strategy is producing the desired effect.
 Through the process of strategic evaluation and
control, the strategists attempt to answer set of
questions, as below.
 Are the premises made during strategy formulation
proving to be correct?
 Is the strategy guiding the organization towards its
intended objectives?
 Are the organization and its managers doing things
which ought 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 utilized properly and objectives met?
 Importance of Strategic Evaluation

 Strategic evaluation can help to assess whether the

decisions match the intended strategy requirements.

 Strategic evaluation, through its process of control,

feedback, rewards, and review, helps in a successful
culmination of the 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
 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 Evaluation
1) Fixing benchmark of performance
 While fixing the benchmark, strategists encounter
questions such as - what benchmarks to set, how to set
them and how to express them.
 In order to determine the benchmark performance to be
set, it is essential to discover the special requirements
for performing the main task.
 The organization can use both quantitative and
qualitative criteria for comprehensive assessment of
performance.
 Quantitative criteria includes determination of net profit,
ROI, earning per share, cost of production, rate of
employee turnover etc. Among the Qualitative factors
are subjective evaluation of factors 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 be compared.
 The reporting and communication system help in measuring the
performance.
 For measuring the performance, financial statements like - balance
sheet, profit and loss account must be prepared on an annual
basis.
3) Analyzing Variance
 While measuring the actual performance and comparing it with
standard performance there may be variances which must be
analyzed.
 The strategists must mention the degree of tolerance limits
between which the variance between actual and standard
performance may be accepted.
 Techniques of Strategic Evaluation
1)Gap Analysis
 The gap analysis is one strategic evaluation technique used
to measure the gap between the organization’s current
position and its desired position.
 The gap analysis is used to evaluate a variety of aspects of
business, from profit and production to marketing,
research and development and management information
systems.
 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.
2) SWOT Analysis
 The SWOT analysis is another common strategic
evaluation technique used as a part of the strategic
management process. The SWOT analysis evaluates the
organization’s strengths, weaknesses, opportunities and
threats.
 Strengths and weaknesses are internal factors, while
opportunities and threats are external factors.
 This identification is essential in determining how best to
focus resources to take advantage of strengths and
opportunities and combat weaknesses and threats.
3) PEST Analysis
 Another common strategic evaluation technique is the PEST
analysis, which identifies the political, economic, social and
technological factors that may impact the organization’s
ability to achieve its objectives.
 Political factors might include such aspects as impending
legislation regarding wages and benefits, financial
regulations, etc
 Economic factors include all shifts in the economy, while
social factors may include demographics and changing
attitudes. Technological pressures are also inevitable as
technology becomes more advanced each day.
 These are all external factors, which are outside of the
organization’s control but which must be considered
throughout the decision making process.
4) Benchmarking
 Benchmarking is 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 to
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 regularly to identify
where adjustments are necessary to maintain the
sustainable competitive advantage.
 Strategic Control

Strategic controls take into account the changing

assumptions that determine a strategy, continually
evaluate the strategy as it is being implemented, and
take the necessary steps to adjust the strategy to the
new requirements.

Most commentators would agree with the definition of

strategic control offered by Schendel and Hofer:
"Strategic control focuses on the dual questions
of whether: (1) the strategy is being implemented
as planned; and (2) the results produced by the
strategy are those intended.
 Types of Strategic Control

The 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
or predictions.
 Premise control has been designed to check
systematically and continuously whether or not the
premises set during the planning and implementation
process are still valid.
 It involves the checking of environmental conditions.
Premises are 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): Two approaches are useful in enacting implementation
controls focused on monitoring strategic thrusts: (1) one way is to
agree early in the planning process on which thrusts are critical
factors in the success of the strategy or of that thrust; (2) the
second approach is to use stop/go assessments linked to a series
of meaningful thresholds (time, costs, research and development,
success, etc.) associated with particular thrusts.
b. Milestone Reviews: Milestones are significant points in the
development of a programme, such as points where large
commitments of resources must be made. A milestone review
usually involves a full-scale reassessment of the strategy and the
advisability of continuing or refocusing the direction of the
company.
3) Strategic Surveillance
 Strategic surveillance is designed to monitor a
broad range of events inside and outside the
company that are likely to threaten the course of
the firm's strategy.
 The basic idea behind strategic surveillance is
that some form of general monitoring of multiple
information sources should be encouraged, with
the specific intent being the opportunity to
uncover important yet unanticipated information.
 Strategic surveillance appears to be similar in
some way to "environmental scanning." Strategic
surveillance is designed to safeguard 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
often rapidly, reconsider the firm's basis strategy
based on a sudden, unexpected event."
 The analysts of recent corporate history are full of
such potentially high impact surprises (i.e., natural
disasters, chemical spills, plane crashes, product
defects, hostile takeovers etc.).
 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.