Thursday, March 25, 2010

Strategy Evaluation


Strategy evaluation is the final Stage in Strategic Management.
Managers desperately need to know when particular strategies are not working; strategy evaluation is the primary means of obtaining this information.
The following are the main activities performed in the evaluation stage.
1. Reviewing external and internal factors that are the bases for current strategies.
2. Measuring performance
3. Taking corrective action.

Strategy Evaluation is becoming increasingly difficult with the passage of time because of the following reasons.
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 increase in number of both domestic and world events affecting organizations.

The Process of Evaluating Strategies:
Numerous external and internal factors can prohibit firms from achieving long term and annual objectives. Externally, actions by competitors, changes in demand, changes in technology, economic changes, demographic shift, and governmental changes. Internally, ineffective strategies may have been chosen or implementation activities may have been poor.
External opportunities and threats and internal strength and weaknesses that are bases for current strategies should continually be monitored for change.

1- Reviewing External & Internal Factors:
Some key questions to address are as follows:
1. Are our strengths still strengths.
2. Have we added other strengths? If so, what are they?
3. Are our internal weaknesses still weaknesses?
4. Do we now have other internal weaknesses? If so, what are they?
5. Are our external opportunities still opportunities?
6. Are there mow other external opportunities? If so, what are
they?
7. Are our external threats still threats?
8. Are there now other external threats? If so, what are they?

2- Measuring Organizational Performance:
This activity includes:
• Comparing expected results to actual result.
• Investigating deviations from plans
• Evaluating individual performance
• Examining progress made toward meeting stated goals.
Both long term and annual objectives are commonly used in this process. Criteria for evaluating strategies should measurable and easily variable.

3- Taking Corrective Actions:
This is the final strategy evaluation activity. It requires changes to reposition a firm competitively for the future.

Some examples of change that may be needed are:
• Altering an organization’s structure,
• Replacing one or more key individuals
• Selling a division
• Or revising business mission

Other changes could include:
• Establishing or revising objectives
• Devising new policies
• Issuing stock to raise capital
• Adding additional salespersons
• Allocating resources differently
• Or developing performance incentives

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