1. Civil Service College Dhaka
Strategy Evaluation
Session 8
19 November 2011
Civil Service College Dhaka
Presentation by
Dr. Muhammad G. Sarwar
Cell:

2. Strategic Management: course outline
Sl. No.
Topic Title
Session no. 1
Strategic Management: an overview 2
Strategy Formulation
Designing Vision and Mission Statements
External Assessment
Internal Assessment
Setting Objectives and Strategic Options
Strategy Analysis and Choice 3
Strategy Execution 4
Strategy Evaluation
Total 8

3. Contents of 8th Session Defining strategy evaluation
Nature of strategy evaluation
Process of strategy evaluation
Strategy Evaluation Framework
Contingency planning
A critique of strategic management

4. Defining strategy evaluation
Strategy evaluation is a systematic review of the formulated strategies at the execution stages to take corrective actions and to control the execution process.
Strategic evaluation is a critical necessity for timely interventions as the organization’s external and internal strategic positions change rapidly
Three basic activities:
Examining the underlying basis of strategy,
Comparing expected results with actual results, and
Taking corrective actions to ensure that performance conforms to plans.

5. Nature of strategy evaluation
Strategy evaluation is a complex undertaking. It must have both a long-term and short-term focus.
Richard Rumelt’s four criteria to evaluate strategy:
Consistency,
Consonance,
Feasibility, and
Advantage.

6. Rumelt’s four criteria to evaluate strategy
Consistency: Organizational conflicts and inter-departmental bickering may be a sign of strategic inconsistency. A strategy must not present inconsistent goals and policies.
Consonance: Consonance refers to examine sets of trends, as well as individual trends, in evaluating strategies.
Feasibility: The final broad test of strategy is its feasibility, that is, whether the strategy can be attained within the limits of physical, human and financial resources of the organization.
Advantage: In evaluating strategy, organizations may examine the nature of positional advantages associated with the strategy. Competitive advantages normally are the result of superiority in one of the three areas:
Resources,
Skills, and
Position.

7. Process of strategy evaluation
Like strategy formulation and execution, strategy evaluation should also involve managers and employees of all level as much as possible.
Strategy evaluation should be performed on a continuing basis, rather than at the end of specified period of time or just after problems occur.

8. Strategy Evaluation Framework
Examining the underlying bases of strategy
Comparing expected results with actual results
Taking corrective actions to ensure that performance conforms to plans

9. Strategy Evaluation Assessment Matrix
Changes occurred in internal strategic position?
Changes occurred in external strategic position?
Satisfactory progress toward attaining stated goals?
Action to be taken No
Take corrective actions
Yes
Continue existing strategy

10. Reviewing Underlying Bases of Strategy
Reviewing underlying bases of organizational strategy is approached by:
Developing revised EFE Matrix; and
Developing revised IFE Matrix.
Revised EFE Matrix should focus on how effective the organization’s strategies to have been in response to key opportunities and threats.
Revised IFE Matrix should focus on changes in the organization’s management, marketing, finance, production operation, R&D and IMS strengths and weaknesses.

11. Measuring Organizational Performance
Measuring organizational performance involves comparing expected results to actual results, investigating deviations from plans, evaluating individual performance, and examining progress being made toward attaining stated objectives.
Strategy evaluation is based on both quantitative and qualitative criteria.
Selecting exact set of criteria for evaluating strategies depends on particular organization’s size, industry environment, strategies, and management philosophy.

12. Measuring Organizational Performance (cont.)
Quantitative criteria commonly used to evaluate strategies are financial ratios that are used to make three critical comparisons:
Comparing organization’s performance over different time periods;
Comparing organization’s performance to competitors; and
Comparing organization’s performance to industry average.

13. Measuring Organizational Performance (cont.)
Key financial ratios that are particularly useful as criteria for strategy evaluation are:
Return on investment
Return on equity
Profit margin
Market share
Debt to equity
Earnings per share
Sales growth
Asset growth.

14. Measuring Organizational Performance (cont.)
Potential problems associated with quantitative
Criteria for evaluation of strategies are:
Most quantitative criteria are geared to annual objectives rather than long-term objectives.
Different accounting methods can provide different results on many quantitative criteria
Intuitive judgments are almost always involved in deriving quantitative criteria.

15. Measuring Organizational Performance (cont.)
Qualitative criteria are also important in evaluating strategies. Underlying declining performance may be due to:
Employee absenteeism
Employee turnover rate
Low employee satisfaction
Low employee productivity.

16. Measuring Organizational Performance (cont.)
Seymour Tilles’s six qualitative questions that are useful in evaluating strategies:
Is the strategy internally consistent?
Is the strategy consistent with the industry environment?
Is the strategy appropriate in view of available resources?
Is the strategy workable?
Does the strategy have an appropriate time frame?
Does the strategy formulated on acceptable degree of risk?

17. Taking Corrective Actions
Corrective actions requires making changes to reposition a organization competitive path. Examples of changes are:
Altering organization’s structure,
Replacing key individuals,
revising a business mission,
Revising organizational objectives,
Devising new policies,
Reallocating resources, etc
Corrective actions should place an organization in a better position to capitalize upon internal strengths and external opportunities.
Continuous strategy evaluation keeps strategies of an organization on right path towards an effective strategic management.

18. Contingency Planning
Regardless of how carefully strategies are formulated, unforeseen events like natural disasters, war, inflation, entry of foreign competitors, etc may upset the strategy.
To minimize the negative impact of these unforeseen events, organizations develop contingency plans.
Contingency plan is defined as alternative plans that can be put into effect if unexpected events occur that upset the organizational strategy.

19. Limitation of Strategic Management
Strategies are fine if used as a sense of direction, otherwise it can stifle creativity, especially if it is rigidly enforced.
Strategies can also cause an organization to define too narrowly, and may lead to marketing myopia.
Many theories of strategic management are either too narrow in focus to build a complete corporate strategy or too general to be applicable for specific situations.
Strategic theories suggest that the element of strategic management i) reaching consensus on corporate objectives, ii) developing a plan to attain those objectives, and iii) allocating resources to execute the plan, can be approached sequentially. But in real world these three elements are interdependent, thus, should occur simultaneously rather then sequentially.

20. Limitation of Strategic Management (contd.)
Strategies are built on assumptions that, in the absence of perfect knowledge, are never perfectly correct. Thus, strategic management is necessarily a repetitive learning cycle, rather than a linear progression towards a clearly defined destination.
Strategic management will add little value, indeed may harm as well, if strategies are designed to be used as a detail blue print for managers.
Strategic managers require to think simultaneously about organization’s desired objectives, best approach for attaining them and resource requirement for the chosen approach. It requires a frame of mind that admits no boundary between means and ends.

21. Recapitulation: Strategic Management
What is Strategic Management?
Strategic Management is an art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives (Fred R. David, 2008).
Strategic Management is the approaches to grow, attract and please clients, compete successfully and achieve targeted levels of organizational performance (Arther A. Thompson, 2010)

22. Recapitulation: Strategic Management (contd.)
In ultimate analysis Strategic Management is the Quest for Competitive Advantage.
4 most frequently used strategic approaches:
Striving to be the industry’s low-cost provider
Outperforming rivals based on quality, diversity, style, technology, value –added services etc
Focusing on a narrow market niche
Developing capability that rivals can’t easily imitate.

23. Recapitulation: Strategic Management Model
Strategy Formulation
Strategy Implementation
Strategy Evaluation

24. Recapitulation: Strategy as a Blend of Proactive Initiatives and Reactive Adjustments
Strategy Evolves over Time
Prior version of strategy
New initiatives +
ongoing strategy elements
Adaptive reactions to changing circumstances
Latest version of strategy

25. Strategic Management 8th Session: references
Fred R. David (2008), Strategic Management: Concepts and Cases, 11th Edition, Prentice Hall (Chapter 9)
Arthur A. Thompson, Jr. (2010) Crafting and Executing Strategy: the quest for comparative, 16th Edition, McGraw Hill (Chapter 11, 12 & 13)

26. Thanks