The best formulated and implemented strategies become obsolete as a firm’s external and internal environments change. It is essential, therefore, that strategists systematically review, evaluate, and control the execution of strategies. Chapter 9 presents a framework that can guide managers’ efforts to evaluate strategic-management activities, to make sure they are working, and to make timely changes. Computer information systems being used to evaluate strategies are discussed. Guidelines are presented for formulating, implementing, and evaluating strategies.
THE NATURE OF STRATEGY EVALUATION
Importance of Strategy Evaluation
The strategic-management process results in decisions that can have significant, long-lasting consequences. Erroneous strategic decisions can inflict severe penalties and can be exceedingly difficult, if not impossible, to reverse.
Most strategists agree, therefore, that strategy evaluation is vital to an organization’s well-being; timely evaluations can alert management to problems or potential problems before a situation becomes critical.
Strategy evaluation includes three basic activities:
Examining the underlying bases of a firm’s strategy.
Comparing expected results with actual results.
Taking corrective actions to ensure that performance conforms to plans.
Strategy evaluation can be a complex and sensitive undertaking. Too much emphasis on evaluating strategies may be expensive and counterproductive. Yet, too little or no evaluation can create even worse problems. Strategy evaluation is essential to ensure that stated objectives are being achieved.
It is impossible to demonstrate conclusively that a particular strategy is optimal, but it can be evaluated for critical flaws. As described in Table 9-1, here are four criteria to use in evaluating a strategy:
These trends make strategy evaluation difficult:
dramatic increase in environmental complexity
difficult in predicting future
increasing number of variables
rapid rate of obsolescence
increase in the number of world events affecting organization f.
decreasing time spans for planning
The Process of Evaluating Strategies
Strategy evaluation is necessary for all sizes and kinds of organizations.
Strategy evaluation should initiate managerial questioning of expectations and assumptions, trigger a review of objectives and values, and stimulate creativity in generating alternatives and formulating criteria of evaluation.
Evaluating strategies on a continuous rather than a periodic basis allows benchmarks of progress to be established and more effectively monitored.
Managers and employees of the firm should continually be aware of progress being made toward achieving the firm’s objectives. As critical success factors change, organizational members should be involved in determining appropriate corrective actions.
A STRATEGY-EVALUATION FRAMEWORK
Table 9-3 summarizes the strategy-evaluation activities in terms of key questions that should be addressed, alternative answers to those questions, and appropriate actions for an organization to take.
Reviewing Bases of Strategy
As shown in Figure 9-2, by developing a revised EFE Matrix and IFE Matrix, the underlying bases of an organization’s strategy can be approached and reviewed.
A revised IFE Matrix should focus on changes in the organization’s management, marketing, finance/accounting, production/operations, R&D, and MIS strengths and weaknesses.
A revised EFE Matrix should indicate how effectively a firm’s strategies have been in response to key opportunities and threats.
Measuring Organizational Performance
Another important strategy-evaluation activity is measuring organizational performance. This activity includes comparing expected results to actual...
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