Name:.

Niyati Mehta
Class & Roll No. – Division: SY.B.Com 63-C
SAP No.:40311180428
Academic Year:2019-2020
Subject: Strategic Management (Semester III)

Main Topic: STRATERGIC ANALYSIS

Sub Topic:STRATEGIC EVALUATION
● DEFINITION
Strategy evaluation means collecting information about how well the strategic υplan is
progressing. 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

● STEPS OF STRATEGY 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 performance
indicator that best identify and express the special requirements might then be
determined to be used for evaluation. 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. If appropriate means are available for
measuring the performance and if the standards are set in the right manner, strategy
evaluation becomes easier. But various factors such as managers contribution are
difficult to measure. Similarly divisional performance is sometimes difficult to measure
as compared to individual performance. Thus, variable objectives must be created
against which measurement of performance can be done. The measurement must be
done at right time else evaluation will not meet its purpose. 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. The positive deviation indicates a better
performance but it is quite unusual exceeding the target always. The negative deviation
is an issue of concern because it indicates a shortfall in performance. Thus in this case
the strategists must discover the causes of deviation and must take corrective action to
overcome .

● PRINCIPLES OF STRATEGY EVALUATION

There are four terms to study: consistency, consonance, advantage, and feasibility.
(1) Consistency has to do with whether the way the business operates matches the objectives
the business strives for. When a business sets objectives or goals, they can evaluate their
daily operations to see if it has met these goals.
(2) Consonance refers to how well the business reacts to the change of surroundings. If
consumers' preferences change, or a competitive business is built next door, a business
needs to be able to adapt and still be successful.
(3) Advantage has to do with whether the business is competitive. If a consumer purchases
products at their business instead of at another store, the business can remain competitive.
(4) Feasibility is concerned with whether the business has the resources and tools to
function. As times change and technology grows, a company need to have the resources
to remain successful.
Strategic Evaluation Process-

(A) Setting standards of performance – The firm must identify the areas of operational
efficiency in terms of people, processes, productivity and pace. Standards set must be related to
key management tasks. The criteria for setting standards may be qualitative or quantitative.
Therefore standards can be set keeping in mind past achievements, compare performance with
industry average or major competitors. Factors such as capabilities of a firm, core competencies,
risk bearing ability, strategic clarity and flexibility and workability must also be considered.

(B) Measurement of performance – Standards of performance act as a benchmark in evaluating

the actual performance. Operationally it is done through accounting, reporting and communication
system. The key areas which must be kept in mind are – difficulty in measurement, timing of
measurement (critical points) and periodicity in measurement (task schedule).

Learning Outcome: Helped me understand principles of strategy evaluation.

Reference: Master of Business Administration, Author: CSK Krishna Machar Yaloo