STRATEGIC MANAGEMENT

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EVALUATION AND CONTROL

S A D Senanayake
M.A.S.Malithi
Department of Organizational Studies
Faculty of Management Studies
The Open University of Sri Lanka
2022/2023
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STRATEGY EVALUATION AND
CONTROL

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• Strategic evaluation and control is the process
of determining the effectiveness of a given
strategy in achieving the organizational
objectives and taking corrective actions
whenever required.

• Control can be exercised through formulation

of contingency strategies and a crisis
management team.

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There can be the following types of control:

1. Operational control:

It is aimed at allocation and use of organization

resources through evaluation of performance of
organizational units, divisions, SBU;’s to assess
their contribution in achieving organizational
objectives.
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2. Strategic control:

It takes 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

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The four basic type of strategic control are:

i. Premise control:

It identifies the key assumption and keeps track

of any change in them to assess its impact on
strategy and implementation. The goal is to find
if the assumptions are still valid or not. It is
generally handled by the corporate planning staff
considering the environmental and
organizational factors.

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ii. Implementation control:

It includes evaluating plans, programs, projects

to see if they guide the organization to achieve
predetermined organizational objectives or not.
It consists of identification and monitoring of
strategic thrusts.

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iii Strategic surveillance:

It aims at generalized control. It is designed to monitor a

broad range of events inside and outside the
organization that are likely to threaten the course of the
firm. Organizational learning and knowledge
management system capture the information for
strategic surveillance.

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iv Special alert control:

It is a rapid response or immediate reassessment of

strategy in the light of sudden and unexpected events. It
can be contingency strategies and a crisis management
team.

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Strategy evaluation and control process

Formulation Implementation
Develop strategic plans to Put strategic plans into
prepare for the future practice

Evaluation
Assess the strategic plans and how well the plans
are implanted/ being implemented

Control
Plan for receiving necessary information carryout evaluations to
exercise improved control of strategy implantation. This enables to
make better plansOSU6501
and-adapted
Source: make
Strategic necessary
role of evaluation alterations.
Management
from The and control in strategic management HRC
Group, Strategic management briefing papers (1989).
Strategic managers, should be able to exercise

1. Proper control over the strategic management

process;

• know how the strategic plans are formulated and

implemented, and
• what corrective action can be taken to improve
performance; where necessary

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2. Finding out what is going on and about the evaluation.

• Collecting information about how well the strategic plan

is progressing.
• Evaluate the results
• Based on the evaluation results, decide on the appropriate
action.
• If everything is taking place as planned, then continue as
planned (or try to do better!).

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However, if evaluation indicates an adverse deviation:
Identify the issues and take measures to eliminate/
minimize corresponding trouble spots.

If the goals, objectives and/or implementation plans are so

ambitious that they cannot be achieved?
Then prepare a realistic goals, objectives and/or
implementation plans set.

If the employees are not well prepared to follow the

implementation process?
Then prepare job aids or give necessary training.
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Evaluation is a part of the overall control process, but it is
important part. Without it,

• Managers may end up making the wrong decisions.

Because of this close relationship between evaluation
and control, it is common to talk of them as though they
were one and the same thing.

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• Consider this

Controls do not just guard the money:

they also provide data and information for

decision-making.

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• Benefits of strategic evaluation and
control

• What are the main benefits of strategic evaluation and

control?

There are three:

1. They provide direction.

They enable management to make sure that the

organization is heading in the right direction and that
corrective action is taken where needed.

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2. They provide guidance to everybody.

Everyone within the organization, both managers and

workers alike, learn what is happening, how their
performance compares with what is expected, and what
needs to be done to keep up the good work or improve
performance.

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3. They inspire confidence.

Information about good performance inspires

confidence in everybody. Those within the organization
are likely to be more motivated to maintain and achieve
better performance in order to keep up their track
record. Those outside customers, government
authorities, shareholders are likely to be impressed with
the good performance.

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• According to Robert J Mockler,
“Management control implies systematic efforts to
set standards to compare actual performance with
the predetermined standards, to determine whether
there are any deviations and to measure their
significance so as to take any action required to
assure that all corporate resources are being used in
the most effective and efficient way”.

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• The above definition of Robert J Mockler has divided
the controlling process in various steps as follows.

i. To establish performance standards to compare actual

performance
ii. To select suitable techniques and measure actual
performance
iii. To compare the performance with standards
iv. To evaluate of deviations and determine their significance
v. To take corrective actions

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 Select techniques
and Measure
Establish organizational
performance performance
standards

Compare
performance
with standards
Take
corrective
actions
Evaluate
deviations. Are
they significant
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1. To establish performance standards:

• The starting step of the controlling process. The

organization should develop the standards of performances.
While fixing the standards, precaution should be taken
about their specificity.

• Some standards may be difficult to quantify in explicit

terms such as morale, discipline, creativity etc. In such
cases qualitative goals and design control mechanism are
useful for measuring the performance.
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• The following are some quantitative standards against the performance
can be measured.

1. Time standard:
The time factor should be considered to complete the task or goal of the
organization. It may be for measuring per hour unit of production, or in
the sales, number of sales are made by the executives in day, etc.

2. Cost Standard:
This describes the financial expenditure involved per unit of activity. It
could be material cost per units, cost of distribution or selling cost on per
sales call basis.
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3. Income standard:
It could be sales for the months, sales generated by sales executives
in a year, etc.

4. Market share standard:

It is emphasized on to increase the share of market. E.g. A company
wants increasing the market share by 5 percent in the next 5 years.

5. Return on investment:
It is one the indicators which shows the various performance of
business such as turnover sales, working capital, production and
operating costs and Investment.

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2. To measure organizational performance:

• After finalized the goals or objectives of the

organization, the next step is controlling process to
measure the actual achieved organizational
performance as compared the fixed goals or
objectives of the organization.

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3.To select the techniques:

• It is one of the difficult tasks to measure the actual performance in

the strategic decisions. There are various techniques to measure the
efficiency and effectiveness of strategic management.

• What is to be measured, how to be measured, when to be measured

or whether to be measured continuously or periodically etc. are
important objectives. These questions provide right path for the
measure the performance of strategy.
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 The Techniques of Measurement:
Financial measures :-
It indicates the financial condition of the business organization. It
involves various ratios, relationship of business variables to each
others. Some of the ratios which exhibit financial soundness of
business are:
• Net Sales to Working Capital
• Current Ratio
• Liquid ratio
• Net profit to net sales ratio
• Net profit to Net worth ratio
• Collection period on credit sales

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Current Ratio Formula

The Current Ratio formula is:

• Current Ratio = Current Assets / Current

Liabilities

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Production measures:-

It is related with outcome of activities to the production

related effort.

It involves

• pre controls,

• concurrent control and

• post controls measures.

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Marketing measures

According to Smith, Arnold and Bizzell, there are five

categories to measures marketing performance.
i. Sales analysis

ii. Market Share analysis

iii. Marketing expenses to sales ratio

iv. Customer attitude tracking

v. Efficiency Analysis

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4. To compare performance with standards:-

The next step of controlling process is to compare the

actual performance with predetermined performance
with standards.

If there are not specified standards performance, It

would be difficult to measure the performance and to
identify the efficiency and effectiveness of strategic
decisions.
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5. To evaluate deviations:-

It is essential step before the deviation is corrected. The

reasons should be investigated. The main idea is to find
the root cause for the deviations or problems therefore it
would never arise in the future also. The deviations may
be positive or negatives.

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6.To take corrective actions:-

After the analysis and investigation, the final steps are

arrived to take corrective actions for remedy of the
problem. The corrective actions should be consistent to
the internal and external environment of business

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Importance of Strategic Evaluation and
Control:

1. There is a need for feedback, appraisal and

reward
2. To check on the validity of strategic choice
3. Congruence between decisions and intended
strategy
4. Creating inputs for new strategic planning

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 Finally,
• Importance of Strategic Evaluation and Control leads
to increase the

i. Quality

ii. Efficiency

iii. Innovations

iv. Customers Satisfaction

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 TECHNIQUES
OF
STRATEGIC EVALUATION
AND
CONTROL

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• 1. Gap Analysis

This is one of the techniques which can

identify the gap between the actual achieved
performance and expected performance of
the organization as per the management
strategy.
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• 2. SWOT Analysis:

This is one techniques of strategic evaluation to

actual monitor the performance of strategic
decisions. SWOT describes as organization’s
strengths, weaknesses, opportunities and threats.

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• 3. PEST Analysis:

This is one of the techniques used for the evaluation system of

strategy. The business atmosphere is highly sensitive and complex in
nature.
PEST denotes
• Political,
• Economical,
• Social and
• Technological factors directly impact on the business. These are
essential factors should OSU6501 Strategic Management
be considered while framing the strategy.
• 4. Benchmarking:

It is technique of strategic evaluation to identify

whether the organization is achieved the expected
results or not.

If it is failed to achieve the expected result, then what is

the difference between actual result and expected result.
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The organization must set the Standard performance is

benchmark for the measuring actual performance.

The regular monitoring and measuring the performance of

strategic plan and collection of data that indicates actual result of

the given activity and set the benchmark of activity.

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 Balanced Scorecard
• A balanced scorecard is a strategic management
performance metric that helps companies identify
and improve their internal operations to help their
external outcomes. It measures past performance
data and provides organizations with feedback on
how to make better decisions in the future.

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 Balanced Scorecard
• The balanced scorecard is a strategic planning and management
system which takes into account non-financial aspects of corporate
performance, such as customer satisfaction and business processes,
to create a complete picture of how the company is likely to perform
in the future.

• For example, reducing the level of customer service may boost

current earnings, but the balanced scorecard approach would also
take into account potential loss of future earnings due to poor
customer satisfaction.
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1. Balanced Scorecard example: Strategic map for a Craft Brewery

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2. Balanced Scorecard example: Strategic map for a Jewelry store

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3. Balanced Scorecard example: Strategic map for an E-Commerce Business

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 Value Chain Analysis

• Value chain analysis (VCA) is a process where a

firm identifies its primary and support
activities that add value to its final product and
then analyze these activities to reduce costs or
increase differentiation.

• Value chain represents the internal activities a firm

engages in when transforming inputs into outputs.

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How do value chains work?

• The value chain framework helps organizations identify and group their
own business functions into primary and secondary activities.

• Analyzing these value chain activities, sub activities and the

relationships between them helps organizations understand them as a
system of interrelated functions.

• Then, organizations can individually analyze each to assess whether the

output of each activity or sub activity can be improved relative to the
cost, time and effort they require.
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• When an organization applies the value chain
concept to its own activities, it is called a value
chain analysis.

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Primary activities
• Primary activities contribute to a product or service's
physical creation, sale, maintenance and support. These
activities include the following:

1. Inbound Operations.
The internal handling and management of resources coming
from outside sources such as external vendors and other
supply chain sources. These outside resources flowing in are
called "inputs" and may include raw materials.
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2. Operations.

Activities and processes that transform inputs into "outputs" the

product or service being sold by the business that flow out to
customers. These "outputs" are the core products that can be sold
for a higher price than the cost of materials and production to
create a profit.

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3. Outbound Logistics.

The delivery of outputs to customers. Processes involve systems

for storage, collection and distribution to customers. This
includes managing a company's internal systems and external
systems from customer organizations.

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4. Marketing and Sales.

Activities such as advertising and brand-building, which

seek to increase visibility, reach a marketing audience
and communicate why a consumer should purchase a
product or service.

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5. Service.
Activities such as customer service and product support, which
reinforce a long-term relationship with the customers who have
purchased a product or service.

• As management issues and inefficiencies are relatively easy to

identify here, well-managed primary activities are often the
source of a business's cost advantage. This means the business
can produce a product or service at a lower cost than its
competitors.
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Secondary activities
• The following secondary activities support the
various primary activities:

1. Procurement and purchasing.

Finding new external vendors, maintaining vendor
relationships, and negotiating prices and other activities
related to bringing in the necessary materials and
resources used to build a product or service.
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2. Human Resource Management

The management of human capital. This includes

functions such as hiring, training and development,
building and maintaining an organizational culture; and
maintaining positive employee relationships.

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3. Technology Development.

Activities such as research and development, IT

management and cyber security that build and maintain
an organization's use of technology.

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4. Company Infrastructure.

Necessary company activities such as legal, general

management, administrative, accounting, finance, public
relations and quality assurance

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Benefits of value chains

The value chain framework helps organizations understand and

evaluate sources of positive and negative cost efficiency.
Conducting a value chain analysis can help businesses in the
following ways:

• Support decisions for various business activities.

• Diagnose points of ineffectiveness for corrective action.

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• Understand linkages and dependencies between different
activities and areas in the business. For example, issues in
human resources management and technology can permeate
nearly all business activities.

• Optimize activities to maximize output and minimize

organizational expenses.

• Potentially create a cost advantage over competitors.

• Understand core competencies and areas of improvement.

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 Thank you

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