Question

Assess the Strategy-Evaluation Framework, including reviewing bases of strategy, measuring organizational performance, and taking corrective actions. Apply this framework to a real company (found in either the literature or your own company).

Answer 1

Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: examining the underlying bases of a firm’s strategies, comparing actual results with expected results and taking remedial/corrective actions. Strategy evaluation is operated at two levels; strategic control and operational control. The strategic Control: At this level, we are concerned more about the consistency of strategy with the Environment. The operational Control: At the Operational Level, the effort is given towards assessing how well the organization is pursuing a given strategy.

Participants in Strategic evaluation: shareholders, board of directors, chief executives, profit center heads or SBU heads, financial controllers, company secretaries, external and internal auditors, audit and executive committees, corporate planning staff or department and middle-level managers.

Activity one is review the underlying bases of strategy; 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. At this stage, there are questions that should be asked:

• Are our external threats still threats?
• Are there now other external threats?
• Are we vulnerable to a hostile takeover?

Activity two is the measure organizational performance activity. This activity includes comparing expected results to actual results, investigating deviations from plans, evaluating individual performance, and examining progress being made toward meeting stated objectives. Both long term and annual objectives are commonly used in this process. Failure to make satisfactory progress toward accomplishing long-term or annual objectives signals a need for corrective action. Quantitative criteria commonly used to evaluate strategies are financial ratios, which strategists use to make three critical comparisons: comparing the firm's performance over different time periods, comparing the firm's performance to competitors, and comparing the firm's performance to industry averages.

Key financial ratios for measuring organizational performance: return on investment, return on equity, profit margin, market share, debt to equity, earnings per share, sales growth and asset growth.

Activity three is the taking corrective action activity. This activity is about making changes to reposition a firm competitively for the future. Examples of changes that may be needed are altering an organization's structure, replacing one or more key individuals, selling a division, or revising a business mission. Taking corrective action raises employees' and managers' anxieties. Research suggests that participation in strategy-evaluation activities is one of the best ways to overcome individuals' resistance to change.