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STRATEGIC EVALUATION & CONTROLShruti Das 03480003913Roshan Jha 08780003913Navita Aggarwal 09580003913Kratika Agarwal 09880003913INTRODUCTION

All strategies are subject to future modification because internal and external factors are constantly changing.

2Continued..Evaluation is vital tothe organizations well-being because:It compares performance with desired results and gives feedback for management to evaluate and take corrective actions.It alerts management to potential/actual problems in a timely fashion.Strategy evaluation is often an appraisal ofperformance. Strategists ask questions like

Have the firms assets increased?Has there been an increase in profitability?Has there been an increase in sales?Has there been an increase in productivity?Have profit margins, ROI, and EPS ratios increased?

Glueck and Jauch Evaluation ofstrategy is that phase of the strategic management process in which the top managers determine whether theirstrategic choice as implemented is meeting the objectives of the enterprise.Two aspects in this phase

Evaluation which emphasizes measurement of results of a strategic action andControl which emphasizes on taking necessary actions in the light of gap that exists between intended results and actual results in the strategic action.

What is strategy evaluation?Nature of the strategic evaluation and control process is to test the effectiveness of strategy.During the two proceedings phases of the strategic management process, the strategists formulate the strategy to achieve a set of objectives and then implement the strategy.There has to be a way of finding out whether the strategy being implemented will guide the organisation towards its intended objectives.Strategic evaluation and control, therefore, performs the crucial task of keeping the organisation on the right track. In the absence of such a mechanism, there would be no means for strategists to find out whether or not the strategy is producing the desired effect.

Nature of strategic management & control6Importance of Strategic EvaluationNeed for feedback, appraisal and rewardCheck on the validity of strategic choicesCongruence between decisions and intended strategySuccessful culmination of strategic management processCreating inputs for new strategic planningSTRATEGIC CONTROLIt 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 requirement.It is early warning systems and differ from post action controls which evaluate only after the implementation has been completed.Types of strategic controlsPremise ControlImplementation controlStrategic surveillanceSpecial alert control

Premise ControlPremise control is necessary to identify the key assumptions, and keep track of any change in them so as to assess their impact on strategy and its implementation.Premise control serves the purpose of continually testing the assumptions to find out whether they are still valid or not. It helps in the strategists to take corrective action at the right time.Premise control responsibility can be assigned to corporate planning staff.Implementation controlThe Implementation of a strategy results in a series of plans, programmes, and projects.Resources allocation plays important role.Implementation control may leads into strategic rethinking.Implementation control can be implemented by identifying and monitoring strategic requirement with respect to market success. It also helps in determining whether to go for diversification or not.Strategic surveillanceIt is generalized aimed at designed to monitor a board range of events inside and outside the company that are likely to threaten the course of firms strategy.It can be done through a broad based, general monitoring on the basis of selected information sources to uncover that are likely to affect the strategy of an organization.Special controlIt is based on trigger mechanism for rapid response and immediate reassessment of strategy in the light of sudden and unexpected events.

Crises and critical situations that occur unexpectedly and threaten the course of a strategy.Techniques of Strategic ControlClassified into two groups:Strategic Momentum Control(For Stable environment):Aimed at assuring that the assumptions on the basis of which strategies were formulated are still valid and what needs to be done in order to allow the organization to maintain its existing strategic momentum.

Three techniques used could be:Responsibility control centresThe underlying success factorsGeneric strategiesB. Strategic leap Control(Turbulent environment):Defining new strategic requirements and cope with emerging environmental realities when the environment is relatively unstable.

Four techniques of evaluation used for exercising strategic leap control:Strategic issue managementStrategic field analysisSystems modellingScenarios.OPERATIONAL CONTROLIt is aimed at allocation and use of organizational resources through evaluation of the performance of organisational units such as divisions, SBUs etc. to assess their contribution to the achievement of organisational objectives.Process of EvaluationIt basically deals with four steps:Setting standards of performanceMeasurement of performanceAnalysing variancesTaking corrective action.Strategy/ Plan/ Objectives:Results in a set of performance standards which form the basis for evaluation through measurement of performance.Setting Of Standards:Three questions while dealing with standard setting: -What Standards should be set? -How should these standards be set? -in what terms should these standards be expressed?Three pronged basic approaches: -Key managerial tasks, -special requirements for the performance of the key tasks, -performance indicators: *Quantitative criteria *Qualitative criteriaMeasurement of performance:Actual performance is depicted and compared with the standards which act as the benchmark.Operationally, measuring is done through the accounting, reporting and communication systems.The other important aspects of measurement relate toDifficulties in measurement.Timing of measurement.Periodicity in measurementAnalysing Variances:Comparison of actual performance with the standards set will lead to an analysis of variances. Three situations may arise:The actual performance matches the budgeted performance.The actual performance is better.The actual performance is below.

Taking Corrective Action:Checking of performanceChecking of standardsReformulating strategies, plans and objectivesTechniques of Operational ControlInternal analysisVRIO framework- the basic idea is that sustainable strategic advantage results through the use of capabilities that are valuable, rare, inimitable and organised for usage. Value chain analysis- focuses on a set of inter-related activities performed in a sequence, for producing and marketing a product or service.Quantitative analysis- takes up the financial parameters & non-financial quantitative parameters such as physical units or time in order to assess performance.Qualitative analysis- supplements the quantitative analysis by including those aspects which are not feasible to measure on the basis of figures & numbers.

Comparative analysisHistorical analysis- is a frequently used method for comparing performance of a firm over a given period of time. Such an analysis can offer the firm a better perception of its performance as compared to an absolute assessment.Industry norm- is a method for analysing performance that brings with it the advantage of making a firm competitive in comparison to its rivals in the same industry. Benchmarking- is a comparative method where a firm finds the best practices in an area & then attempts to bring its own performance in that area in line with the best practice.

Comprehensive analysisKey factor rating- is a method that takes into account the key factors in several areas and then sets out to evaluate performance on the basis of these. This is quite a comprehensive method as it takes a holistic view of the performance areas in an organisation.Balanced scorecard- method is based on the identification of four key performance measures of customer perspective, internal perspective, innovation and learning perspective and the financial perspective. Strategic control & Operational controlAttributesStrategic controlOperational Control1. AimProactive, continuous questioning of the basic direction of strategyAllocation and use of organisational resources2. Main concernSteering the organisations future directionAction control3. FocusExternal environmentInternal organisation4. Time horizonLong-termShort-term5. Exercise of controlExclusively by top management, may be through lower-level supportMainly by executive or middle-level management on the direction of the top management6. Main techniquesEnvironmental scanning, information gathering, questioning and reviewBudgets, schedules and MBO7. Basic questionAre we moving in the right direction?How are we performing?