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Lesson#40

STRATEGY REVIEW EVALUATION AND CONTROL

Learning objectives
The last step of strategy frame work model is control evaluation. In this chapter the main concern is
evaluation process its importance and porter five forces model

Evaluation

Evaluation is the systematic determination of merit, worth, and significance of something or someone.
Evaluation often is used to characterize and appraise subjects of interest in a wide range of human
enterprises, including the Arts, business, computer science, criminal justice, education, engineering,
foundations
and non-profit organizations, government, health care, and other human services.
In the field of evaluation, there is some degree of disagreement in the distinctions often made between
the terms 'evaluation' and 'assessment.' Some practitioners would consider these terms to be
interchangeable, while others contend that evaluation is broader than assessment and involves making
judgments about the merit or worth of something (an evaluand) or someone (an evaluee). When such a
distinction is made, 'assessment' is said to primarily involve characterizations – objective descriptions,
while 'evaluation' is said to involve characterizations and appraisals – determinations of merit and/or
worth. Merit involves judgments about generalized value. Worth involves judgments about instrumental
value. For example, a history and a mathematics teacher may have equal merit in terms of mastery of
their respective disciplines, but the math teacher may have greater worth because of the higher demand
and lower supply of qualified mathematics teachers. A further degree of complexity is introduced to this
argument when working in different languages, where the terms 'evaluation' and 'assessment' may be
variously translated, with terms being used that convey differing connotations related to conducting
characterizations and appraisals.

There are many methods, techniques and approaches for conducting evaluations. The following list
includes some of the most common.

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Accelerated aging
Action research
Advanced
Product Quality
Planning

Alternative
assessment

Appreciative
Inquiry

Assessment
Axiomatic design
Benchmarking
Case study
Change
management

Clinical trial
Cohort study
Competitor
analysis

Consensus
decision-making

Consensusseeking
decisionmaking

Content analysis
Conversation
analysis

Cost-benefit
analysis

Data mining
Delphi Technique
Discourse analysis
Electronic
portfolio

Environmental
scanning

Ethnography
Experiment
Experimental
techniques

Factor analysis
Factorial
experiment

Feasibility study
Field experiment
Fixtureless In-
Circuit Test

Focus group
Force field
analysis

Game theory
Grading
Inquiry
Interview
Marketing
research

Meta-analysis
Metrics
Multivariate
statistics

Naturalistic
observation

Observational
techniques

Opinion polling
Organizational
learning

Participant
observation

Policy analysis
Process
improvement

Project
management

Qualitative
research

Quality audit
Quality circle
Quality control
Quality
management

Quality
Management
System

Quantitative
research

Questionnaire
Questionnaire
construction

Root cause
analysis

Rubrics
Sampling
School
accreditation

Self-assessment
Six Sigma
Standardized
testing

Statistical process
control

Statistical survey
Statistics
Strategic planning
Structured
interviewing

Systems theory
Student testing
Total Quality
Management

Triangulation

Strategy Evaluation
Organizations are most vulnerable when they are at the peak of their success.
R.T. Lenz

“Strategy evaluation alerts management to potential or actual problems in a timely fashion.”
It is Complex and sensitive undertaking
Overemphasis can be costly and counterproductive
Systematic Review, Evaluation & Control
1. Strategies become obsolete
2. Internal environments are dynamic
3. External environments are dynamic
Michael Porter
's five forces

Michael Porter
's 1979 framework uses concepts developed in Industrial Organization (IO) economics
to derive 5 forces that determine the attractiveness of a market. Porter referred to these forces as the
microenvironment, to contrast it with the more general term macro environment. They consist of those
forces close to a company that affect its ability to serve its customers and make a profit. A change in
any of the forces normally requires a company to re-assess the marketplace.
Five Forces

Five forces -- the bargaining power of customers, the bargaining power of suppliers, the threat of new
entrants, and the threat of substitute products -- combine with other variables to influence a fifth force,
the level of competition in an industry. Each of these forces has several determinants:

144
A graphical representation of Porters Five Forces
The bargaining power of customers
o
buyer concentration to firm concentration ratio
o
bargaining leverage
o
buyer volume
o
buyer switching costs relative to firm switching costs
o
buyer information availability
o
ability to backward integrate
o
availability of existing substitute products
o
buyer price sensitivity
o
price of total purchase
The bargaining power of suppliers
o
supplier switching costs relative to firm switching costs
o
degree of differentiation of inputs
o
presence of substitute inputs
o
supplier concentration to firm concentration ratio
o
threat of forward integration by suppliers relative to the threat of backward integration by
firms
o
cost of inputs relative to selling price of the product
o
importance of volume to supplier
The threat of new entrants
o
the existence of barriers to entry
o
economies of product differences
o
brand equity
o
switching costs
o
capital requirements
o
access to distribution
o
absolute cost advantages
o
learning curve advantages
o
expected retaliation
o
government policies

The threat of substitute products
o
buyer propensity to substitute
o
relative price performance of substitutes
o
buyer switching costs
o
perceived level of product differentiation
The intensity of competitive rivalry
o
power of buyers
o
power of suppliers
o
threat of new entrants
o
threat of substitute products
o
number of competitors
o
rate of industry growth
o
intermittent industry overcapacity
o
exit barriers
o
diversity of competitors
o
informational complexity and asymmetry
o
brand equity
o
fixed cost allocation per value added
o
level of advertising expense
Some argue that a 6th force should be added to Porter's list to include a variety of stakeholder groups
from the task environment. This force is referred to as "Relative Power of Other Stakeholders". Some
examples of these stakeholders are governments, local communities, creditors, and shareholders.
This 5 forces analysis is just one part of the complete Porter strategic models. The other elements are
the value chain and the generic strategies.

Purpose of strategy evaluation
Strategy evaluation is vital to the organization’s well-being
Alert management to potential or actual problems in a timely fashion
Erroneous strategic decisions can have severe negative impact on organizations

Basic Activities –

1. Examining the underlying bases of a firms’ strategy
2. Comparing expected to actual results
3. Corrective actions to ensure performance conforms to plans
In many organizations, evaluation is an appraisal of performance –
Have assets increased?
Increase in profitability?
Increase in sales?
Increase in productivity?
Profit margins, ROI and EPS ratios increased

Four Criteria (Richard Rummelt):

Consistency
Consonance
Feasibility
Advantage

Consistency

Strategy should not present inconsistent goals and policies.
Conflict and interdepartmental bickering symptomatic of managerial disorder and
strategic inconsistency

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Consonance

Need for strategies to examine sets of trends
Adaptive response to external environment
Trends are results of interactions among other trends

Feasibility

Neither overtax resources nor creates unsolvable sub problems
Organizations must demonstrate the abilities, competencies, skills and talents to
carry out a given strategy

Advantage

Creation or maintenance of competitive advantage
Superiority in resources, skills, or position

The process of evaluating Strategies

1. Strategy evaluation is necessary for all sizes and kinds of organization. Strategy evaluation should
initiate managerial questioning of expectations and assumptions should trigger a review of objectives
and values and should stimulate creativity in generating alternative and formulating criteria of
evaluation
2. Evaluating strategies on continuous rather than a periodic basis allows benchmark of progress to
established and o\more effectively monitored
3. Managers and employees of the firm should be continually aware of progress being made towards
achieving the firm’s objectives. As a critical success factors change, organization members should be
involved in determining appropriate corrective action.

A Strategy-Evaluation Framework

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. Notice that corrective actions are
almost always needed except when (1) external and internal factors have not significantly changed and
(2) The firm is progressing satisfactorily toward achieving stated objectives.

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