Evaluation and control of the policies using GAP ANALYSIS

Evaluation and control of the policies

1. SUBJECT: STRATEGIC MANAGEMENT TOPIC:STRATEGY EVALUATION AND CONTROL

2. INTRODUCTION TO STRATEGY EVALUATION The final stage in strategic management is strategy evaluation and control. All strategies are subject to future modification because internal and external factors are constantly changing. In the strategic evaluation and control process managers determine whether the chosen strategy is achieving the organisation’s objectives.

3. MEANING OF STRATEGIC EVALUATION Strategic evaluation is the assessment process that provides executive and managers performance information about programs, projects, activities designed to meet business goals and objectives. Strategic evaluation and control is the process of determining the effectiveness of a given strategy in achieving the organizational objectives and taking corrective action wherever required.

4. DEFINITION OF STRATEGIC EVALUATION According to F.R David , strategic evaluation includes three basic activities: 1.Examining the underlying bases of a firm’s strategy, appraising internal and external factors. 2.Comparing expected results with actual results. 3.Taking corrective action to ensure that performance conforms to plans.

5. PROCESS OF STRATEGIC EVALUATION 1.Fixing benchmark of performance 2.Measurement of performance 3.Analyzing variance 4.Taking corrective action

6. IMPORTANCE OF STRATEGIC EVALUATION 1.Verification of strategic choice 2.Congruence between strategy and decisions 3.Asessment of progress 4.Linkage between performance and rewards 5.Feedback for future planning 6.Overcoming resistance to change 7.Functional coordination 8.Premise control 9.Implementation control

7. NATURE OF STRATEGIC 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. *Strategic evaluation and control therefore, performs the crucial task of keeping the organization on the right track.

8. *There has to be a way of finding out whether the strategy being implemented will guide the organization towards its intended objectives. *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.

9. PARTICIPANTS IN STRATEGIC EVALUATION 1.Board of directors 2.Shareholders 3.Chief executives 4.Profit centre heads 5.Financial controllers 6.Company secretaries 7.External and internal auditors 8.Audit and executive committees 9.Corporate planning staff or department 10.Middle level managers

10. REQUIREMENTS FOR EFFECTIVE EVALUATION * Control should monitor only relevant activities and results. *Control system should generate minimum information because too much information creates clutter and confusion. *Both performance evaluation and corrective actions should be done at the most appropriate time.

11. *Control system should focus on exceptional outcomes. *There should be a balanced focus on long term and short term performance. *Those achieving or exceeding performance standards should be properly rewarded.

12. BARRIERS OF EVALUATION 1.Resistance to evaluation 2.Problems in measurement 3.Limits of control 4.Focus on short term 5.Emphasis on efficiency

13. DIFFICULTIES IN EVALUATION * A dramatic increase in the environment’s complexity *The increasing difficulty of predicting the future with accuracy *The increasing number of variables *The rapid rate of obsolescence of even the best plans *The increase in the number of both domestic and world events affecting organisations *The decreasing time span for which planning can be done with any degree of certainty

14. STRATEGY EVALUATION CRITERIA 1.Quantitative factors 2.Qualitative factors

15. Strategy evaluation criteria: 1. Quantitative factors: Quantitative criteria commonly employed to evaluate strategies are financial ratios, which strategists use to make three important comparisons; Comparing the firm’s performance over different time periods Comparing the firm’s performance to competitors Comparing the firm’s performance to industry averages Some of the key financial ratios used as criteria for strategy evaluation: Return on investment profit margin Return on equity Market share Employee turnover Earnings per share Employee satisfaction Sales growth

16. 2. Qualitative factors: Many managers feel that qualitative organizational measurements are best arrived at simply be answering a series of important questions aimed at revealing important facets of organizational operations. Qualitative measures need to be used with care and caution because they involve significant amounts of human judgement. Conclusions based on such measures must be drawn carefully. Qualitative factors are values, beliefs, perception, attitude, behaviour, relationship, love and care, culture, simulation etc.

17. SYMPTOMS OF MALFUNCTIONING OF STRATEGY *Company is not performing well against its close rivals, similar company’s or industry as a whole *Corporate culture is not aligned with strategy *Implementation of strategy is slow *Organizational conflict and interdepartmental bickering are often symptoms of strategy malfunction *Managerial problems continue despite changes in personnel and if they tend to be issue based rather than people based, their strategy may be inconsistent

18. *If success for one organizational department means failure for another department then it is a symptom of strategy malfunction *If policy problems and issues continue to be brought to the top for resolution, then strategy may be malfunctioning *Overtaxing of available resources is a symptom of strategy malfunction *Degree of risk is high as compared to reward, strategy is in consistent with changing environment

19. *If strategy implementation does not give punctuality to time horizon, then it is symptom of strategy malfunction *Company is not performing in terms of stated objectives, return on investment(ROI), market share, profitability trends, EPS, etc….. *Decreasing share price *Key employees are deserting *Frequent CEO changes

20. *Continuous losses *Low market share *Lack of synergy in mergers and joint ventures *Faulty financial models *Increase in inventory *Lack of flexibility and stubbornly staying in course *Asset- liability mismatch and defaults in debt servicing

21. STRATEGIC CONTROL Strategic control is the process of judging whether the chosen strategy is progressing in the right direction and producing the desired results and taking corrective actions whenever necessary Strategic control is the process of tracking the strategy as it is being implemented, detecting any problem areas and making necessary adjustments There are four types of strategic control : 1.Premise control 2.Implementation control 3.Strategic surveillance 4.Strategic alert control

22. OPERATIONAL CONTROL Operational control is the process of evaluating the performance of strategic business units, divisions, etc.. And their contribution to the achievement of organizational objectives. The results of strategic actions are assessed under operational control. Evaluation techniques for operational control : *Value chain analysis *Quantitative performance measurements *Bench marking *Balanced score card *Key factor rating

23. OPERATIONAL CONTROL PROCESS 1.Setting performance standards 2.Measuring actual performance 3.Analysing variances 4.Taking corrective actions

24. CHARACTERISTICS OF AN EFFECTIVE CONTROL SYSTEM 1.Accurate 2.Timely 3.Objective and comprehensible 4.Focused on strategic control points 5.Economically realistic 6.Organizational realistic 7.Coordinated with the organization’s workflow 8.Flexible 9.Prescriptive and operational 10.Accepted by organization members

25. ORGANIZATIONAL ANARCHIES Organizational anarchy is a term used to describe organization’s that have a poor decision making environment Five signs of organizational anarchies : *Chain of command *Policy(rules) *Legislation *Control of the organization *Ambiguity

26. MEASUREMENT OF PERFORMANCE Once standards are determined, the next step is measuring performance. The actual performance must be compared to the standards. Strategic control standards are based on the practice of competitive benchmarking – the process of measuring a firm’s performance against that of the top performance in its industry.

27. ANAYZING THE VARIANCE Variance analysis , also described as analysis of variance or ANOVA, involves assessing the difference between two figures. It measures the differences between expected results and actual results of a production process or other business activity. Measuring and examining variances can help management contain and control costs and improve operational efficiency.

28. ROLE OF ORGANIZATIONAL SYSTEM IN STRATEGIC EVALUATION AND CONTROL 1.Planning system 2.Development system 3.Appraisal system 4.Reward system 5.Information system 6.Motivation system

29. FACTORS DETERMINING ORGANIZATION’S SUCCESS OR FAILURE 1.Internal consistency 2.Consistency with the environment 3.Appropriateness in the light of available resources 4.Acceptable degree of risk 5.Appropriate time-horizon 6.Workability

30. NEW BUSINESS MODELS A business model is a conceptual structure that supports the viability of a product or company and explains how the company operates, makes money, and how it intends to achieve its goals. According to Peter Drucker, “A business model is supposed to answer who your customer is, what value you can create or add for the customer and how you can do that at reasonable costs ”

31. EXAMPLES OF BUSINESS MODELS *Bricks-and-clicks *Nickel-and-dime *Freemium *Subscription *Aggregator *Online marketplace *Collective business models *Cutting out the middleman model *Direct sales model *Distribution business model

32. DIGITAL ECONOMY Digital economy refers to an economy that is based on digital computing technologies, although we increasingly perceive this as conducting business through markets based on the internet and the world wide web. The digital economy is also sometimes called the internet economy, new economy, or web economy.

33. INTERNET BUSINESS OR E-COMMERCE BUSINESS MODELS: 1.Business to business (B2B) 2.Business to consumer (B2C) 3.Consumer to consumer (C2C) 4.Consumer to business (C2B) 5.Business to government (B2G) 6.Government to business (G2B) 7.Government to citizen (G2C)

34. E- COMMERCE E- commerce , also known as electronic commerce or internet commerce, refers to the buying and selling of goods or services using the internet, and the transfer of money and data to execute the transactions. E- commerce is often used to refer to the sale of physical products online, but it can also describe any kind of commercial transaction that is facilitated through the internet.

35. USES OF E-COMMERCE OR APPLICATIONS *Online shopping *Electronic data interchange(EDI) *Electronic tickets *Group buying *Newsgroups *Online banking *Online office suite *Shopping cart software *Social networking *Teleconferencing *Enterprise content management(ECM) *Instant messaging(IM)

36. Some common applications related to electronic commerce are follows: Document automation in supply chain and logistics Domestic and international payment systems Enterprise content management Group buying Automated online assistants Instant messaging Newsgroups Online shopping and order tracking Online banking Online office suites Shopping cart software Teleconferencing Electronic tickets

37. KEY SUCCESS FACTORS IN E-COMMERCE *Providing value to customers *Providing service and performance *Providing attractive website *Providing incentive for customers to buy and to return *Providing personal attention *Multichannel marketing *Customer retention *Acquisition cost *Taking advantage of m- commerce

38. CONCLUSION The strategic implementation and evaluation are very essential to every organization’s. Strategic implementation is the process of putting all plans into actions to attain organizational organizational goals. Through this, a company will be able to move where it wants to be and what it wants to attain. This strategy is essential because it serves as guide for the company in order to achieve its goals. Strategy evaluation helps the company determine whether the plans are achieved or not. If not, the evaluation will help the company determine what went wrong and provide solution to what went wrong.