Module 4: Strategic evaluation and control

Strategic evaluation and control is the last phase in the process of strategic management by
which the managers compare the results of the strategy with the level of achievement of the
objectives and corrective actions are taken for strategic effectiveness. It is a continuous process
though which an organization ensures whether it is achieving its objectives.

Strategy Evaluation
After a strategy is implemented, the next step is to evaluate the strategy.
Strategy evaluation means checking whether the strategy is working properly and helping the
organization achieve its goals.
In this stage, employees and managers:
 Review the performance of the strategy
 Compare actual results with planned goals
 Identify any problems or differences (deviations)
 Take corrective actions to improve performance
Strategy evaluation is a continuous process, which means it is done regularly, not just once.
Organizations use information systems and control systems to get quick feedback and monitor
progress. Both evaluation and control systems help the organization track whether the
strategic plan is moving in the right direction.

Characteristics / Requirements of an Effective Strategy Evaluation System

For a strategy evaluation system to be effective, it must have certain important characteristics.
These characteristics help organizations monitor performance and make better decisions.

1. Economical
The activities related to strategy evaluation should be cost-effective. The organization should
collect only the necessary information and avoid unnecessary expenses. The evaluation system
should use resources carefully and maintain a balance between cost and benefit.
Example: A company uses a simple monthly performance report instead of expensive daily
surveys to reduce evaluation costs.

2. Meaningful
Strategy evaluation activities should be directly related to the objectives of the organization.
The system should focus on information that helps measure whether organizational goals are
being achieved.
Example: If the goal of a company is to increase sales, the evaluation system should measure
sales growth rather than unrelated data like office decoration expenses.

3. Providing Useful Information

The information collected during evaluation must help managers make decisions and improve
performance. Information should be practical and relevant so that managers can take corrective
action when needed.
Example: A retail store receives data showing that customer complaints are increasing.
Management uses this information to improve customer service training.

4. Providing Timely Information

The evaluation system should provide information at the right time so that managers can
respond quickly. Delayed information may not be useful because the problem may have
already become serious.
Example: If a production machine breaks down, the maintenance report should be sent
immediately so repairs can start without delay.

5. Providing a True Picture of Events

The evaluation system should present accurate and honest information about the organization’s
performance. Managers need correct data to understand the real situation and make proper
decisions.
Example: If sales are decreasing, the report should clearly show the decline instead of hiding
the problem to make performance look better.

6. Directed Towards the Right Person

The evaluation information should be given to the person who has the authority to take action.
Sending information to the wrong person may delay decisions and reduce effectiveness.
Example: A financial report about budget shortage should be sent to the finance manager, not
to the marketing department.

7. Being Elaborate and Detailed

In large organizations, the evaluation system should provide detailed information to manage
different departments effectively. Detailed information helps in coordination and ensures that
all departments are working according to the plan.
Example: A multinational company prepares separate performance reports for sales,
production, and human resources to monitor each department properly.
Why Strategy Evaluation is Important
Strategy evaluation is an important part of the strategic management process. It means
checking whether the strategy of an organization is working properly or not. In today’s fast-
changing business environment, companies must regularly review their strategies to achieve
their goals. Strategy evaluation helps organizations improve performance and make better
decisions in the future.
The importance of strategy evaluation can be understood through the following points:
1. Verifying Underlying Assumptions
When a company makes a strategy, it is based on certain assumptions about customers, market
demand, competition, and technology. Strategy evaluation checks whether these assumptions
are still correct.
Example:
During the COVID-19 period, many restaurants assumed customers would visit physically.
Later, they realized that customers preferred online food delivery. Companies like Zomato
and Swiggy changed their strategies to focus more on delivery services.
So, strategy evaluation helps organizations update their plans when conditions change.

2. Corrective Action
Strategy evaluation helps identify the difference between expected performance and actual
performance. If results are not satisfactory, management can take corrective action to improve
performance.
Example:
If a retail company plans to increase sales by 20% but achieves only 10%, management may:
 Reduce prices
 Increase advertising
 Improve customer service
For example, Reliance Retail may change promotional offers or store layout if sales targets
are not achieved.

3. Monitoring Implementation
A good strategy is useful only when it is properly implemented. Strategy evaluation helps
managers check whether employees are following the plan correctly.
Example:
If a bank introduces a new digital banking service, management must monitor whether
employees are promoting the service to customers. Banks like State Bank of India regularly
review branch performance to ensure their strategies are implemented properly.
4. Feedback Mechanism
Strategy evaluation provides feedback to management about what is working well and what
needs improvement. This feedback helps organizations make better decisions in the future.
Example:
An e-commerce company collects customer feedback about delivery time and product quality.
Companies like Flipkart use customer reviews to improve their services and update their
strategies.

5. Accountability and Improvement

Strategy evaluation makes employees more responsible for their work. When performance is
measured regularly, employees try to perform better. It also helps management identify areas
where improvement is needed.
Example:
In a sales company, employees may receive incentives or bonuses based on their performance.
For example, sales staff in HDFC Bank may get rewards for achieving sales targets. This
motivates employees and improves overall performance.

Conclusion
Strategy evaluation is important because it helps organizations check their performance,
correct mistakes, monitor implementation, learn from feedback, and improve accountability.
Regular strategy evaluation helps companies adapt to changes and achieve long-term success.

Criteria for Strategy Evaluation

According to Richard Rumelt, there are four important criteria that help managers evaluate
whether a strategy is good or not. These criteria are used to check if the strategy is suitable,
practical, and beneficial for the organization. The four criteria are:

1. Consistency
Consistency means the strategy should not have conflicting goals or policies. All departments
and activities in the organization should work toward the same objectives. If different
departments follow different directions, confusion and poor performance may occur.
In simple words, the strategy should be clear, stable, and well-coordinated.
Example:
If Tata Motors promotes safety and reliability but compromises on quality to reduce costs,
customers may lose trust. Therefore, the company must maintain consistency between its goals
and actions.
2. Consonance
Consonance means the strategy should match the external environment and respond to
changes in the market, technology, competition, and customer needs. Organizations must
adjust their strategies according to new trends and conditions.
In simple words, the strategy should be flexible and adaptable to changes.
Example:
Paytm adapted quickly to the increasing demand for digital transactions and mobile wallets.
This shows consonance with market trends.

3. Feasibility
Feasibility means the strategy should be practical and possible to implement with the available
resources such as money, manpower, technology, and time. The organization should not take
more work than it can handle. In simple words, the strategy should be realistic and
achievable.
Example:
For instance, a small retailer cannot expand like Reliance Retail unless it has sufficient
financial and human resources.

4. Advantage
Advantage means the strategy should help the organization gain or maintain a competitive
advantage over competitors. It should make the company stronger in the market by offering
better quality, lower cost, better service, or innovation.
In simple words, the strategy should help the company perform better than competitors.
Example:
Amazon provides quick delivery and a wide range of products, which gives it a competitive
advantage over many competitors.

Conclusion
The four criteria suggested by Richard Rumelt—Consistency, Consonance, Feasibility, and
Advantage—are essential for evaluating the effectiveness of a strategy. By using these criteria,
organizations can improve decision-making and achieve long-term success.

The Evaluation Process

The evaluation process is a step-by-step method used by organizations to check whether their
strategy is working properly. It helps managers compare planned results with actual
performance and take action if needed.
This process ensures that the organization stays on the right path to achieve its goals. The
evaluation process generally includes four main steps:

1. Setting Performance Standards

Setting performance standards means defining clear targets or benchmarks that the
organization wants to achieve. These standards can be measured using numbers (quantitative)
or quality indicators (qualitative).
Common performance standards include:
 Sales growth
 Market share
 Profit level
 Customer satisfaction
 Return on Equity (ROE)
In simple words, performance standards are the expected results of the organization.
Example:
Maruti Suzuki may set a performance standard to sell a certain number of cars each quarter.
These targets help management measure success.

2. Measuring Performance
Measuring performance means collecting data about actual results achieved by the
organization. This information is usually gathered through accounting systems, sales reports,
production records, and customer feedback.
In simple words, this step answers the question:
“What results did we actually achieve?”
Example: For instance, State Bank of India measures performance by tracking the number
of new accounts opened, loan approvals, and customer transactions.

3. Analyzing Variance
Analyzing variance means comparing actual performance with the planned standards to
identify differences. The difference between expected results and actual results is called
variance.
Variance can be:
 Positive variance: Performance is better than expected
 Negative variance: Performance is worse than expected
In simple words, this step checks:
“Is our performance meeting the target or not?”
Example:
If a company planned sales of 10,000 units but sold only 8,000 units, there is a negative
variance of 2,000 units.
For example, Reliance Retail may compare monthly sales with targets to identify whether
performance is above or below expectations.

4. Taking Corrective Action

Taking corrective action means making changes when performance does not meet the
standards. Management may modify the strategy, improve processes, provide training, or
reallocate resources to improve performance.
In simple words, this step answers the question:
“What should we do to fix the problem?”
Corrective actions may include:
 Changing the strategy
 Increasing marketing efforts
 Reducing costs
 Hiring more employees
 Improving product quality
Example:
If sales are low, a company may offer discounts or increase advertising.
For instance, Flipkart may launch special sales events or promotional offers when sales targets
are not achieved.

Conclusion
In conclusion, the evaluation process is an important part of strategic management. It helps
organizations set clear goals, measure actual performance, identify differences, and take
corrective actions. By following these steps, organizations can improve efficiency, achieve
targets, and ensure long-term success.

Strategic Control
When a strategy is made, it is not possible to predict all future problems during its
implementation. Therefore, managers need to regularly check the progress of the strategy and
make changes if required. Strategic control helps managers monitor and evaluate plans,
policies, and strategies to ensure that organizational goals are achieved.
Strategic Control Process
The strategic control process is a system used by organizations to monitor their strategy while
it is being implemented. It ensures that the strategy remains effective and suitable even when
business conditions change.
In today’s fast-changing environment, companies must continuously check whether their plans
are still relevant. Strategic control helps management detect problems early and take timely
action to avoid losses.
The strategic control process generally includes the following four types of controls:

1. Premise Control
Premise control means checking whether the basic assumptions on which the strategy was
built are still correct. These assumptions may relate to economic conditions, market demand,
competition, government policies, or technology.
In simple words, premise control answers the question:
“Are our original assumptions still valid?”
If assumptions change, the strategy may also need to be revised.
Example:
IndiGo closely monitors fuel prices and economic conditions because changes in these factors
directly affect its operations.

2. Implementation Control
Implementation control means checking whether the strategy is being implemented properly
and whether the results of small actions support the overall strategy. It helps management
decide whether to continue, modify, or stop the strategy.
In simple words, this step answers the question:
“Is the strategy working as planned during implementation?”
Implementation control focuses on:
 Monitoring progress
 Evaluating results
 Making adjustments if needed

Example:
For instance, Hindustan Unilever may track the sales of a new product and decide whether
to expand production or change marketing strategies.
3. Strategic Surveillance
Strategic surveillance means continuously observing a wide range of events inside and
outside the organization that may affect the strategy. It is a broad and general monitoring
system.
In simple words, this step answers the question:
“Are there any new events that could affect our strategy?”
Strategic surveillance helps organizations stay alert to:
 Changes in technology
 Competitor actions
 Customer preferences
 Government regulations
 Economic conditions
Example:
Infosys keeps track of global technology trends and customer demands to remain competitive
in the IT industry.

4. Special Alert Control

Special alert control is used when sudden and unexpected events occur that can seriously
affect the organization. In such situations, management must quickly review and revise the
strategy.
In simple words, this step answers the question:
“Do we need to change our strategy immediately due to an emergency?”
Examples of sudden events include:
 Natural disasters
 Economic crises
 Pandemic outbreaks
 Major accidents
 Hostile takeover attempts
Indian Example:
Reliance Industries rapidly expanded its digital and online services to adapt to changing
customer needs during the crisis.
Conclusion
The strategic control process is essential for ensuring that organizational strategies remain
effective and relevant. The four types of strategic control help organizations monitor
assumptions, track progress, observe environmental changes, and respond quickly to
emergencies.

Types of External Controls

External controls are rules, pressures, and regulations that come from outside the organization
and influence its strategies and decisions. These controls are not created by the company itself
but are imposed by government bodies, courts, investors, customers, and environmental
agencies.
External controls ensure that organizations operate legally, responsibly, and ethically. They
also protect society, the environment, and stakeholders from harmful business practices.
The major types of external controls are:
1. Government / Regulatory Control
2. Environmental / Ecological Regulations
3. Market / Investor Pressure
4. Legal / Judicial Decisions

1. Government / Regulatory Control

Government or regulatory control refers to rules and regulations set by the government that
organizations must follow. These laws ensure fair competition, consumer protection, employee
safety, and financial transparency.
Companies must follow government laws and industry standards while making strategies.
Examples of government regulations include:
 Tax laws
 Labor laws
 Safety standards
 Licensing requirements
 Industry regulations
Example:
Telecommunication companies must follow rules set by the Telecom Regulatory Authority
of India. These rules control pricing, service quality, and customer protection. Companies like
Bharti Airtel must comply with these regulations while planning their strategies.
2. Environmental / Ecological Regulations
Environmental or ecological regulations are rules designed to protect the environment from
pollution and harmful activities. These regulations require companies to control waste, reduce
pollution, and use natural resources responsibly.
Companies must operate in an environmentally friendly and sustainable manner.
Examples include:
 Pollution control laws
 Waste management rules
 Water and air quality standards
 Environmental impact assessments
Example:
Manufacturing companies must follow environmental standards set by the Central Pollution
Control Board. If a factory releases harmful chemicals into rivers or air, it may face penalties
or closure.

3. Market / Investor Pressure

Market or investor pressure refers to the influence of shareholders, customers, financial
analysts, and competitors on the organization’s strategy. These stakeholders expect good
financial performance, quality products, and customer satisfaction.
In simple words, companies must meet market expectations to survive and grow.
Market pressure may include:
 Demand for higher profits
 Customer expectations for quality
 Competition from other companies
 Investor demand for better returns
Example:
Amazon and Flipkart continuously improve delivery speed and service quality due to
customer and investor expectations.

4. Legal / Judicial Decisions

Legal or judicial decisions refer to court rulings that require organizations to change their
operations or strategies. Courts ensure that companies follow laws and protect the rights of
customers, employees, and society.
In simple words, companies must obey court decisions and adjust their strategies accordingly.
Examples include:
 Court orders to stop harmful activities
 Compensation to customers or employees
 Changes in business operations
 Product bans or recalls
Example:
The Supreme Court of India has issued rulings on pollution control and business operations
that forced industries to adopt safer and cleaner practices.

Conclusion
In conclusion, external controls play an important role in guiding organizational strategies.
Government regulations, environmental laws, market pressure, and legal decisions ensure that
companies operate responsibly, protect the environment, satisfy stakeholders, and follow the
law.
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