SVIT, II SEMESTER MBA, CORPORATE STRATEGY, MODULE

– 6, STRATEGY EVALUATION

MODULE – 6

STRATEGY EVALUATION

6.1 THE PROCESS OF EVALUATING STRATEGIES

Evaluating strategies is a critical part of the strategic management process. It helps ensure that
the implemented strategy is effective and aligned with the organization’s goals. Evaluation
allows management to assess performance, identify problems, and take corrective action if
needed.

1. Setting Benchmarks to Measure Performance

 Define clear objectives: Use financial (e.g., ROI, profits) and non-financial indicators
(e.g., customer satisfaction, employee engagement).
 Set standards: Standards must be realistic, measurable, and time-bound.
 Examples:
o Target sales revenue
o Market share goal
o Customer complaint reduction

2. Measuring Actual Performance

 Collect data on actual results through reports, audits, feedback, etc.

 Compare outcomes against set benchmarks.
 Use tools like Balanced Scorecard, KPIs, or Dashboards for evaluation.

3. Analyzing Deviations

 Identify any significant deviations between planned and actual performance.

 Determine causes:
o External (economic downturn, competitor actions)
o Internal (inefficient operations, employee resistance)

4. Taking Corrective Action

 If deviations are negative and significant, implement changes such as:

o Reallocating resources
o Redesigning processes
o Changing leadership or team structures
o Revising the strategy itself (modification or full change)

5. Reviewing and Updating Strategy

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 Strategy evaluation is continuous, not a one-time event.

Dr. Anuja Manohar,
Associate Professor,
Department of Management Studies,
SVIT
 SVIT, II SEMESTER MBA, CORPORATE STRATEGY, MODULE
– 6, STRATEGY EVALUATION

 Regularly review:
o Strategic assumptions
o External environment (PESTEL, SWOT)
o Internal capabilities

Tools Used in Strategy Evaluation

 SWOT Analysis
 Gap Analysis
 Balanced Scorecard
 Benchmarking
 Financial ratio analysis
 Porter’s Five Forces (to reassess market position)

Importance of Strategy Evaluation

 Ensures strategic goals are being met

 Facilitates timely adjustments
 Enhances organizational learning
 Improves accountability and performance

6.2 STRATEGY EVALUATION FRAMEWORK

The Strategy Evaluation Framework provides a structured approach for assessing the
effectiveness of a strategy. It ensures that the organization is on track to achieve its objectives
and allows timely corrective actions.

1. Strategy Evaluation Criteria (Three Key Tests)

According to Richard Rumelt, strategy evaluation should answer the following questions:

a) Consistency

 Is the strategy free from internal conflicts?

 Example: Goals should not contradict resource constraints.

b) Consonance

 Is the strategy aligned with external environment trends?

 Ensures adaptability to market, technology, socio-political changes.

c) Feasibility
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 Can the strategy be executed with available resources (financial, human, time)?
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 Unrealistic strategies should be avoided.

Dr. Anuja Manohar,
Associate Professor,
Department of Management Studies,
SVIT
 SVIT, II SEMESTER MBA, CORPORATE STRATEGY, MODULE
– 6, STRATEGY EVALUATION

d) Advantage

 Does the strategy provide a competitive advantage?

 Focus on superior skills, resources, or market position.

2. Strategy Evaluation Process

a) Fixing Performance Standards

 Set clear, measurable objectives (e.g., ROI, growth rate).

b) Measuring Actual Performance

 Use financial reports, audits, surveys, KPIs.

c) Analyzing Variance

 Compare actual performance with standards.

 Identify the cause of deviations.

d) Taking Corrective Actions

 Adjust strategy, structure, or operations as needed.

3. Tools for Strategic Evaluation

 Balanced Scorecard (Financial + Non-financial)

 SWOT Analysis (Internal + External check)
 Benchmarking (Compare with industry standards)
 Gap Analysis (Actual vs. Desired performance)
 Financial Ratios (Profitability, Liquidity, etc.)

4. Strategic Control Types

 Premise Control: Monitor assumptions of the strategy.

 Implementation Control: Ensure plans are executed as designed.
 Strategic Surveillance: Broad monitoring of internal/external factors.
 Special Alert Control: Rapid response to sudden events (e.g., COVID-19).

Conclusion

A well-structured strategy evaluation framework ensures that an organization remains

competitive, adapts to changes, and achieves long-term goals. It also helps avoid strategic drift
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and encourages continuous improvement.

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Dr. Anuja Manohar,

Associate Professor,
Department of Management Studies,
SVIT
 SVIT, II SEMESTER MBA, CORPORATE STRATEGY, MODULE
– 6, STRATEGY EVALUATION

6.3 BALANCED SCORECARD

The Balanced Scorecard (BSC) is a strategic tool developed by Robert Kaplan and David
Norton, used to evaluate an organization’s performance beyond just financial measures by
balancing four key perspectives.

The Four Perspectives of BSC:

Perspective Key Question Example Indicators

How do we look to
1. Financial ROI, profit margin, revenue growth
shareholders?
Customer satisfaction, retention,
2. Customer How do customers see us?
market share
3. Internal Business Process efficiency, quality control,
What must we excel at?
Process innovation rate
4. Learning & Can we continue to improve and Employee training, knowledge
Growth create value? sharing, skill development

Purpose of Balanced Scorecard:

 Aligns business activities to vision and strategy

 Improves internal and external communication
 Monitors organizational performance against strategic goals
 Promotes long-term and short-term goal setting

Steps in Implementing BSC:

1. Define Vision and Strategy

2. Set Objectives for Each Perspective
3. Develop KPIs (Key Performance Indicators)
4. Set Targets and Initiatives
5. Monitor, Evaluate, and Take Corrective Action

Advantages of Balanced Scorecard:

 Provides a comprehensive view of organizational performance

 Encourages strategic alignment across departments
 Supports continuous improvement
 Links performance with strategy execution

Limitations:
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
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Can be complex to implement and maintain

Dr. Anuja Manohar,

Associate Professor,
Department of Management Studies,
SVIT
 SVIT, II SEMESTER MBA, CORPORATE STRATEGY, MODULE
– 6, STRATEGY EVALUATION

 May require cultural change and training

 If not regularly updated, it becomes ineffective

Example: A Company Using BSC

Perspective Objective KPI

Financial Increase profits Net profit margin
Customer Improve satisfaction Customer feedback score
Internal Process Reduce defects Defect rate per unit
Learning & Growth Upskill staff Training hours per employee

6.4 CHARACTERISTICS OF AN EFFECTIVE EVALUATION SYSTEM

An effective evaluation system ensures that the strategy is on track, goals are being met, and
corrective action is taken when necessary. It must be timely, accurate, and adaptable to
organizational needs.

The key characteristics include:

1. Timeliness: The system should provide feedback at the right time to enable prompt
corrective actions.
2. Accuracy: It must deliver reliable and precise information for sound decision-making.
3. Adaptability: The system should be flexible and responsive to the changing needs of
the organization.
4. Objectivity: Evaluation should be based on clear, unbiased, and measurable criteria.
5. Action-Orientation: The system should not only identify deviations but also guide
strategic adjustments.

Thus, a well-designed evaluation system helps organizations stay aligned with their strategic
goals and remain competitive

6.5 CONTINGENCY PLANNING

Contingency Planning is the process of developing alternative strategies or action plans to deal
with unexpected events or uncertainties that may affect the organization’s strategic objectives.

It is also known as “what-if” planning or plan B.

Objective:
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Dr. Anuja Manohar,

Associate Professor,
Department of Management Studies,
SVIT
 SVIT, II SEMESTER MBA, CORPORATE STRATEGY, MODULE
– 6, STRATEGY EVALUATION

To ensure that the organization is prepared to respond effectively to major risks, crises, or
failures in the original plan.

Key Elements of Contingency Planning:

1. Risk Identification
o Analyse internal and external environments.
o Identify potential threats (e.g., economic crisis, cyberattacks, natural disasters).
2. Impact Analysis
o Assess the potential impact of each risk on business operations.
o Prioritize based on severity and likelihood.
3. Development of Contingency Plans
o Prepare specific alternative plans for critical threats.
o Define roles, responsibilities, and resource needs.

4. Implementation Procedures
o Create step-by-step procedures to be followed when the contingency plan is
activated.
5. Training and Communication
o Employees should be trained on emergency responses.
o Clear communication protocols must be established.
6. Testing and Updating
o Conduct simulations or mock drills.
o Regularly review and revise the plan as the environment changes.

Importance of Contingency Planning:

 Reduces Uncertainty during unexpected situations

 Ensures Business Continuity in times of disruption
 Protects Resources, including people, data, and infrastructure
 Increases Stakeholder Confidence
 Improves Risk Management Capability

Examples:

 IT Company: Backup systems and disaster recovery plans

 Retail Chain: Alternative suppliers in case of supply chain disruptions
 Manufacturing Firm: Safety protocols in case of equipment failure

6.6 ROLE OF ORGANISATIONAL SYSTEMS IN EVALUATION

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Organizational systems refer to the structures, processes, and procedures within an organization
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that support planning, implementation, and evaluation of strategies.

Dr. Anuja Manohar,
Associate Professor,
Department of Management Studies,
SVIT
 SVIT, II SEMESTER MBA, CORPORATE STRATEGY, MODULE
– 6, STRATEGY EVALUATION

They play a critical role in evaluating strategies by collecting data, tracking progress,
identifying deviations, and enabling corrective action.

Key Roles of Organizational Systems in Evaluation:

1. Performance Monitoring and Control

 Systems help in collecting data related to performance indicators (KPIs).

 Enable comparison of actual performance with strategic goals.
 Use tools like dashboards, scorecards, and MIS (Management Information Systems).

2. Data Collection and Analysis

 HR systems, accounting systems, and CRM platforms provide real-time, accurate data.
 This data helps in evaluating financial, operational, customer, and employee-related
outcomes.

3. Facilitating Corrective Actions

 Organizational systems track deviations from expected results.

 They support quick decision-making by providing actionable insights.
 Example: ERP system detects production delay → triggers alternate supply plan

4. Communication and Feedback

 Systems create structured channels for reporting and feedback.

 Regular reporting helps in upward and downward flow of performance-related
information.

5. Integration across Departments

 Evaluation requires data and collaboration from multiple departments.

 Systems like ERP integrate departments (HR, Finance, Sales), making evaluation more
cohesive and efficient.

6. Standardization and Accountability

 Systems define roles, responsibilities, and standards, ensuring that everyone knows
what is expected.
 This promotes accountability and clarity in evaluation processes.

Conclusion:
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Dr. Anuja Manohar,

Associate Professor,
Department of Management Studies,
SVIT
 SVIT, II SEMESTER MBA, CORPORATE STRATEGY, MODULE
– 6, STRATEGY EVALUATION

Organizational systems form the backbone of effective strategy evaluation. They ensure
accuracy, integration, speed, and transparency, making strategic evaluation systematic and
action-oriented.

6.7 EMERGING TRENDS AND ISSUES IN STRATEGIC MANAGEMENT – ESG

INITIATIVES AND THE ROLE OF TECHNOLOGY

Strategic management is rapidly evolving due to global challenges, stakeholder expectations,

and technological advancements. Two of the most significant trends are:

1. ESG Initiatives (Environmental, Social & Governance)

What is ESG?

ESG refers to non-financial factors that impact long-term sustainability and are now central to
strategic decisions.

a) Environmental Responsibility

 Strategies now include reducing carbon footprints, promoting green energy, waste
reduction, and eco-friendly products.
 Examples:
o Use of renewable energy
o Sustainable sourcing
o Green buildings

b) Social Impact

 Companies are focusing on employee welfare, diversity & inclusion, community

development, and human rights.
 Stakeholder expectations are high for businesses to act ethically and socially
responsibly.

c) Governance Excellence

 Emphasis on transparency, ethical leadership, regulatory compliance, and fair practices.

 Strong governance builds stakeholder trust and reduces risk.

Strategic Implications of ESG

 Integration of ESG into mission, vision, and long-term goals.

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 ESG performance is now a key factor in attracting investors.

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 Firms are developing sustainability strategies and publishing ESG reports.

Dr. Anuja Manohar,
Associate Professor,
Department of Management Studies,
SVIT
 SVIT, II SEMESTER MBA, CORPORATE STRATEGY, MODULE
– 6, STRATEGY EVALUATION

2. Role of Technology in Strategic Management

Technology has become a core enabler and driver of competitive advantage in strategic
planning and execution.

a) Data-Driven Decision Making

 Use of Business Analytics, AI, and Big Data to improve forecasting, customer insights,
and risk analysis.
 Real-time dashboards and data visualization aid in better strategic control.

b) Digital Transformation

 Strategic shifts to digital platforms, cloud computing, and automation.

 Example: E-commerce models, virtual operations, online customer service.

c) AI and Machine Learning

 Enhancing strategic functions such as customer segmentation, process optimization,

and predictive maintenance.

d) Cyber security and Data Privacy

 With increased digital operations, protecting data has become a strategic priority.

e) Remote Work and Collaboration Tools

 Tech-driven models like hybrid workplaces, cloud tools (Zoom, Teams), and virtual
teams are influencing organizational design and strategies.

Emerging Strategic Issues

 Sustainability vs Profitability: Balancing ESG goals with financial performance.

 Rapid Tech Changes: Constant tech upgrades challenge long-term planning.
 Geopolitical and Economic Uncertainty: Requires agile and flexible strategies.
 Talent Management: Up skilling and managing tech-savvy, diverse teams.

Conclusion:

Strategic management today is not just about market competition but also about being
responsible, resilient, and technology-enabled. The integration of ESG values and emerging
technologies into strategy is no longer optional—it is a key determinant of future success and
sustainability.
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Dr. Anuja Manohar,

Associate Professor,
Department of Management Studies,
SVIT