Strategy evaluation

An insight into how the efficiency of an organizaional strategy can be measured.

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            Measuring the efficiency of the organizational strategy is extremely important to conduct a SWOT analysis to figure out the points of strength, weakness, opportunities and both internal and external threats of the entity in question. This requires taking certain precautions or even to replace the entire strategy.

In corporate strategy, Johnson and Scholes present a model where strategic options are evaluated according to three key success criteria:

•           Suitability (would it work?)

•           Feasibility (can it be made to work?)

•           Acceptability (will they work it?)

Suitability

Suitability deals with the overall logic of the strategy. The key question to consider is “does the strategy address the key strategic issues underlined by the organization’s strategic position?”

•           Is it economically rational?

•           Would the organization get economies of scale, economies of scope or experience economy?

•           Would it be suitable for environment and available capabilities?

Tools of evaluating suitability include:

•           Ranking strategic options.

•           Decision trees.

•           What-if analysis.

Feasibility

Feasibility asks questions regarding the resources required to implement the strategy are they available? Can they be developed or obtained? Resources include funding, people, time and information.

Tools of evaluating feasibility include:

•           Cash flow analysis and forecasting

•           Break-even analysis

•           Resource deployment analysis

Acceptability

Acceptability is concerned with the estimation of the identified stakeholders (mainly shareholders, employees and customers) with the estimated performance outcomes, which can be return, risk and stakeholder reactions.

•           Return deals with the profits expected by the stakeholders (financial and non-financial). For example, shareholders would expect wealth Flourishing, employees would expect career development and customers would expect better value for money.

•           Risk deals with the probability and consequences of failure of a strategy (financial and non-financial).

•           Stakeholder reactions deals with anticipating the expected reaction of stakeholders. Shareholders could oppose the issuing of new shares, employees and unions could oppose outsourcing for fear of losing their jobs, customers could have worries about a merger with regards to quality and support.

Tools that can be used to evaluate acceptability include:

•           what-if analysis

•           stakeholder mapping

General approaches

In general terms, there are two main approaches, which are opposite but complementary in some ways, to strategic management:

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