UNIT-5 Strategy Evaluation and Control

UNIT-5
STRATEGY EVALUATION AND CONTROL

Strategic evaluation and control is the process of determining the effectiveness of a given strategy in achieving the
organizational objectives and taking corrective actions whenever required.
Strategic control is concerned with tracking a Strategy as it is being implemented, detecting problems or
changes in its underlying premises, and making necessary adjustments. • Strategic control is concerned with
guiding action on behalf of the strategy as that action is taking place and when the end result is still several years
off.
• The sooner an invalid premise can be recognized and rejected, the better are the chances that an
acceptable shift in the strategy can be devised.
• Planning premises are primarily concerned with environmental and industry factors
Establishing Strategic Controls
• The control of strategy can be characterized as a form of "steering control".
• As time lapses between the initial implementation of a strategy and achievement of its intended result,
investments are made and numerous projects and actions are undertaken to implement the strategy.
Environmental situation (e.g. competitors launching new products or change in government regulations)
and the firm's internal situation (core competencies being achieved, learning curve effect).
• Strategic controls are necessary to steer the firm through these events.
• Strategic controls must provide the basis for adopting the Firm's strategic actions and directions in response to
these developments and changes The four basic types of strategic control are:
1. Premise control
2. Strategic surveillance
3. Special alert control
4. Implementation control
1. Premise control
• Premises are assumptions or predictions.
• Premise control is designed to check systematically and continuously whether the premises on which the strategy
is based are still valid.
• If a vital premise is no longer valid, the strategy may have to be changed. E.g. many software companies
postponing the joining dates of new recruits during slowdowns
• The sooner an invalid premise can be recognized and rejected, the better are the chances that an acceptable shift
in the strategy can be devised.
• Planning premises are primarily concerned with environmental and industry factors
Environmental factors
• Some of the factors are inflation, technology, interest rates, regulation, etc.
• Environmental factors exercise considerable influence over the success of a firm's strategy as strategies usually
are based on key premises about them. –e.g. All the polluting industries in the vicinity of Taj Mahal at Agra were
asked to use cleaner fuel like natural gas. Some of the more polluting industries like tannery were asked to shift
their base
Industry factors
• The performance of the firms in a given industry is affected by industry factors. • Competitors, suppliers, product
substitutes, and barriers to entry are a few of the industry factors about which strategic assumptions are made
2. Strategic Surveillance
Premise controls are focused controls; strategic surveillance is unfocused. Strategic surveillance is designed to
monitor a broad range of events inside and outside the firm that are likely to affect the course of its strategy.
• The basic idea behind strategic surveillance is that important yet unanticipated information may be uncovered by
a general monitoring of multiple information sources.
• Strategic surveillance must be kept as unfocused as possible.
Strategic surveillance provides an ongoing broad-based vigilance in all daily operations that may uncover
information relevant to the firm‘s strategy. • –e.g. Citicorp benefited significantly from a Brazilian manager's
strategic surveillance of political speeches Da Silva, Brazil's new president, who said Brazil would not pay interest
on its debt as scheduled. Citicorp raised its annual default charges to 20 percent of its$2.5 billion Brazilian
exposure Xerox could know from its surveillance that the photocopying market was shifting from black and white
to color prints. This helped them to focus on earning higher revenues by selling color photocopying machines
3. Special Alert Control

• A special alert control is the thorough, and often rapid, reconsiderations of the firm's strategy because of a
sudden, unexpected event. • –e.g. change in the firm's strategy in events like SARS, bombing of twin towers, etc
Such events should trigger an immediate and intense reassessment of the firm’s strategy and its current strategic
situation. • Crisis teams and contingency plans can handle the firm’s initial response to unforeseen events that may
have an immediate effect on its strategy
Implementation control
• Strategy implementation takes place as a series of steps, programs, and moves that occur over an extended time.
• Managers implement strategy by converting broad plans into concrete incremental actions and results of specific
units and individuals.
• Implementation control is the type of strategic control that must be exercised as those events unfold
Implementation control is designed to assess whether the overall strategy should be changed in light of the results
associated with the incremental actions that implement the overall strategy.
There are two basic types of implementation control:

1. Monitoring strategic thrusts
2. Milestone reviews
Monitoring strategic thrusts or projects
• As a means of implementing broad strategies, many small projects are undertaken which represent what needs to
be done if the overall strategy is to be accomplished.
• These strategic thrusts provide managers with information that helps them determine whether the overall strategy
is progressing as planned or needs to be adjusted.
One of the approaches to monitor strategic thrusts is to agree early in the planning process which thrusts or which
phases of thrusts are critical factors in the success of the strategy.
• Managers responsible for these implementation controls will single them out from other activities and observe
them frequently
Milestone reviews
• Milestones like critical events, allocation of a major resource or passage of a certain time can be used to monitor
progress.
• The milestone reviews usually involves a full scale assessment of the strategy and of the advisability of
continuing or refocusing the firm's direction.
• –e.g. Boeing had plans to develop supersonic transport airplanes. Initial investment was made considering the
potential and because another competitor, Concorde, was doing it. But when another invest was to be made Boeing
did a thorough analysis and found that the project would be very costly to develop, there would not be much
demand to this service considering the cost and the reason why Concorde would be able to do would be because of
the huge government subsidies. These factors led Boeing to abort this project even though millions of dollars were
already invested.
Implementation control is also enabled through
• Operational control system like budgets, • schedules and key success factors. • They provide post-action
evaluation and control over short periods. • To be effective, operational control systems must take four steps
common to all postaction controls:
1. Set standards of performance
2. Measure actual performance
3. Identify deviations from standards
4. Initiate corrective action
There are various kinds of strategists like managers, board of directors, chief executive officers, entrepreneurs,
senior management, SBU-level executives, corporate planning staff, consultants, middle level managers, executive
assistants.

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UNIT-5

STRATEGY EVALUATION AND CONTROL

3. Special Alert Control

There are two basic types of implementation control:

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