QUESTION: DISCUSS THE IMPORTANCE OF EXTERNAL EVALUATION AND EXPLAIN THE IMPORTANT ELEMENTS IN THIS EVALUATION?

STRATEGY EVALUATIONStrategic evaluation is the assessment process that provides executives and managers performance information about programs, projects and activities designed to meet business goals and objectives.Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness of the comprehensive plans in achieving the desired results. Strategic Evaluation is the final phase of strategic management. Significance of strategy evaluationThe significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups, departments etc., through control of performance. Strategic Evaluation is significant because of various factors such as developing inputs for new strategic planning, the urge for feedback, appraisal and reward, development of the strategic management process, judging the validity of strategic choice etc.Types of strategy evaluationa) Internal evaluation: This is evaluation that is carried out by someone from the actual project team. Clearly, such an evaluator has the advantage of understanding fully the thinking behind the development, together with an appreciation of any problems that may have arisen, and should also command the trust and cooperation of the other members of the team. On the other hand, such an evaluator may find it difficult to make any criticisms of the work carried out, and, because of their close involvement with the project, may be unable to suggest any innovative solutions to such problems that are identified. Such an internal evaluator will know only too well how the members of the group have struggled to produce their course, curriculum or package, and may shrink from the thought of involving them in more work.

b) External evaluation: This is evaluation that is carried out by someone who is (or was) not directly involved in the development or operation of the system being evaluated, i.e., by someone from out with the project team. i. Advantages: Bringing objectivity, Lack of vested interest, and The ability to look at matters from a fresh perspective. ii. Disadvantages: Are related to relative value systems and to the lack of involvement the evaluator has had in project-related decisions. IMPORTANCE OF EXTERNAL EVALUATION

Prediction is very difficult, especially about the future. -- Neil BohrThe external factors include competitors, changes in demand, technology, economic changes, demographic shifts, and governmental actions. Increasing turbulence in markets and industries around the world means the external audit has become an explicit and vital part of the strategic management process.Most often the external evaluation is required for funding purposes or to answer questions about the program's long-term impact by looking at changes in demographic indicators such as graduation rate or poverty level. In addition, occasionally a manager may request an external evaluation to assess programmatic or operating problems that have been identified but that cannot be fully diagnosed or resolved through the findings of internal evaluation.

EXTERNAL AUDITExternal audit is the identification and evaluation of trends and events beyond control of single firm. The purpose of external audit is development of finite list of opportunities and avoiding the threats.

Why Does the External Environment Matters?Understanding the environment that surrounds an organization is important to the executives in charge of the organizations. There are several reasons for this. a) First, the environment provides resources that an organization needs in order to create goods and services. In the seventeenth century, British poet John Donne famously noted that no man is an island. Similarly, it is accurate to say that no organization is self-sufficient. As the human body must consume oxygen, food, and water, an organization needs to take in resources such as labor, money, and raw materials from outside its boundaries. Subway, for example, simply would cease to exist without the contributions of the franchisees that operate its stores, the suppliers that provide food and other necessary inputs, and the customers who provide Subway with money through purchasing its products. An organization cannot survive without the support of its environment.b) Second, the environment is a source of opportunities and threats for an organization. Opportunities are events and trends that create chances to improve an organizations performance level. Threats are events and trends that may undermine an organizations performance. Executives must also realize that virtually any environmental trend or event is likely to create opportunities for some organizations and threats for others.c) Third, the environment shapes the various strategic decisions that executives make as they attempt to lead their organizations to success. The environment often places important constraints on an organizations goals, for example. A firm that sets a goal of increasing annual sales by 50 percent might struggle to achieve this goal during an economic recession or if several new competitors enter its business. Environmental conditions also need to be taken into account when examining whether to start doing business in a new country, whether to acquire another company, and whether to launch an innovative product, to name just a few.

IMPORTANT ELEMENTS IN EXTERNAL EVALUATION

THE ELEMENTS OF THE GENERAL ENVIRONMENT: PESTEL ANALYSISAn organizations environment includes factors that it can readily affect as well as factors that largely lay beyond its influence. Because the general environment often has a substantial influence on an organizations level of success, executives must track trends and events as they evolve and try to anticipate the implications of these trends and events.PESTEL analysis is one important tool that executives can rely on to organizes factors within the general environment and to identify how these factors influence industries and the firms within them. PESTEL is an anagram, meaning it is a word that created by using parts of other words. In particular, PESTEL reflects the names of the six segments of the general environment: (1) political, (2) economic, (3) social, (4) technological, (5) environmental, and (6) legal.

1) P is for PoliticalThe political segment centers on the role of governments in shaping business. This segment includes elements such as tax policies, changes in trade restrictions and tariffs, and the stability of governments.

2) E is for EconomicThe economic segment centers on the economic conditions within which organizations operate. It includes elements such as interest rates, inflation rates, gross domestic product, unemployment rates, levels of disposable income, and the general growth or decline of the economy.

3) S is for SocialSocial factors include trends in demographics such as population size, age, and ethnic mix, as well as cultural trends such as attitudes toward obesity and consumer activism.

4) T is for TechnologicalThe technological segment centers on improvements in products and services that are provided by science. Relevant factors include, for example, changes in the rate of new product development, increases in automation, and advancements in service industry delivery. One key feature of the modern era is the ever-increasing pace of technological innovation.

5) E is for EnvironmentalThe environmental segment involves the physical conditions within which organizations operate. It includes factors such as natural disasters, pollution levels, and weather patterns.

6) L is for LegalThe legal segment centers on how the courts influence business activity. Examples of important legal factors include employment laws, health and safety regulations, discrimination laws, and antitrust laws.

EVALUATION TECHNIQUES

1) COMPETITIVE ANALYSIS: PORTERS FIVE FORCE MODELIt is a widely used approach for developing strategies in many industries. It is an important part of an external audit, identifying rival firms and determining their strengths, weaknesses, capabilities, opportunities, threats, objectives and opportunities. The five forces include:a) Rivalry among competitive firms: Is usually the most powerful of the five competitive firms. The strategies pursued by one firm can be successful only to the extent that they provide competitive advantage over the strategies pursued by rival firms.

b) Potential entry of new competitors: Whenever new firms can easily enter a particular industry, the intensity of competitiveness among firms increase.

c) Potential development of substitute products: In many industries, firms are in close competition with producers of substitute products in other industries.

d) Bargaining power of supplies: The bargaining power of suppliers affects the intensity of competition in an industry, especially when there is large number of suppliers.

e) Bargaining power of consumers: When customers are concentrated, large, or buy in volume, their bargaining power represents a major force affecting intensity of competition in an industry.

2) THE EXTERNAL FACTOR EVALUATION (EFE) MATRIXEFE matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological and competitive information. There are around 15-20 factors, rated form 1-4 (average is 2.5), 1 being the lowest and 4 being the highest. 3) COMPETITIVE PROFILE MATRIXIt identifies a firms major competitors and its particular strengths and weaknesses in relation to a sample firms strategic position. Critical success factors in a CPM include both external and internal issues. The ratings and total weighted scores are compared to a sample firm.

4) COMPETITIVE INTELLIGENCE PROGRAMSCompetitive intelligence, as formally defined by the society of Competitive Intelligence Professionals (SCIP), is a systematic and ethical process for gathering and analyzing information about the competitions activities and general business trends to further a businesss own goal. Firms need an effective competitive intelligence program. The three basic missions of a CI program are (1) to provide a general understanding of an industry and its competitors, (2) to identify areas in which competitors are vulnerable and to assess the impact strategic actions would have on competitors, and (3) to identify potential moves that a competitor might make that would endanger a firms position in the market.