Sm Evaluation and Control

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@ www.iloveppt.org

STRATEGIC EVALAUTION &CONTROL


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It is the process of determiningthe effectiveness of a givenSTRATEGY in achieving the

organizational objectives andtaking corrective action whereverrequired.

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Strategic Control

Takes into account the changingassumptions that determine astrategy, continually evaluate thestrategy as it is being implementedand take necessary steps to adjustthe strategy to the newrequirements.

Includes environmental scanning.



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Types

Premise control Implementation control

Strategic surveillance Special alert control



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Operational ontrol

Aimed at allocation and use of organizationalresources through evaluation of organizational

units such as divisions, departments, SBUs etc.

Concerned with action or performance. Based on organizational appraisal rather than

environmental monitoring, as is the case with

strategic control.



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Process

Setting of Standards

Measurement of performance

Analysis of variance

Taking corrective measures



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Evaluation Techniques forStrategic Control

Strategic MomentumControl

Responsibility controlcenters

The underlyingsuccess factors

Generic Strategies

Strategic Leap control

Strategic issuemanagement

Strategic field analysis Systems modelling

Scenarios



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What is a responsibility center?

In simple words: an organizational unit for whicha manager is made responsible.

Examples: A specific store in a chain of grocerystores.

A work-station in a production line manufacturingautomobile batteries.

The payroll data processing center within a firm.


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Types of Responsibility Centers

Revenue Centers

Cost Centers or Expense Centers

Profit Centers and

Investment Centers


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Revenue Centers

Responsibility Centers whose members controlrevenues but,

Not the manufacturing or acquisition cost of theproducts or service they sell, or

The level of investment in the responsibilitycenter.

In other words, you cannot link the input to theoutput.

They are evaluated on the basis of actual sales ororders booked against budgets or quotas and

Example: a unit of a chain store in a mall.


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Expense/Cost Centers

Responsibility centers whose employees controlcosts, but

Do not control their revenues or investment level.

Examples: Production department in amanufacturing unit.


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Profit Centers

Managers of profit centers control both therevenues and costs of the product or service theydeliver.

It is like an independent business except it is partof a larger organization (e.g. departmental stores

of larger chains Wal Mart, restaurants,corporate hotels such as Hilton, Holiday Inn).

The store manager would have responsibility forpricing, product selection, and promotion.


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Evaluation Techniques forOperational Control

Consists ofInternal Analysis

Comparative AnalysisComprehensive Analysis



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Internal Analysis

VRIO frameworkValue chain analysis

Quantitative Analysis Qualitative Analysis



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VRIO ANALYSIS

Capabilities of the organization are evaluated onthe basis of VRIO framework

V- VALUABLE

R- RARE

I- INIMITABLE O- ORGANISED FOR USAGE



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Value chain analysis

Focus is on a set of inter related activities whichare performed in a sequence, right from theprocurement of raw materials to marketing of aproduct

These activities are segregated to identifiableactivities based on the relevance to strategy andthen evaluated.



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Quantitative Analysis

Financial Parameters- cost, sales, revenues,expenses, profits

Non Financial Parameters- physical units, timetaken, rate of absenteeism, market ranking etc.



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COMPARATIVE ANALYSIS

Historical Analysis

Industry Norms

Benchmarking



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Historical Analysis

Comparing performance of a firm over a givenperiod of time.

Helps in knowing to what extend and how theperformance has taken place and identify thetrend or pattern.



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Industry Norms

A comparative method where, firm organizationalperformance is evaluated in comparison to theperformance its rivals in the same industry.

Helps in bringing up the firms performance up tothe level of the other firms.



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Benchmarking

Firm finds the best practices in an area and thenattempts to bring its own performance in thatarea in line with the best practice.

Such best practices are called benchmarks andare set as standards by the firm to exerciseoperational control.



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COMPREHENSIVE ANALYSIS

Key factor rating

Business intelligence systems

The balance score card



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Key Factor

The combination of important facts thatis required in order to accomplish one or moredesirable business goals. For example, one of thekeysuccess factors in promoting animal food products might be to advertise them in a way

that appeals to those consumers who loveanimals.



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Examples of Key Factors

Number of new customers per year;

Number of lost customers per year OR the number of

customers retained

Hire and retain excellent employees (measured by employee

turn-over, job vacancies, customer satisfaction);

Successful new product introductions (measured by sales and

costs);

Good/healthy financial indicators: for example, working capital,

acceptable ratios (in particular debt to equity ratios), profit

margins, cash flow, receivables and more;



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Strong supplier network; Strong distribution network or channel;

Successful product positioning;

Low cost structure



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Balance Scorecard

The balanced scorecard is astrategic planningand management system that is usedextensively in business and industry,government, and nonprofit organizationsworldwide to align business activities to the vision

and strategy of the organization, improve internaland external communications, and monitororganization performance against strategic goals.



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Originated by Drs. Robert Kaplan (HarvardBusiness School) and David Norton as aperformance measurement framework that addedstrategic non-financial performance measures totraditional financial metrics to give managers and

executives a more 'balanced' view oforganizational performance.



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Balance Scorecard


P ti


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Perspectives

The Learning & Growth Perspective:

This perspective includes employee training andcorporate cultural attitudes related to bothindividual and corporate self-improvement.



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The Customer Perspective

Analyzing customer focus and customersatisfaction in any business.

These are leading indicators: if customers are notsatisfied, they will eventually find other suppliersthat will meet their needs.



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The Financial Perspective

Timely and accurate funding data will always be apriority.

includes additional financial-related data, such asrisk assessment and cost-benefit data, in thiscategory.

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Sm Evaluation and Control