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Hawassa University
Faculty of Business and Economics
Department of Business Management
Lecture note for the course Business Policy and Strategy (Mgmt 492)
Strategy evaluation can be a complex and sensitive undertaking. Too much emphasis
on evaluating strategies may become expensive and counterproductive. No one likes
to be evaluated too closely! The more managers attempt to evaluate the behavior of
others, the less control they have. Yet too little or no evaluation can create even worse
problems. Strategy evaluation is essential to ensure that stated objectives are being
achieved.
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Strategy evaluation is becoming increasingly difficult with the passage of time, for
many reasons. Domestic and world economies were more stable in years past,
product life cycles were longer, product development cycles were longer,
technological advancement was slower, change occurred less frequently, there were
fewer competitors, foreign companies were weak, and there were more regulated
industries. Other reasons why strategy evaluation is more difficult today include the
following trends:
1) A dramatic increase in the environment’s complexity
2) The increasing difficulty of predicting the future with accuracy
3) The increasing number of variables
4) The rapid rate of obsolescence of even the best plans
5) The increase in the number of both domestic and world events affecting
organizations
6) The decreasing time span for which planning can be done with any degree of
certainty
When empowered employees are held accountable for and pressured to achieve
specific goals and are given wide latitude in their actions to achieve them, there can
be dysfunctional behavior.
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corrective actions are needed in an organization! Centuries ago, a writer (perhaps
Solomon) made the following observations about change:
There is a time for everything,
A time to be born and a time to die,
A time to plant and a time to uproot,
A time to kill and a time to heal,
A time to tear down and a time to build,
A time to weep and a time to laugh,
A time to mourn and a time to dance,
A time to scatter stones and a time to gather them,
A time to embrace and a time to refrain,
A time to search and a time to give up,
A time to keep and a time to throw away,
A time to tear and a time to mend,
A time to be silent and a time to speak,
A time to love and a time to hate,
A time for war and a time for peace.
Managers and employees of the firm should be continually aware of progress being
made toward achieving the firm’s objectives. As critical success factors change,
organizational members should be involved in determining appropriate corrective
actions, if assumptions and expectations deviate significantly from forecasts, then the
firm should renew strategy-formulation activities, perhaps sooner than planned. In
strategy evaluation, like strategy formulation and strategy implementation, people
make the difference. Through involvement in the process of evaluating strategies,
managers and employees become committed to keeping the firm moving steadily
toward achieving objectives.
Notice that corrective actions are almost always needed except when
1. external and internal factors have not significantly changed and
2. the firm is progressing satisfactorily toward achieving stated objectives
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Numerous external and internal factors can prohibit firms from achieving long- term
and annual objectives. Externally, actions by competitors, changes in demand,
changes in technology, economic changes, demographic shifts, and governmental
actions may prohibit objectives from being accomplished. Internally, ineffective
strategies may have been chosen or implementation activities may have been poor.
Objectives may have been too optimistic. Thus, failure to achieve objectives may not
be the result of unsatisfactory work by managers and employees. All organizational
members need to know this to encourage their support for strategy-evaluation
activities. Organizations desperately need to know as soon as possible when their
strategies are not effective: Sometimes managers and employees on the front lines
discover this well before strategists.
External opportunities and threats and internal strengths and weaknesses that
represent the bases of current strategies should continually be monitored for change.
It is not really a question of whether these factors will change, but rather when they
will change and in what ways. Some key questions to address in evaluating strategies
are given here.
1. Are our internal strengths still strengths?
Hawassa University, Faculty of Business & Economics, Department of B. Management Course Title: Business Policy & Strategy (Mgmt 492)
Course Instructor: Suleyman K.
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2. Have we added other internal strengths? If so, what are they?
3. Are our internal weaknesses still weaknesses?
4. Do we now have other internal weaknesses? If so, what are they?
5. Are our external opportunities still opportunities?
6. Are there now other external opportunities? If so, what are they?
7. Are our external threats still threats?
8. Are there now other external threats? If so, what are they?
9. Are we vulnerable to a hostile takeover?
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Some key financial ratios that are particularly useful as criteria for strategy evaluation
are as follows:
1. Return on investment (ROl)
2. Return on equity (ROE)
3. Profit margin
4. Market share
5. Debt to equity ratio
6. Earnings per share
7. Sales growth
8. Asset growth
But there are some potential problems associated with using quantitative criteria
for evaluating strategies. First, most quantitative criteria are geared to annual
objectives rather than long-term objectives. Also, different accounting methods can
provide different results on many quantitative criteria. Third, intuitive judgments are
almost always involved in deriving quantitative criteria. For these and other
reasons, qualitative criteria are also important in evaluating strategies. Human
factors such as high absenteeism and turnover rates, poor production quality and
quantity rates, or low employee satisfaction can be underlying causes of declining
performance. Marketing, finance/accounting, R&D, or management information
systems factors can also cause financial problems. Scholars on Strategic
Management identified six qualitative questions that are useful in evaluating
strategies:
1. Is the strategy internally consistent?
2. Is the strategy consistent with the environment?
3. Is the strategy appropriate in view of available resources?
4. Does the strategy involve an acceptable degree of risk?
5. Does the strategy have an appropriate time framework?
Hawassa University, Faculty of Business & Economics, Department of B. Management Course Title: Business Policy & Strategy (Mgmt 492)
Course Instructor: Suleyman K.
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6. Is the strategy workable?
Some additional key questions that reveal the need for qualitative or intuitive
judgments in strategy evaluation are as follows:
1. How good is the firm’s balance of investments between high-risk and low-
risk projects?
2. How good is the firm’s balance of investments between long-term and short-
term projects?
3. How good is the firm’s balance of investments between slow-growing
markets and fast-growing markets?
4. How good is the firm’s balance of investments among different divisions?
5. To what extent are the firm’s alternative strategies socially responsible?
6. What are the relationships among the firm’s key internal and external
strategic factors?
7. How are major competitors likely to respond to particular strategies?
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Strategy evaluation can lead to strategy-formulation changes, strategy-
implementation changes, both formulation and implementation changes, or no
changes at all. Strategists cannot escape having to revise strategies and
implementation approaches sooner or later. Scholars on Strategic management
offered the following insight on taking corrective actions:
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specifically relate to a firm’s objectives. They should provide managers with useful
information about tasks over which they have control and influence. Strategy-
evaluation activities should provide timely information; on occasion and in some
areas, managers may need information daily. For example, when a firm has
diversified by acquiring another firm, evaluative information may be needed
frequently. However, in an R&D department, daily or even weekly evaluative
information could be dysfunctional. Approximate information that is timely is
generally more desirable as a basis for strategy evaluation than accurate
information that does not depict the present. Frequent measurement and rapid
reporting may frustrate control rather than give better control. The time dimension
of control must coincide with the time span of the event being measured.
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see only data. They love comparisons, rankings, anything that removes decision
making from the realm of mere opinion. Successful companies maintain tight,
accurate financial controls. Their people don’t regard controls as an imposition of
autocracy but as the benign checks and balances that allow them to be creative
and free.
5.5 Contingency Planning
A basic premise of good strategic management is that firms plan ways to deal with
unfavorable and favorable events before they occur. Too many organizations
prepare contingency plans just for unfavorable events; this is a mistake, because
both minimizing threats and capitalizing on opportunities can improve a firm’s
competitive position.
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In some cases, external or internal conditions present unexpected opportunities.
When such opportunities occur, contingency plans could allow an organization to
capitalize on them quickly.
5.6 Auditing
A frequently used tool in strategy evaluation is the audit. Auditing is defined by the
American Accounting Association (AAA) as “a systematic process of objectively
obtaining and evaluating evidence regarding assertions about economic
actions and events to ascertain the degree of correspondence between
these assertions and established criteria, and communicating the results to
interested users.”
Two government agencies - the General Accounting Office (GAO) and the Internal
Revenue Service (IRS) - employ government auditors responsible for making sure
that organizations comply with federal laws, statutes, and policies. GAO and IRS
auditors can audit any public or private organization. The third group of auditors
consists of employees within an organization who are responsible for safeguarding
Hawassa University, Faculty of Business & Economics, Department of B. Management Course Title: Business Policy & Strategy (Mgmt 492)
Course Instructor: Suleyman K.
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company assets, for assessing the efficiency of company operations, and for
ensuring that generally accepted business procedures are practiced.
Even so, businessmen typically spend their time (as we all do) with prodigality that
would shame even the laziest individual. Few businessmen use time effectively and
no one ever reaches perfection. Businessmen can always make better use of their
time, and the more they strive to do so the more it will enrich their venture as swell as
their personal lives.
Generally, the typical individual can be three to four times more productive without
increasing the number of working hours. This reflects the basic principle that it is
more important to do the right things than to do things right. This principle
implies the key to effective time management - prioritizing the items that should be
accomplished in any given day.
Time is a natural recourse, which is limited in extent and freely given to all equally.
Time is the most abundant and least wisely utilized resource in our community.
Hawassa University, Faculty of Business & Economics, Department of B. Management Course Title: Business Policy & Strategy (Mgmt 492)
Course Instructor: Suleyman K.
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Effective personal time management increases the productivity of a person. Poor time
management causes complications to both your business and social life.
Time is a limited resource. It is those little things left undone that would make you
angry if you know that your hours are limited. Have you ever seen your most important
tasks being put off until later, later and later, while you are being busy with many not
so important activities? Do you hope that you may have more time and better mood in
the figure to start the task and do it properly? Does an approaching deadline mean a
crisis for you, like an examination day approaching while you didn’t study well and
worries panicking you of falling on the course as the days pass by?
If you answer these questions in the positive, then you have a serious problem in
managing your time; and particularly, you have the problem of procrastination.
Procrastination is putting off the things that you should be doing now to a later time.
This is common problem for many of us. The typical sources of procrastination and
laziness include lack of clear personal life goals, waiting for the right mood, waiting for
the right time, underestimating the difficulty of tasks and unclear standards for the
outcomes of tasks which we are expected to perform. Another major culprit behind
procrastination is the feeling you may have that the tasks are imposed on you from
outside, assuming that the task is not necessarily of direct relation to your goal, if you
have one.
We need to understand the value of every minute, hour, day, week, month and year in
order to break habits of poor personal time management. To realize the value of one
month, ask a mother who gave birth to a premature baby; to realize the value of one
week, ask the editor of a weekly newspaper, to realize the value of one hour, ask the
lovers who are waiting to meet, to realize the value of one minute, ask the person who
missed the train. To realize the value of one second, ask the person who just avoided
an accident. Once you have known how much a given time means to your personal
development, it is worth mentioning some of the measures you are supposed to take
to improve usage of personal time. These measures include learning to say ‘no’,
learning to prioritize and combining several activities at the same time.
For example, an acquaintance of you with a friend would like you to see a movie with
him/her tonight; but tonight you were going to study. You really are not interested. You
want to say no, but you hate turning your new friend down. Politely saying no should
become part of your habit. Saying no frees up time for the things that are most
important.
The other major action to improve your time management is prioritizing your
activities. You can arrange your tasks in to top priority, medium priority and low
priority tasks. Again, if you do not clearly know their order of priority, that by itself is
one symptom for poor time management. Another suggestion to better manage your
personal time is undertaking several tasks simultaneously. This can include tasks
such as reading while traveling, making a mental list of activities while showering and
so on.
Managing time means investing time (the resource) to get what you decide you want
out of life, including what you want out of the venture created. This definition assumes
that the businessmen know what they want out of life-goal-oriented action. It implies
Hawassa University, Faculty of Business & Economics, Department of B. Management Course Title: Business Policy & Strategy (Mgmt 492)
Course Instructor: Suleyman K.
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that the businessmen have focused values about the venture, work, family, social
activities, possessions, and themselves.
Why does the problem of time management exist for the businessman? It is basically
due to a lack of information and a lack of motivation. The businessman must want to
manage his or her time effectively and then spend some time to acquire the
information necessary to accomplish this. Effective time management starts with an
understanding of some benefits that will result from the managed time itself.
1) Increased Productivity: Reflects the fact that thee is always enough time to
accomplish the most important things. Through a conscious effort and
increased focus, the business man can determine what is the most important to
the success and growth of the venture and focus on those things rather than on
less important or more enjoyable things; the business man must learn to focus
on majors, not the minors.
2) Increased job satisfaction: Getting more important thing done and being
more successful at helping the venture grow will give the businessmen more
job satisfaction.
3) Improved interpersonal relations: There will be an improvement in the esprit
de corps of the venture as there are less time pressure, better results, and
more job satisfaction for the businessmen. While total time spent with other
individuals in the company may in fact decrease, the actual time will be of
better quality as the businessmen is free to be involved with interrelations. Also,
more time becomes available for the businessman to spend with family and
friends.
4) Reduced anxiety and tension: Worry, guilt, and other emotions tend to
reduce mental effectiveness and efficiency so that decision making is less
effective. Effective, time management reduces concerns and anxieties allowing
better decisions to be made in a shorter time.
5) Better health: All of the above benefits culminate in this. Large amounts of
energy and persistence are needed for the growth as well as for the start of a
venture. High energy levels and long working hours require good health. Poor
control of time often leads to mental and physical fatigue, poor eating habits,
and no exercise. If there is one thing the businessman needs to help the
venture grow, it is good health. A good health is a by-product of good time
management.
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4) The principle of teamwork: During the time analysis, one thing will
become very apparent to the businessman. i.e., the small amounts of time totally
under his/her control. The businessmen need to help the team become sensitive to
the time management concept when dealing with other individuals in the
organization. Each person should want to employ the same effective practices of
time management.
a) Valuing Time
Hawassa University, Faculty of Business & Economics, Department of B. Management Course Title: Business Policy & Strategy (Mgmt 492)
Course Instructor: Suleyman K.
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Suppose you have lost your ten birr in this morning. Following this misfortune, you
were unhappy and preferred to do nothing for the whole morning. That means, you
give more value to your 10 birr than your time left over. So in order to properly and
productively allocate your time, first you have to recognize that a need to use time
exists, i.e. you have to be committed to examining new methods for getting the most
out of the day. Without being committed and motivated you will not succeed. If you fail
to recognize that you could, and can get more out of the time, you will never be able to
avoid old habits, and develop new effective behavior.
Some of the common symptoms of poor time management / time wasters are:
Problem of saying ‘no.’
Investing too much time to the “urgent” rather than the “important tasks.”
Lack of setting priority.
Frequently feeling stressed, anxious and time pressured.
Doing the work of subordinates.
Rarely completing work on time.
Feeling indispensable.
Excessive talk over telephone.
Lack of planning.
Interruptions (telephone, personal visitors).
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To summarize what has been said back and forth, Effective strategy evaluation
allows an organization to capitalize on internal strengths as they develop, to exploit
external opportunities as they emerge, to recognize and defend against threats,
and to mitigate internal weaknesses before they become detrimental.
A potentially fatal problem is the tendency for analytical and intuitive issues to
polarize. This polarization leads to strategy evaluation that is dominated by
either analysis or intuition, or to strategy evaluation that is discontinuous, with a
lack of coordination among analytical and intuitive issues.