Following this idea, he opened no new stores but rather piled up cash to the ceiling in preparation for an economic debacle that never came. For example, if you say the strategy for a retailer is to expand from Florida to Georgia, what trends under consonance match that strategy and which don't? However, the Hershey Company, which is so successful that its name is practically the generic term for the product, has persistently followed a policy of no advertising. The other analyses can be used to identify the strengths and weaknesses and assess the effects of each option upon them. However conducted the focus of attention is on the future of the organisation rather than assessing past performance. No seasoned politician would undertake a campaign for a major office without an equally clear concept of his strategy.
The company building its future around technological equipment, the company selling primarily to the government, the company investing in underdeveloped nations, the company selling to the Common Market, the company with a plant in the South—all these have this prospect in common. EasyJet has made proposals to Geneva airport to establish a third hub. A viable strategy not only reveals what goals are to be accomplished; it says something about when the aims are to be achieved. Strategy and resources, taken together, determine the degree of risk which the company is undertaking. Included are money, competence, and facilities; but these by no means complete the list.
Figure 9:1 — Comparing Tests for Evaluating Strategic Options To the criteria identified above can also be added the following questions: Attractiveness — does the strategy look attractive in terms of financial returns and the timescale required for delivery? What are the risks involved in following the strategy and how significant are they? In companies selling consumer goods, for example, the major resource may be the name of the product. The classical illustration of this kind of outcome is the strategy pursued by Montgomery Ward under the late Sewell Avery. Both parts—the achieving and the becoming—are important for a full understanding of what a company hopes to attain. This can be broken down further to assess the extent to which the strategy addresses the challenges of the external environment, is based upon or enhances the resources and capabilities of the organisation, builds or exploits synergies and is consistent with its corporate culture. In fact, one of the critical attributes of highly centralized organizations is that the more centralized they are, the more speculative they are. A valid strategy will yield growth, profit, or whatever other objectives the managers have established.
When will they be paid for? For example, when the old Underwood Corporation decided to enter the computer field, it was making what might have been an extremely astute strategic choice. The job of management is not merely the preparation of valid policies for a standard set of activities; it is the much more challenging one of first deciding what activities are so strategically significant that explicit decision-rules in that area are mandatory. A new product developed, a plant put on stream, a degree of market penetration, become significant strategic objectives only if accomplished by a certain time. Their impact may be experienced through both the cultural and political contexts of the organisation. Such cases—and they are legion—emphasize that in stating corporate objectives, bigger is not always better. Concluding that it simply did not have sufficient resources to stay with the new venture, it decided to return to its traditional strengths: typewriters and simple data-processing systems.
In any case, there are two basic issues which management must decide in relating strategy and resources. The Rumelt evaluation method has four criteria for evaluating business strategies. The range of frameworks and models that may prove useful in this assessment include portfolio matrices, linkages and core competences analysis, the identification of management styles and the parenting matrix. Another reason for not reviewing the validity of a strategy too frequently is the need to convince competitors that the organization stands firm by its strategy, which fixed and unshakeable. Such a basis simply serves to shorten the time horizon with which the executive is concerned.
The four criteria are vital in evaluation of a business strategy. Starting out as a small but profitable chain, it grew rapidly into receivership. Strategy evaluation is the appraisal of plans and their results, which affect the principal mission of an organization. However, it lacked a commercial distribution system. You wrote that my answers were incomplete.
Resource analysis Value chain analysis Core competences analysis Activity mapping Resource and capability gap identification Cultural web re-mapping Stakeholder re-mapping Figure 9:2 — A Framework for Evaluating Strategies — Questions and Tools Some of the tools and techniques identified in Figure 9:2 can be used to provide input into addressing the questions under more that one set of criteria. In most companies the system of management rewards is closely related to currently reported profits. It is not unusual for discussions about suitability to stress the importance of fit between the elements outlined above. Another rare and drastic corrective action is reformulating the strategy which requires going back to the process of strategic management, reframing of plans according to new resource allocation trend and consequent means going to the beginning point of strategic management process. Resource and capabilities analysis underpins the evaluation of the criterion related to capabilities. How important are the assets? Among the Qualitative factors are subjective evaluation of factors such as - skills and competencies, risk taking potential, flexibility etc. Unlike feasibility test, advantage test focuses on the differences between firms rather than their common mission.
But there is a basic fallacy in confusing a financial plan with thinking about the kind of company you want yours to become. The primary purpose of this Session is to examine how many of the tools, models and frameworks explored throughout this Module can be used in the assessment and selection of strategic options. However, the technique can be extended to provide a more rigorous analysis of the current strategy of an organisation and to evaluate the suitability of a range of strategic options. Some of the companies succeeded in making the shift from aircraft to missiles, but this has only resulted in their being faced with the same problem on a larger scale. It is difficult to generalize about which policies are major, even within a particular industry, because a number of extraordinarily successful companies appear to violate all the rules. Rumelt warned that one of the biggest challenges to consistency is sudden growth. I shall now discuss these.
Were supporting functional strategies consistent with the business unit strategies? Again, they may be accidentally destroyed. If all of these criteria are met, you have a strategy that is right for you. Some organisationns carry out strategy evaluation informally and infrequently while other have formal, detailed strategy review procedures that they carry out on a regular basis. Coherent action: To carry out the guiding policy, you need to identify a set of actions. A firm which has a certain product policy, price policy, or advertising policy is saying that it has chosen to relate itself to its customers—actual and potential—in a certain way. I know he's already helped me.