Evaluating Business Strategy: Suitability, Feasibility & Acceptability

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  • 0:03 Evaluating Business Strategy
  • 0:18 Suitability
  • 4:00 Feasibility
  • 5:38 Acceptability
  • 6:22 Lesson Summary
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Lesson Transcript
Instructor: Martin Gibbs

Martin has 16 years experience in Human Resources Information Systems and has a PhD in Information Technology Management. He is an adjunct professor of computer science and computer programming.

Businesses need a well-defined strategy, or they will flounder. This lesson discusses how to evaluate a well-defined strategy by looking at suitability, feasibility, and acceptability.

Evaluating Business Strategy

Researchers Johnson, Scholes, and Whittington have proposed that a business strategy's potential success is based on looking at the following three criteria: suitability, feasibility, and acceptability.

Let's take a closer look at each of these criteria.

Suitability

When assessing suitability, the question leaders must ask is: Does the strategy align with the external environment? There are several tools for analyzing this environment: competitors, customers, market conditions, and also political and environmental aspects.

Some of the tools used to evaluate the external landscape include:

  • SWOT
  • Porter's Five Forces
  • PESTEL

Let's take a quick look at each of these:

SWOT

SWOT stands for strengths, weaknesses, opportunities, and threats. For analysis of external forces, we focus on opportunities and threats. When conducting a SWOT analysis, it helps to create a table to input each of the items, like the one here for an auto parts chain:

Strengths Weaknesses Opportunities Threats
Huge sales! Ordering system three versions behind Rise in do-it-yourself demographic Competitor landed major promotion deal
New stores in seven states Training program is weak Working on deal with Wagner brake company Recycling fees on the rise

After performing a SWOT analysis, this auto parts chain has determined that while some of their strengths are huge sales and the fact that they have opened new stores in seven states, they also have some weaknesses, including a weak training program and an outdated ordering system. For the external forces of the SWOT analysis, they see opportunities in the deal that they are working on with a new supplier as well as the growth in the do-it-yourself demographic, while they recognize that some external threats to their well-being are that a competitor has landed a major promotion deal and their fees to recycle, which is important to their business, are increasing.

Sometimes businesses merge sections of the chart (e.g., threat-strength or opportunity-weakness) as they evaluate strategy. If the strategy addresses external factors that need to be reduced (threats) or increased (opportunities), it meets the suitability test.

Porter's Five Forces

Like SWOT, Porter's Five Forces focuses on external pressures on a business, with the main focus being on competition. Competitive rivalry can drive down prices if the competition is tough.

Let's say you are manufacturing a product with a very low profit margin. After using Porter's Five Forces to evaluate external forces, you realize that all factors are pushing competition to all-time highs. New entrants are arriving in the industry, suppliers are demanding higher prices, and buyers are demanding lower prices. You will need to re-think the suitability of your business strategy! A race to the bottom is not going to end well.

PESTEL

The PESTEL model also evaluates external forces and determines suitability by looking at political, economic, social, technological, environmental, and legal factors.

In some cases, each of these influencers can be considered a threat (from SWOT analysis). They are external pressures that need to be considered when evaluating the suitability of your strategic plan.

Take a look at this chart for some examples using our auto parts chain example:

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