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Strategy Evaluation: Definition, Methods & Tools

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  • 0:00 What Is Strategy Evaluation?
  • 0:27 Process Of Strategy Evaluation
  • 1:39 Principles Of Strategy…
  • 2:43 Application
  • 4:38 Lesson Summary
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Lesson Transcript
Instructor: Brianna Whiting
In this lesson, we'll look at the steps in order to perform a strategy evaluation. We'll discuss key factors and will relate strategy evaluation to real life scenarios.

What Is Strategy Evaluation?

When Sally goes to the store to purchase groceries for dinner, she grabs the items off the shelf, places them in her cart, pays for them and is on her way. While this may seem like a simple process, the store itself is looking at Sally's simple process in a complex way. This is what we call strategy evaluation, or the way in which a business examines the overall well-being of the company and its future goals.

Process of Strategy Evaluation

By now, I'm sure you're asking, what do you mean? So, let's look at how strategy evaluation can occur at a business. This can be broken into a few steps in order to clarify the process.

The first step is to ask, 'What does the business want to accomplish?' In other words, what performance goals will be set in order to determine the progress of the business? Some factors to consider when determining the goals are production costs, net profit, employee turnover rate, risk taking, and perhaps one of the most important considerations, does the company have the personnel needed to reach the goals?

The second step is to ask, 'How will the goals be measured?' Business will need to understand the standard, and then look at how the business compares to that standard.

Third, you'd ask, 'How does the business differ?' For instance, was the performance of the business above the standard and why? Was the business below the standard, and if so, why? If the business does fall below the standard, then the business needs to determine the reasons in order to correct the problem.

Lastly, you'd ask, 'What will the business do to fix the problems?' Do the standards need to be modified? What factors contributed to the problem and how will they be adjusted?

Principles of Strategy Evaluation

Now that we have explained how strategy evaluation occurs, the next step is to understand some basic principles to consider while developing a strategy. There are four terms to study: consistency, consonance, advantage, and feasibility.

  1. Consistency has to do with whether the way the business operates matches the objectives the business strives for. When a business sets objectives or goals, they can evaluate their daily operations to see if it has met these goals.
  2. Consonance refers to how well the business reacts to the change of surroundings. If consumers' preferences change, or a competitive business is built next door, a business needs to be able to adapt and still be successful.
  3. Advantage has to do with whether the business is competitive. If a consumer purchases products at their business instead of at another store, the business can remain competitive.
  4. Feasibility is concerned with whether the business has the resources and tools to function. As times change and technology grows, a company needs to have the resources to still remain successful.

Application

So now that we have explained what factors need to be considered with strategy evaluation, and the steps to take, let's apply this information to our scenario mentioned earlier about Sally visiting a store and purchasing groceries. For starters, let's look at the goods the business provides. Are the goods what Sally needs or wants? How does the grocery selection of other businesses compare? In other words, will Sally be satisfied with the groceries the business has to offer, or will she leave and seek a more superior product?

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