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Criteria for Strategy Evaluation

      

Criteria for Strategy Evaluation

  

Answers

Faith
i) Financial versus nonnancia1 measures -
Financial measures include usual measures like; profit, profitability, shareholders return, cash flow/ liquidity, share price, earning per share, return on net assets, return on sales. Most of these traditional financial measures concentrate on profit and it goes without saying that profit is essential to the long-term survival of any business no matter what size or shape. However, Levitt said, ‘profit is a requisite not a purpose’ of businesses. Profit is essential to any business but it is not the only reason why the organization is in business.
Equally important is the short-term, liquidity/cash flow evaluation. Lack of long- term profitability is not a major reason for the demise of business but cash-flow problems can even. Despite anything we have said about strategy being long-term the one thing we have to bear in mind is short- term cash flow. Without this, there is no long-term success.

ii) Non — financial measures
Financial measures taken in isolation are unlikely to be sufficient to guarantee the long-term survival and. development of the organization. The organization must develop if it is to continue to adapt and remain in touch with its market place. Growth can be good and a healthy influence but if pursued for its own sake can lead to problems. Sales maximization and volume growth can often lead to serious declines in profitability especially in higher competitive market places. Directed and controlled growth based on qualified and detailed analysis of the market place and potential business opportunities can lead to a flourishing organization.

iii) Multiple Criteria
In every situation, the dependence upon a single criterion for evaluating and appraising strategy is likely to be dangerous. This is because;
i) Organization becomes inefficient from some point if a single criterion is used.
ii) Organization fulfils multiple functions and has multiple goals, some of which may be in conflict. It would be inappropriate to assess strategies purely on the bias of any one criterion.
Organization and strategies can best be regarded as living entities. If they follow their markets they will also need to be dynamic and evolving entities just to be able to survive let alone flourish. Time, if no other factor, will always act to make certain measures redundant and other measures important in new situations. Also conflict always arises in management of organization. These require that different performance measures need to be traded off in different situations. The choice of the most appropriate measures for evaluation and appraisal will depend entirely on the organization’s situation and the, marketing strategies ability to balance internal and external needs.
Titany answered the question on October 7, 2021 at 05:48

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