DSpace at Khazar University
DSpace at Khazar University
DSpace at Khazar University
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
Determining which objectives are most important in the evalu<strong>at</strong>ion of str<strong>at</strong>egies<br />
can be difficult. Str<strong>at</strong>egy evalu<strong>at</strong>ion is based on both quantit<strong>at</strong>ive and qualit<strong>at</strong>ive<br />
criteria. Selecting the exact set of criteria for evalu<strong>at</strong>ing str<strong>at</strong>egies depends on a<br />
particular organiz<strong>at</strong>ion's size, industry, str<strong>at</strong>egies, and management philosophy. An<br />
organiz<strong>at</strong>ion pursuing a retrenchment str<strong>at</strong>egy, for example, could have an entirely<br />
different set of evalu<strong>at</strong>ive criteria from an organiz<strong>at</strong>ion pursuing a market-development<br />
str<strong>at</strong>egy.<br />
Quantit<strong>at</strong>ive criteria commonly used to evalu<strong>at</strong>e str<strong>at</strong>egies are financial r<strong>at</strong>ios,<br />
which str<strong>at</strong>egists use to make three critical comparisons: (1) comparing the firm's<br />
performance over different time periods, (2) comparing the firm's performance over<br />
different time periods, (2) comparing the firm's performance to competitor's and (3)<br />
comparing the firm's performance to industry averages. Some key financial r<strong>at</strong>ios th<strong>at</strong><br />
are particularly useful as criteria for str<strong>at</strong>egy evalu<strong>at</strong>ion include:<br />
a. Return on investment e. Debt to equity<br />
b. Return on equity f. Earnings per share<br />
c. Profit margin g. Sales growth<br />
d. Market share h. Asset growth<br />
But there are some potential problems associ<strong>at</strong>ed with using quantit<strong>at</strong>ive criteria<br />
for evalu<strong>at</strong>ing str<strong>at</strong>egies. First, most quantit<strong>at</strong>ive criteria are geared to annual objectives<br />
r<strong>at</strong>her than long-term objectives. Also, different accounting methods can provide<br />
different results on many quantit<strong>at</strong>ive criteria. Third, intuitive judgments are almost<br />
always involved in deriving quantit<strong>at</strong>ive criteria. For these and other reasons, qualit<strong>at</strong>ive<br />
criteria are also important in evalu<strong>at</strong>ing str<strong>at</strong>egies. Human factors such as high<br />
absenteeism and turnover r<strong>at</strong>es, poor production quality and quantity r<strong>at</strong>es, or low<br />
employee s<strong>at</strong>isfaction can be underlying causes of declining performance. Marketing,<br />
finance/accounting, R & D, or computer inform<strong>at</strong>ion systems factors can also cause<br />
financial problems. Seymour Tilles identifies six qualit<strong>at</strong>ive questions th<strong>at</strong> are useful in<br />
evalu<strong>at</strong>ing str<strong>at</strong>egies:<br />
a. Is the str<strong>at</strong>egy internally consistent?<br />
b. Is the str<strong>at</strong>egy consistent with the environment?<br />
c. Is the str<strong>at</strong>egy appropri<strong>at</strong>e in view of available resources?<br />
d. Does the str<strong>at</strong>egy involve an acceptable degree of risk?<br />
93
Change language