Best Ways to Evaluate Business Strategies

by Bert Markgraf, Demand Media

Strategies help businesses reach their goals.

Businesses of all sizes develop strategies to help them reach their goals. You can evaluate business strategies before you implement them or after the activities they specify are finished. Evaluating a strategy before implementation lets you make improvements if necessary, while an evaluation afterward helps avoid mistakes in future strategic initiatives. Such evaluations analyze the effectiveness of a strategy and are a key factor in improving overall business performance.

Internal Consistency

If a strategy is to be effective, it cannot be internally inconsistent or have policies or targets that conflict with overall company structures or goals. The evaluation verifies whether its approach to the internal organization of the company and operations reinforces the valuable aspects of existing structures. The targets specified by the strategy have to match overall company goals. The internal elements of the strategy have to all further the same objectives and avoid conflicting measures.

External Environment

In addition to being consistent with the internal company structures, a strategy has to match its external environment. Companies exist in a marketplace that includes customers, competitors and regulatory bodies. Businesses create value and deliver benefits. They incur costs and make profits within an existing pricing structure. The evaluation analyzes to what extent the strategy addresses these factors in a consistent manner — for example, verifying that the value creation specified by the strategy matches target market needs.

Related Reading: Competitive Business Strategies

Strategic Advantages

A strategy has to create advantages to make its implementation worthwhile. The benefits of the strategy have to be substantially greater than the costs of carrying it out, and the strategy has to create competitive advantages in the marketplace. It could, for example, change a product to increase its value for a specific market segment that needs the change. The evaluation compares the costs related to strategy activities, the benefits to the company and what strategic advantages the strategy predicts.

Feasibility

An evaluation of strategy feasibility asks whether the company has the ability to implement the strategy. It checks that company resources, personnel available for carrying out the work and the expertise of the available staff are adequate. It compares what is available with what the strategy needs for its implementation. It analyzes the consequences of doing the work and identifies any new issues that may surface as a result. A test of its effectiveness is whether it has reached its targets.