Evaluating Strategy (AQA A-Level Business): Revision Notes
Evaluating Strategy
Why businesses evaluate strategy
Once a business has chosen and begun to implement a strategy, the work doesn't stop there. A crucial next step is evaluating whether the strategy is actually working. Evaluation means assessing how well the strategy is performing and whether it's helping the business achieve its overall objectives.
This ongoing evaluation is essential because:
- Business environments constantly change
- Unexpected problems may arise during implementation
- Departments may struggle to meet targets
- Market conditions may shift
- Resources may be used differently than planned
Without regular evaluation, a business might continue with an ineffective strategy, wasting time and resources while competitors move ahead. This makes evaluation not just helpful, but essential for maintaining competitive advantage.
Continuous monitoring and review
Strategies cannot simply be set and forgotten. They require continuous monitoring and review throughout their implementation. This means regularly checking progress rather than waiting until the end of a strategic period to see if things worked.
Monitoring implementation progress
Managers who create a strategy must actively monitor whether all parts of the business are doing what they're supposed to do. This involves:
- Checking each department is achieving its targets for implementing the strategic changes
- Ensuring teams are sticking to the agreed timescale (meeting deadlines)
- Verifying that spending stays within the budgeted resources
Worked Example: Monitoring an Online Expansion Strategy
If a retail business is implementing a strategy to expand into online sales, managers need to check that:
- The IT department has the website ready on time
- The warehouse team has the new distribution system working
- The marketing department stays within its budget for promoting the new online store
Each checkpoint helps identify whether implementation is proceeding as planned or if adjustments are needed.
Measuring performance against objectives
Strategic plans include specific objectives with deadlines for when they should be achieved. Effective evaluation compares what's actually happening (actual performance) with what was planned (objectives in the plan).
This comparison helps identify:
- Whether the strategy is on track
- Which areas are performing well
- Which areas are falling behind
- How far off target the business is
Regular comparison allows for timely interventions rather than discovering problems only after they've become serious.
For instance, if a strategy aimed to increase market share by 5% within one year, managers should regularly measure the actual market share achieved to see if they're on course to meet this objective.
Monitoring the competitive environment
The competitive environment must also be tracked carefully. This means watching for external factors that could cause strategic drift—when the strategy becomes less suitable because things outside the business have changed.
Examples of external factors to monitor include:
- New competitors entering the market
- Changes in customer preferences
- Economic shifts (recession, inflation)
- New technology emerging
- Changes in laws or regulations
If these external factors are spotted early, the business can act before the strategy goes too far off course. Ignoring the external environment can leave a business pursuing an outdated strategy that no longer matches market reality—a critical mistake that can cost market share and competitive position.
Taking action when needed
When targets or objectives aren't being met, it's not enough to simply notice—managers must find out why. The reasons could include:
- A department isn't implementing the strategy effectively
- The strategy itself isn't suitable for current market conditions
- Unexpected external changes have occurred
Once the reason is identified, action must be taken to get back on track. This might mean providing more support to struggling departments, adjusting timescales, allocating more resources, or even modifying the strategy itself.
Exam Tip: Questions may ask you to justify whether a business should continue with, modify, or abandon a strategy based on evaluation data. Always consider both internal implementation issues and external environmental factors in your answer.
Techniques for monitoring strategy
Businesses use several specific techniques to gather information about how their strategy is progressing. The two main approaches are market analysis and management information systems.
Market analysis
Market analysis helps businesses check whether their initial assumptions about the market were accurate. When developing a strategy, businesses make predictions about customer demand, competitor behaviour, and market trends. Market analysis tests whether these predictions match reality.
Businesses conduct market analysis by:
Using market research: Firms employ both primary market research (collecting new data directly from customers) and secondary market research (analysing existing data from reports and statistics) to monitor how the strategy is proceeding. For example, a business might survey customers to check if their new product range is being well-received.
Auditing sales levels: Businesses carefully examine sales levels, paying particular attention to their target markets. This involves comparing expected sales (what was predicted in the plan) with actual sales (what's really happening). If there's a significant difference between the two, managers need to investigate why.
Worked Example: Identifying Strategic Problems Through Sales Analysis
A UK supermarket chain's strategy involved launching a premium own-brand range expecting £5 million in sales in the first quarter, but actual sales were only £2 million.
Analysis:
- Expected sales: £5 million
- Actual sales: £2 million
- Gap: £3 million (60% below target)
Evaluation: This large gap signals that assumptions about the market may have been wrong—perhaps:
- Customers aren't willing to pay premium prices
- Competitors have stronger brands
- The marketing wasn't effective
- The product positioning was incorrect
This evaluation data would lead managers to investigate further and potentially revise the strategy.
Exam Tip: When discussing market analysis, explain both what data is collected and why it's useful for evaluating strategy. Show you understand it's about testing assumptions, not just gathering information. Always link the analysis back to strategic decision-making.
Management information systems
Management information systems are vital tools that provide most of the information needed to evaluate strategy. These are computer systems that constantly collect and process routine departmental data to give managers a clear picture of the current state of the business.
How they work: These systems automatically gather data from across the organisation—sales figures from the sales department, production numbers from manufacturing, stock levels from warehouses, and so on. This data is then processed to show whether the business is on course to meet its objectives.
Enterprise Resource Planning (ERP):
One important type of management information system is Enterprise Resource Planning. These integrated systems connect different departments, allowing managers to see how resources are being used across the entire business.
For example, Tesco uses ERP systems to track stock levels, sales data, and supply chain information in real-time across all its stores, enabling rapid response to trends and problems.
Using mathematical techniques: Managers don't just look at raw data from these systems. They also use mathematical techniques such as extrapolating trends (projecting current patterns into the future) to interpret the data and predict where the strategy is heading. For instance, if sales have grown by 2% each month for three months, managers might extrapolate this trend to predict next quarter's sales.
The advantage of management information systems is that they provide up-to-date, accurate information quickly, allowing managers to spot problems early and make informed decisions about the strategy.
UK business example: Companies like Marks & Spencer use sophisticated management information systems to monitor sales across different product lines and store locations. This helps them evaluate whether strategies (such as focusing more on food sales or improving online delivery) are working.
Key Points to Remember:
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Strategies need continuous evaluation throughout their implementation, not just at the end of a planning period—regular monitoring helps catch problems early.
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Compare actual performance against planned objectives to identify whether the strategy is on track and which areas need attention.
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Monitor both internal progress and external factors—departments must meet their targets, but external changes can also affect strategy success.
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Market analysis tests initial assumptions about customer demand, competitor behaviour, and market conditions using research and sales data.
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Management information systems provide real-time data from across the business, allowing managers to see the current state and take action when needed.