The criteria used for evaluation of strategic alternatives are:
- Suitability-: It is concerned with environmental fit of the strategic alternative. It also provides the rationale to a strategy. It indicate whether the strategic alternative make sense in relation to environmental circumstances. It is also a basic of qualitative assessment concerned with testing out the rational of strategy and is useful for screening options. The assessment of suitability consists of two stages.
- Establishing the rational: Various tools and techniques are used to establish the rational which describes the ideas whether they are good or not some of these tools are lifecycle portfolio matrix, positioning, value chain analysis and portfolio analysis.
- Screening Options: Suitability of a specific strategic option is relative to other available options. The methods used for understanding suitability are ranking, decision tree and scenarios.
- Acceptability-: It is concerned with the expected performance outcomes of a strategic alternative. It is strongly related to people expectations and therefore the issues of require careful analysis. The criteria for acceptability of strategic alternative are
- Return-: Expected return from specific strategic options is assessed. The various approaches to analyze return are
- Profitability analysis: It assesses financial return to investment. The tools used for this analysis are return on capital employed, payback period, and discounted cash flow.
- Cost benefit analysis: It assesses the overall economic impact of strategic options. This analysis attempts to put a money value of all the costs and benefits of strategic options.
- Shareholder value analysis: It assesses the impact of strategic options in generating shareholders value. The shareholder value is the total shareholder return.
ii. Risks; It involves probably estimate about robustness of strategic The level of risk is important for acceptability of strategic options. New product development carries high level of risks. The approaches for analyzing risks are.
- Financial ratio projection,
- Sensitivity analysis
- Simulation modeling
- Decision matrices:
iii. Stakeholder expectation: It provides political dimensions to the organizations acceptability of a strategic alternative. The approaches of stakeholder are
- Stakeholder mapping
- Game theory.
3. Feasibility: It is concerned with availability of resources and competencies to deliver strategic alternatives. It determines an option implement ability and work ability in practice. It assesses the organizations capability to make the strategic alternatives succeed. The approaches for available to understand feasibility are
- Funds flow analysis: It assesses financial feasibility. It forecasts the funds required and the likely resources of funds for strategic alternatives.
- Break even analysis: It studies costs volume profit relationships to assess financial feasibility. This analysis identifies BEP when revenue equal costs.
- Resource deployment analysis-2: It identifies need for resources and competencies for specific strategic alternatives. It is used to judge
- Sufficiency of current resources and competencies to pursue strategic options.
- Need for unique resources and competencies to sustain strategic advantages.