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Strategic Alternative Evaluation Criteria

This chapter discusses the main evaluation criteria for strategic alternatives, including suitability, acceptability, and feasibility. Suitability refers to how well the alternatives fit with the organization's circumstances, acceptability considers if the expected performances will be acceptable to stakeholders, and feasibility assesses if the available resources are sufficient. Theoretical structures for evaluating suitability, screening options, and assessing acceptability and feasibility are also explored.

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Strategic Alternative Evaluation Criteria

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  1. Johnsen & ScholesChapter 8 Fred Wenstøp

  2. Main evaluation criteria • Suitability • qualitative assessment of how well the strategic alternatives fit with the circumstances of the organisation • quantitative ranking of alternatives • Acceptability • will the expected performances be acceptable to the stakeholders? • Feasibility • are the available resources sufficient? Fred Wenstøp

  3. Theoretical structure • Suitability of fit ranks lexicographically first • J&S recommends that the suitability test is performed first to get rid of unsuitable options. • Screening the options according to suitability will produce a rank order • J&S say precious little about what performance criteria to use beside ROC, or how to weight the criteria • Acceptability and feasibility must be considered as frames producing boundaries for the viable set of options Fred Wenstøp

  4. Suitability as fit • Suitability with regard to: • degree of fit with life cycle stage (Life Cycle Analysis) • viability of positioning (Life Cycle Analysis) • financial performance (Business Profile) • improvement of balance of activities (Portefolio Analysis) • value for money (Value Chain Analysis) • exploitation of core competencies (Value chain Analysis) Fred Wenstøp

  5. Screening options for suitability • Screening criteria (loosely) • key factors in the environment • resources • stakeholders’expectations (ROC) • The need for weighting is mentioned Fred Wenstøp

  6. Acceptability(the three first criteria are alternatives, not complements) • Profitability • Return on capital employed, ROCE = PBIT/(OF + LTL) • Payback period • Discounted cash flows • Benefit/cost efficiency • Shareholder value • Risk Fred Wenstøp

  7. Feasibility • Types of analyses • Funds flow analysis, Liquidity (financial) • Break-even analysis (financial) • Resource deployment analysis • Detailed analysis for the deployment of key resources and competences for each strategy Fred Wenstøp

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