How can a manager judge which strategic option is best for the company?

How can a manager judge which strategic option is best for the company?

Strategy means the skill of managing any affair. It is used to describe a pathway along which the organization moves towards its goals or objectives. Strategic planning is a systematic process of envisioning a desired future and translating this vision into broadly defined goals or objectives and a sequence of steps to achieve them. Basically, there are three tests that can be used to evaluate the merits of one strategy over another. These are as follows:

The Goodness of Fit Test: A good strategy must be well matched to industry and competitive conditions, market opportunities, and threats and other aspects of the enterprise’s external environment. It should also be well matched to the company’s resource strengths and weaknesses, competencies, and competitive capabilities.

The competitive advantages test: A good strategy leads to sustainable competitive advantage. The bigger the competitive edge, the more powerful and effective it is.

The performance test: Good strategies improve company performance. We can evaluate the performance of a strategy by observing the following improvements:

  • Gains in profitability; and
  • Gains in the company’s competitive strength and long-term market position.

The strategic option that best meets all the above mentioned three tests can be regarded as the best strategic alternative.