Evaluation of Strategy Based on the Three Elements

Abstract

The implementation of each strategic decision involves investment of a large amount of capital, human resources and managerial efforts. An incorrect decision often means the failure of an investment. Risks of strategic decisions can be reduced if we can re-examine or identify whether the strategic decisions that have been made are consistent with the actual situation of the company and with the external environment and industry development. Based on the basic principles of strategic decision-making presented in this book, this chapter puts forward the basic logic and thinking of the evaluation of strategic decision-making from the standpoint of the three elements of strategy.

If we evaluate strategy decision from the perspective of the three elements of the strategy concept, we can once again have careful consideration and systematic analysis on many aspects concerning the strategic decision-making, thereby reducing the risk of strategic decision.

9.1 Overview

A strategic decision is an integrated decision, which consists of three sub-decisions on three major questions of an organization. When we make a mistake in any one of the three sub-decisions, it will lead to the failure of the entire strategy. Once a strategic decision has been made and implemented, it involves a certain amount of capital investment (in most cases a lot of capital investment). The mistake of a strategy decision means the loss of funds.

After a strategic decision has been made, can the decision be evaluated afterwards for making further judgment on the correctness of the decision? We know, the process of strategic decision-making itself has been involved in the judgment and evaluation of the competitive situation. A systematic evaluation of strategic decisions itself can help us once again assess the logic of the decisions and the risks so to reduce or minimize error of the decision.

However, it seems to be a hard work to judge whether the strategic decision is correct. The difficulty lies in the following.

First, the judge (decision maker) needs to be familiar with the situations of the company, the industry, competitors and consumers. The strategic decision is about both the current and the future. Any member of any organization, regardless of his / her high position, will not be able to know well of all the (or 100% of) the information needed for strategic decision-making. Some key information usually needs to be predicted.

Second, the judger needs to make the right assessment of whether the three sub-decisions of the organization strategy are in line with the situation of the company and the industry, which requires a clear thinking and logical reasoning ability.

The strategic assessment is the outline evaluation of the company’s strategic decisions. In Chap. 7, we talked about a basic principle of strategic decision-making. Company’s strategy should match up with the organization's resources, capabilities and the external environment. Such strategy is an integrated one. Although the content of each specific strategy evaluation is different, we can still make overall evaluation of the decision from the potential of industry development and the resources and capabilities of the company according to the basic principles of strategy making.

The original purpose of this book is to explain the concepts of strategy (or to answer the question of what is strategy). How to make good strategic decisions belongs to the domain of strategy management. I am not as deep and systematic in studies on how to make good or high quality strategic decisions as the study on the strategic concept. So here, I would like to only introduce some principles of strategic evaluation based on the three elements of the strategy concept. I hope that the application of these principles can partially improve the quality of strategic decision and reduce errors in decisions.

9.2 Evaluation of Competitive Strategies

The competitive strategy is about how to compete and for what consumers are attracted. Although competitive ideas embodied in the different competitive strategies are not alike, from the perspective of three elements of strategic connotation, the major issue element and the element of the competitive goal are the same.

As for competitive strategy, no matter what the cost-leadership strategy, differentiation strategy, or hybrid strategy is, the major issue (the element of development issue) in the competition is “What kinds of consumers to attract? What do I use to attract them”? So we do not need to evaluate this element.

The target element of the competitive strategy is to “attract consumers and increase sales.” Different competitive strategies attract different consumer groups, for example, cost-leadership strategy attracts customers who are sensitive to price; differentiation strategy attracts customers who are delicate to the quality value of the product; hybrid strategy attracts customers who are keenness to both price and quality. Information of the number and size of target groups as well as the market competitors who have the same interest in the target customers are important. Hence, the following aspects are vital to the “goal element” evaluation of competitive strategy. (Table 9.1).

Table 9.1 Evaluation for the goal element of competitive strategies

Companies whose competitive strategies are not the same will have different basic guideline. That is the element of general ideology of the strategy will be different for competing in the market. For example, the guideline of a company choosing cost-leadership strategy is different from that of a company choosing differentiation strategy. How do we evaluate the guideline element of the competitive strategy of a company?

According to the strategy clock, there are several types of competitive strategies. Here we only introduce the most commonly used differentiation strategy, cost-leadership strategy and hybrid strategy. Let us look at the differentiation strategy first.

• (1) Evaluation of the guideline of differentiation strategy

If a company chooses differentiation, how do we assess whether its competitive strategy is appropriate or consistent with the situation of the company and the market?

First, there are enough numbers or size of group (or consumers) in the market that are interested in the differentiation theme of the company’s products or services. The number of merchants or competitors providing the same products or services on the market is not large so that there are people in the market who will buy my products or services.

Second, it is an assessment of the company’s resources and capabilities. Differentiation means my products or services are special. Generally, they are better than the competitors’ are, such as better design, better performance, colors that are more beautiful, more convenient usage and so on. It is in need of R&D and technical support to achieve the differentiation. Does the company have the resources and ability to achieve the expected special themes? Companies need to evaluate in this aspect. Differentiation needs the capital investment. After deducting the cost, do I still have profits? If there is no profit, the company’s business cannot be sustained. In addition, if the differentiation can bring me a good profit, there must be competitors imitating me in the market. Is my differentiation theme hard to be copied by competitors? If it is easy, is there a following way to deal with? These questions need to be answered seriously for the company choosing the competitive strategy of differentiation.

Therefore, we can evaluate the “general ideology” (guideline) element of differentiation strategy from the following aspects (Table 9.2).  Answers to the questions in Table 9.2 can give us a better assessment of the strategy.

Table 9.2 Evaluation for general ideology of differentiation strategy

• (2) Evaluation of the guideline of cost-leadership strategy

If the company chooses the cost-leadership competitive strategy, how do we evaluate the guideline elment of the strategy?

First, it is evaluation of the external environment. There is a large number or scale of groups (or consumers) in the market that are interested in my standardized products or services. There are few merchants or competitors providing the same products or services on the market.

Second, it is evaluation of the company’s resources and capabilities. The basic idea of the cost-leadership strategy is that the costs of my product or service are low, so the price can be lower in order to attract customers who are sensitive to price in the market. Cost-leadership strategy is strict on the control of cost, and companies need to have a sound system of management and approaches to maintain a low cost. Therefore, does the company have the capability to achieve the expected cost (for example does it has the economies of scale? What is the position in the experience curve? Is there a good management practice system and method to control the key expenditure of cost? How about decision-making efficiency and operational efficiency?) Companies need to assess from this aspect. The price of products or services is relatively low. So, do I still have profit after deducting the cost? If there is no profit, the business will not be sustained over a long period. In addition, are there any competitors in the market imitating my low cost? If it is yes, is there a following way to deal with it? Is there a tread in near future that the technology or business model in the industry will lead to a breakthrough that will make the cost of the product lower? Will I own this technology or business model in the future? These questions also need to be answered seriously for the company choosing the cost-leadership competitive strategy.

Thus, we can judge the “general ideology element” of cost-leadership strategy from the following aspects (Table 9.3).

Table 9.3 Evaluation for the overall ideological element of cost-leadership strategy

• (3) Evaluation of the guideline of hybrid strategy

In the strategic clock map, hybrid strategy is located in the upper left corner. Choosing this competitive way means promoting high value products or services to market, but with low price. It puts forward higher requirements for enterprises choosing this competitive strategy. The company not only needs to provide special products or services to the market, but also requires to control the cost at the same time. Therefore, as to the resources and capability, the company needs to have almost the capabilities of R&D, design and quality control with differentiation to improve the value of products and services so as to meet the changing needs of consumers. In addition, due to the requirement of low price, companies need to have strong capability of cost control as the cost-leadership strategy.

Thus, we can evaluate the guideline element of hybrid competitive strategy from the following aspects in Table 9.4.

Table 9.4 Evaluation for general ideology element of hybrid strategy

9.3 Evaluation of Corporate Strategies

Corporate strategy involves the direction of company’s future development. Once implemented, it generally needs large investment. The evaluation of the strategy refers to the evaluation of the future development trend of the market and of corporate’s capability.

There are several types of corporate strategies, such as diversification, forward integration, backward integration, acquisition, etc. We have particularly introduced the meaning and content of these strategies in detail in Chap. 6. Here I will only choose two strategies of backward integration and peer acquisition and illustrate how to evaluate corporate strategy in detail.

• (1) Evaluation of backward integration strategy

Backward integration refers to a company getting into the industries related to its main industry, such as the main components, raw materials. Companies from different industries entering into backward integration are involved in different industry areas, but the logical thinking of the evaluation will be the same.

Suppose car assembly and sales are your company’s main business. Engine is the core part of a car, and you need to buy it from the market. However, the price is so expensive that you plan to enter the field of car engine (assuming mainly for the use of your own production). How to evaluate this decision? As we know, we need money, work force and material resources when entering the engine field. The approaches could be self-development, buying a company from the market that owns engine technology and produces engines, having controlling shares in a company in the market, etc. The latter two options are much more expensive than the first, but can get the needed engines in a short time. While examining the market, we need to analyze and evaluate these three options.

Like all the other investments, we wish to have a good return of the investment and thus hope for a good prospect of the future development of the automotive market. Therefore, we need to assess which stage of development the industry is in now? What is the direction of future?

If the future development of the industry is optimistic, we need to consider whether we have the ability to develop and produce engines. Alternatively, we need to know if we have enough money to purchasing from the market (such as through holding or acquisition). In addition, we need to consider the question of do I have the ability (or team) to manage the business after entering? These issues are important for the strategic decision-making of backward integration.

We evaluate this strategy from the three elements of strategy as follows. For easy understanding, I will divide the evaluation of this strategy into four parts. First is the evaluation of company’s major development issue or problem (Evaluation 1). Second is the evaluation of long-term goals (Evaluation 2). Third will be the evaluation of general ideology (or guideline) one of the issue that it is self-development or acquisition from the market (Evaluation 3). Fourth is the evaluation of the specific guidelines of self-development or acquisition approaches (Evaluation 4) (see Fig. 9.1 below).

Fig. 9.1

Evaluations of backward integration strategy

• A. Evaluation of company major development problem (evaluation 1)

In general, if the quality of the raw materials or parts in the market is stable and the price is reasonable, there is no need for the company to invest in the supplier field. But if the market price is expensive, the number of suppliers is small, and the core raw materials or expensive price of parts led to your main product profit margins lower than your competitors significantly (those enterprises who own raw materials or core components), then the company need to consider entering the field of suppliers. Therefore, when the following conditions are met, the company’s motivation for backward integration is clear. (Table 9.5).

Table 9.5 Evaluation for development problem of backward integration strategy

These items assess the necessity to enter the supplier space.

• B. Evaluation of the goal element (evaluation 2)

A company takes a backward integration strategy into consideration, which is expected to enter the field of suppliers of company’s main business and succeed in this field. No matter how to enter the supplier’s industry, we have to invest in capital, human and material resources. Success means that the funds invested can get a good return. However good returns need the support of the market demand. In addition, the company needs to have the ability of business management in the supplier’s industry. Therefore, the evaluation of the goal element of the backward integration strategy involves market evaluation and capability evaluation in business management, etc.

Let us look at the market evaluation. We hope that the industry in which the company’s main business operates is in the early or rapid development stage. The market demand for the products of the industry is stable or growing, so that the company’s products have a good market support. At the same time, we need to look at the company’s entry into the supplier space and the company’s own situation. The following items can help us to identify the market situation of the company’s backward integration. (Table 9.6).

Table 9.6 Evaluation for development goal of backward integration strategy

The first 3 terms are the forecast of the market size of the company’s products and its future development. They are the market basis of backward integration decision, therefore you need to analyze and forecast it. If you think that the market size is large, stable and will continue to grow, your return on investment in the field of the suppliers will grow with the growth of the market after you enter. If you analyze and consider that the market is large, stable, but unlikely to continue to grow, in this case, with the market no longer growing, the supplier of the industry generally will not grow and industry competition may intensify. Therefore, you need to analyze the supplier area to be entered, whether there is an advantage for your products or service when compared with the main competitors’. If there exists no advantage, or even more disadvantages, the decision of backward integration needs to be decided carefully.

Items 4 to 6 concern with the future competition of the supplier field. If there is little obstacle to enter the supplier’s field and the number of competitors is large, you should also make careful decision on whether you need to enter this field.

Items 7 to 9 are about the company’s ability. Whether the company is capable (or is there practicable plan) to operate and manage the business of the industry to be entered. Whether the company has sufficient financial resources to support the business to be launched? If the answers to these questions are relatively certain, it shows that the company has the strength to enter the supplier field.

• C. Evaluation of guideline 1 in evaluation 3

Guideline 1 (Fig. 9.1) in the backward integration strategy is to provide basic guidance on the issue whether it enters into the field of supplier through “self-development” or “purchasing or having share stake in the suppliers of raw materials or spare parts in the market”. With the guidance, we can make the right choice between “self-development”, or “acquisition” of the suppliers in the market”. We evaluate whether guidance 1 is correct or feasible mainly through judging if it conforms to and reflects the actual situation of company and market (Table 9.7).

Table 9.7 Evaluation for guiding principle 1 for self-development in backward integration

If your answers of the above questions are quite certain, it means that you have the ability of self-development.

In general, investment of self-development is less expensive than acquiring suppliers in the market, but it takes more time. In addition, if consumers (or buyers) of the field of suppliers have a strong preference for the brand, maybe it would not be long for you to develop and produce a product, but it may take a quite long time for consumers in the market to accept your product.

If you do not have the ability to self-develop and produce to enter the supplier field, there is a choice to acquire or have share stake in a supplier from the market. In the case where the self-development program is not feasible, although the acquisition or mastering program appears to be the only option for you to enter the supplier field, there is still a need for a strategic evaluation.

The following questions can help us determine whether the thought of acquisition or mastering is correct (Table 9.8).

Table 9.8 Items for evaluation of guiding principle 1 for acquisition in backward integration

Item (1) concerns the capital for entering into the supplier field. The funds of acquisition are not only required for the acquisition itself, but also the costs of the acquisition process and the subsequent expenses. Just like buying a house, in addition to funds of buying a house (price), you also have to consider the commission, government tax as well as the decoration and other costs. Companies need to have an overall budget and assess their own capital on this basis. Or to assess the question of do I have enough money (or channels to get funds) to achieve the acquisition or holding.

Item (2) is about the company’s overall financial strength. The attended acquisition will not affect the capital needed for the daily operation and development of the company’s main business. That is the company can guarantee the operation of its main business financially.

Item (3) concerns the management of your acquisition of a project or a company. Especially if the acquired target loses, you need to make a viable solution. Item (4) relates to the reaction of the acquired or holding target, which you wish would be positive, but sometimes it will be unpleasant or negative. In this case, it will greatly extend your acquisition time while increasing the cost of acquisition and even leading to failure.

You have to analyze these questions and make decisions based on the analysis.

• D. Evaluation of guideline 2 in evaluation 4

Assuming you analyze and make a self-development decision under the overall guideline 1, and then you have to put forward the basic general ideology to provide guidance on the tactics of the acquisition (or holding). With the instruction of the general ideology, you or your subordinates can develop a detailed tactical program. Guideline 2 is to put forward the basic guideline on how to better taking self-development approach when the company has determined on self-development.

Different enterprises will have different main obstacles when entering into the field of suppliers. Sometimes it is a technical problem that the company may not have the technology and capability to develop products in the supplier field. In this case, high-level decision makers need to propose a general ideology to solve the key problems. The general ideology provides guidance for their subordinates to consider specific tactics. When a company lacks the core technical ability, with the help of R&D capability from market, the company can develop technical ability and products based on their own. In general, the basic guideline formulated should be conducive to the formation of self-development capabilities and product development, while the investment is relatively small, or it takes a shorter time to form the ability.

• E. Evaluation of guideline 2 of acquisition

This guideline is to put forward the basic ideology of acquiring (or mastering) what kind of supplier in the market to provide direction of the acquisition or share control over entities in the market. The purpose of the basic ideology (or guideline) proposed by the company is to coach the budget (or investment), the completion time of acquisition, the technological level of the suppliers to be acquired, the quality of products, the scale of production and the management team.

We can evaluate whether the company’s guideline is consistent with its actual situation from the following aspects: (Table 9.9).

Table 9.9 Items for evaluation of basic guiding principle 2 for acquisition of backward integration strategy

If your answers to the above questions are basically yes, then you have proposed the right guidelines for the company’s specific acquisition, and your subordinates can plan and deploy the specific acquisition process according to your guidelines.

• (2) Evaluation of peer acquisition strategy

The acquisition of a company generally involves the following cases–the acquisition of peer companies within the same industry, the acquisition of suppliers (also known as backward integration), the acquisition of vendors (also known as forward integration), or the acquisition of companies unrelated to their main business (also known as unrelated diversification). Although purposes of the acquisition are different, the basic idea of acquisition strategic evaluation is the same. Here we only concentrate on the main content of the strategic evaluation through peer acquisition.

Peer acquisition refers to the acquisition of companies with the same main business, such as Geely’s acquisition of Volvo, BenQ’s acquisition of Siemens’ mobile phone business. Peer acquisition usually requires significant amounts of money. Whether these investments can be recovered within the expected time and has a good return depends on the market and company’s own resources and capabilities.

The purposes of the company’s peer acquisition are not the same, but on the whole, it is expected to make up for some shortcomings in resources or capabilities through acquisitions, such as getting better technology, brand, or expanding market share to achieve economies of scale. So peer acquisition is generally goal-oriented, that is to say the target first. See the three elements in the figure below.

Let us look at the main content of the strategic evaluation of three elements. As with the strategic evaluation introduced earlier, we will evaluate the decisions of the three elements involved in the strategy. These include an evaluation of the development goals set, an evaluation of the identified major problems encountered in achieving the goals, and an evaluation of the proposed overall guidelines to the problems. The 3 elements and their evaluations are illustrated in Fig. 9.2.

Fig. 9.2

Three elements of peer acquisition strategy

• A. Evaluation of the “Development Goal” (Evaluation 1)

The company plans peer acquisitions are to acquire high quality resources and capabilities from the market, such as more advanced technology, more popular brands than their own, and marketing channels that they don’t have (or lack of), etc. No matter for what purpose, its ultimate goal is to serve the market better and to get better benefits from (or become more successful in) their own main business in this field. As the integration strategy described above, peer acquisition strategies also invest many capitals, work force and material resources, so those investments require a good return. Whether the investment can achieve a good return, the support of market demand and the business capacity of company in the field are essential. Therefore, the evaluation of the goal element of peer acquisition strategy also involves the evaluation of market evaluation and enterprise capability, etc.

The following items can help us to determine the goal element of the peer acquisition strategy (Table 9.10).

Table 9.10 Evaluation for development goal of peer acquisition strategy

The first three items are about the product’s market size and future development. They are the market basis for decisions of peer acquisition strategy. Therefore, you have to analyze and forecast the market. If you analyze and think that the market size is large, stable and continues to grow, the market will gradually digest your production capacity increased by your investment, or your new products, and then your return on investment of peer acquisition will have the support from the growth of the market.

After analyzing, you believe that the market is large and stable, but unlikely to continue to grow. In this case, industry competition will intensify because the market is no longer growing, for the acquisitions of technology and brand; you have to analyze the business you will acquire. Is the technology more advanced compared to your main competitors’? If there are no advantages, or even more disadvantages, you need to make careful decision. As to the acquisition of channels, if the future market is no longer growing, you need to think it over unless your product is particularly popular or favored by the market, the sales growth of your product or service is good and you need to increase the channels to expand your sales.

Items (4) to (6) refer to the company’s ability that the company has capability (or a feasible solution) to operate and manage the company and its business. They include whether the company has the experience of acquisition, whether the company has a viable solution for the rational integration of acquired enterprise, whether the company has a reasonable plan for the arrangements for possible redundant personnel, etc.

• B. Evaluation of development problem or issue element (evaluation 2)

What is the motive of my acquisition? Is it clear? What are the obstacles during the process of my company’s development? Or is it necessary for me to acquire the necessary resources or capabilities (technology, brand, channel, etc.) through acquisition? The evaluation of the development issue element in the three elements of the acquisition strategy can help us assess the motivation of acquisition and its necessity.

In general, the company has three major motives for peer acquisition. The first is acquiring technology. Or the company lacks core technology, so it needs to acquire it from the market. The technology-driven acquisitions can be evaluated from the following aspects (see Table 9.11).

Table 9.11 Evaluating the lack of core technology issue in acquisition strategy

The analysis and answers to these items are mainly to judge whether the company lacks core technologies and whether it is necessary for the company to obtain the core technologies from the market through acquisition. In general, if the company can develop core technology by itself or by outsourcing, such as recruiting core R&D team members from the market, or working with core researchers in the research institution of university, generally there is no need for companies to invest more funds to acquire the existing enterprises from the market. If the answers of three questions above are positive, there exist advanced core technologies on the market and there are opportunities for acquisition, then it is indicated that the company needs core technologies and the motivation of technology-driven acquisition is clear.

The cultivation of a good brand usually takes time. The second motivation of peer acquisition is acquiring well-known brand sometimes including its sales channels from market. Necessity of this motivation can be evaluated from the following aspects (see Table 9.12).

Table 9.12 Evaluating the lack of brand or sales channel issue in acquisition strategy

The analysis and answers to these questions above are about the judgment whether the company lacks the brand (or sales channel) and whether it is necessary for the company to have them through acquisition from the market. Same as the previous judgment on technology, if the company already has a good brand or can create a sales channel, generally it does not need to invest more money to acquire the existing enterprises from the market. But we know that for the establishment of a brand, especially for it to be accepted and recognized by the market, it takes time to accumulate and precipitate. Thus, if the answer to the three items above is quite sure, it means that acquisition motivation of the company driven by brand and channel is clear.

The third motivation of peer acquisition is to gain economics of scale. This is mainly due to the small scale of the company in the industry, the company hopes to rapidly expand the number of products or services in the market through acquisition, to achieve economies of scale. Scale-up can also be achieved by expanding factories or establishing branch companies. For physical product, Scale-up can also be completed through OEM processing. For service product, its scale can be expanded by seeking franchisees from the market. Compared with acquisition, most of these approaches are cheaper. Therefore, for the purpose of expanding the scale of the economy, we should also evaluate the necessity of the acquisition strategy. The following table can help us assessing its necessity (Table 9.13).

Table 9.13 Evaluating the lack of scale issue in acquisition strategy

The analysis and answers to these items above concern the judgment on whether the company needs to expand the scale and whether it is necessary for the company to become larger in scale through acquisition.

In general, if the company really needs to expand the scale, it can choose to outsource or invest and develop by itself, etc. So sometimes, there is no need for a company to invest large sums of money to acquit existing enterprises from the market. For most companies that invest for acquisition, they obtain the scale (or capacity) as well as other resources or capabilities, such as channels, brands and technologies. Generally, there is little peer acquisition only for the sake of capacity. It is because the peer acquisition is able to acquire the resources and capabilities (technology, brand, capacity, management experience, channels, etc.) needed by the industry at one go, so it is favored by many companies with abundant funds in the industry.

• C. “Guideline” evaluation (evaluation 3)

The guideline element in the bottom right corner of peer acquisition strategy triangle is the basic guideline or principle to the question “what kind of enterprise to buy,” or instructive recommendation of the amount of funds to invest and the requirement of the target company. The following questions (or aspects) will help us to judge whether the guidelines proposed is correct or feasible (Table 9.14).

Table 9.14 Evaluating the guideline in acquisition strategy

Item (1) concerns the plan of the company’s acquisition funds. The amount of acquisition funds will determine the scale and standard of the target company on the market. Sometimes it will determine the capital plan of acquisition according to a good target company in the market. In general, the acquisition funds should not affect the funds required for the development of company’s main business. Peer acquisition generally invests large amount of funds, for example, Geely Automobile spends 1.8 billion US dollars acquiring Volvo and raises 750 million US dollars as the following operation funds.¹ Although BenQ does not spend much on the purchasing of Siemens mobile phone business, it takes nearly €840 million to maintain operation later. So the company needs a good plan of acquisition funds, including the amount and method of raising funds, etc. When it lacks funds, we need to carefully consider the acquisition or the extension of the acquisition and other issues.

If executives ask subordinates to search for the target company from the market, the subordinates will ask what kind of company to purchase, for which executives need to give them basic advice. Actually, the general opinions are important, because they are the basic guidelines of your acquisition strategy. It is the guidance to the specific acquisition of the target company, and items (2) to (5) concern the requirements of target company to be acquired.

In general, as to technology-driven acquisitions, one of the basic principles to follow is to acquire companies with advanced technologies in the industry. But we know that the more advanced the technology, the higher the price. Therefore, decision-makers can know the industry’s technology and its development through technical experts in the industry. They can determine the scope of the advanced technology to be acquired according to their own resource of funds.

The acquisition price of enterprises with larger size and better quality in the market will be higher. Therefore, for acquisitions driven by obtaining the marketing channels, decision-makers can develop the overall ideology of the target companys channel requirements according to their own financial strength and regional development planning in order to provide guidance for the choice of target company’s channels.

In general, peer acquisition will consider the technology, brand, channel, management experience and other aspects of enterprises to be acquired, so companies can plan the guideline of the acquisition strategy according to their own acquisition requirements as a whole, or highlight one aspect of the requirements as its guideline in the plan, such as leading technologies and so on.

Item (6) is about the plan of acquisition time. Acquisitions, as a relatively long process, involve the search for target companies, the negotiation, the assessment of the corporations to be acquired, as well as law, finance, tax, business and many other procedures. You can set the basic requirements for time in the guideline of acquisition.

If your answers to the six questions listed above are basically yes, your guideline of the acquisition is normally correct. Your subordinates can plan the specific tactic program of acquisition according to the guideline you determined.

It is worth mentioning that sometimes the elements of guideline in the company strategy will not immediately come out, not alone good ideas. They may be gradually improved in the process. For example, after you have determined your guideline, your subordinates may not find a target company that conforms to the guideline, or a company that happen to be on sale in the market may not exactly meet your basic needs. You need to adjust or improve the guideline according to the actual situations.

9.4 Conclusions

I have introduced some ideas and aspects of the evaluation of strategy from its three elements. The evaluation content will be more systematic. In addition, the evaluation process itself can help us think and analyze many aspects of strategic decisions again, so that it can reduce risks. This chapter also shows that evaluation through the three elements of the strategy is feasible.

If you evaluate a strategy through an actual example of a company, you will find that strategic evaluation involves many predictions, such as forecasts for the industry development, market, consumers, and for their future capabilities. Thus, decision-makers of a company need to be familiar with the industry and its own situation. Otherwise, the strategic evaluation will only be empty talk and the inaccuracy of the forecasts will lead to the inaccuracy of strategic evaluation.

From the perspective of the three elements, the strategic decision-maker is a prophet, thinker, discoverer and solver of major problems.