The Criteria For Determining Strengths And Weaknesses - Strategic Management

A major problem which must be resolved prior to any analysis of corporate capabilities is the criteria that would determine whether an element under examination is a strength or a weakness. Four types of criteria have been suggested to classify an element into strength or weakness. These are:

  1. Historical;
  2. Normative;
  3. Competitive parity; and
  4. Critical Factors for Success.

1. THE HISTORICAL CRITERION
Here, the analyst compares the characteristics under examination with past performances. An improvement over the past performance may be seen as strength, and a decline a weakness. Before, arriving at such conclusion, it is always advisable to check the reliability of the ‘past' in future. In a large number of situations ‘past' may not be valid for future and this would certainly invalidate our assessment or judgment.

2. THE NORMATIVE CRITERION
Here, the basis of judgment is ‘what ought to be' the level of performance to classify a particular element into a strength or a weakness. Thus, based on theory, expert opinion, industry practices or personal opinions, one can develop ‘norms' for evaluation.

3. THE COMPETITIVE PARITY CRITERION
As its basis for judgment, this criterion utilizes the action successful direct competitors or potential competitors. It is based on the premise that a firm must, at the minimum, meet the actions of the competitors. Thus, if the industry practice of providing 60 days credit to the trade is not followed, it may be considered a weakness.

4. THE CRITICAL FACTORS FOR SUCCESS CRITERION
Each business, in some sense, is unique. It requires a set of minimum performance standards and hence capabilities. This criterion helps to examine the strengths and weakness in the context of meeting the minimum requirements for success.

One criterion is seldom sufficient for a complete evaluation of a firm. Some elements like ‘financial strengths' may be evaluated better on ‘historical' and ‘competition' criteria; and ‘marketing' may be best evaluated on the basis of ‘competition' and ‘critical factors for success criterion.


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