Page 76 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes An example of EFE Matrix for a hypothetical company is given below:
Table 4.2: EFE Matrix for Hypothetical Company

Key external factor Weight Rating Weighted score
Opportunities:
1. Emerging new markets 0.15 2 0.30
2. Decrease in the cost of components 0.10 3 0.30
3. Internet use growing rapidly 0.15 3 0.45
4.Trend is to have quality products 0.10 3 0.30
Threats:
1. Obsolescence of technology 0.10 2 0.20
2.Cheap Chinese imports 0.15 2 0.30
3. Increase in labour costs due to legislation 0.10 3 0.30
4. Attrition of skilled manpower 0.15 3 0.45
1.00 2.60

The total weighted score indicates how well a particular company is responding to current and
expected factors in the environment. The highest possible total weighted score will be 4.0 and
the lowest will be 1.0. The average score is 2.5. A score of 4.0 indicates that an organisation is
responding in an outstanding way to existing opportunities and threats. In the example above,
the total weighted score of 2.6 means the company is above average in responding to factors in
the environment.
QUEST

QUEST (Quick Environment Scanning Technique) is a four step process, which uses scenario-
building for environmental analysis.
The four steps are:

1. Managers make observations about major events and trends in the environment.
2. They speculate on a wide range of issues that are likely to affect the future of the business
enterprise.

3. A report is prepared summarizing the issues and their implications to the firm, together
with 2 to 3 scenarios.
4. The report and the scenarios are reviewed by strategists, based on which they identify
feasible options.
Thus, QUEST helps in generating feasible alternative strategies for consideration of the
management.

Competitive Profile Matrix (CPM)

This is a competitor analysis, which focuses on each company against whom a firm competes
directly. It helps to identify the strengths and weaknesses of the major competitors of the firm,
vis-à-vis the firm. Generally, the Critical Success Factors (CSFs) are compared. In addition, other
factors that can be compared are breadth of product line, sales, distribution, production capacity
and efficiency, technological advantages etc. Using the format shown in Table, a firm can prepare
competitor profile matrix.

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