Page 77 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 4: External Assessment

Notes
Table 4.3: Competitive Profile Matrix (CPM)
CRITICAL FIRM COMPETITOR COMPETITOR COMPETITOR
SUCCESS FACTOR I II III
Weight Rating Score Rating Score Rating Score Rating Score
1. Market share
2. Product quality
3. Consumer
loyalty
4. Price
competitiveness
5. Sales
distribution
6. Customer
service
7. Global
expansion
8. Advertising, etc.

After calculating the weighted scores for the firm, and the major competitors, they are compared
to prepare a competitive profile.

Forecasting Techniques

Macro environmental and industry scanning and analysis are only marginally useful if what
they do is to reveal current conditions. To be truly useful, such analysis must forecast future
trends and changes. Forecasting is a way of estimating the future events that are likely to have
a major impact on the enterprise. It is a technique whereby managers try to predict the future
characteristics of the environment to help managers take strategic decisions. Various techniques
are used to forecast future situations. Important among these are:
1. Time series analysis: Extrapolation is the most widely practiced form of forecasting. Simply
stated, extrapolation is the extension of present trends into the future. It rests on the
assumption that the world is reasonably consistent and changes slowly in the short run.
They attempt to carry a series of historical events forward into the future. Because time
series analysis projects historical trends into the future, its validity depends on the similarity
between past trends and future conditions.
2. Judgemental forecasting: This is a forecasting technique in which employees, customers,
suppliers etc., serve as a source of information regarding future trends. For example, sales
representatives may be asked to forecast sales growth in various product categories based
on their interaction with customers. Survey instruments may be mailed to customers,
suppliers or trade associations to obtain their judgments on specific trends.
3. Expert opinion: This is a non-quantitative technique in which experts in a particular area
attempt to forecast likely developments. Knowledgeable people are selected and asked to
assign importance and probability rating to various future developments. This type of
forecast is based on the ability of a knowledgeable person to construct probable future
developments on the interaction of key variables. The delphi technique is one such
technique.

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