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Lesson 3 - EFE CPM Matrix

This document discusses the External Factor Evaluation (EFE) Matrix and the Competitive Profile Matrix (CPM) for strategic management. The EFE Matrix allows companies to compile and assess external opportunities and threats through a 5 step process of listing factors, assigning weights, rating responses, calculating weighted scores, and determining a total score. The CPM identifies a company's competitors and evaluates their strengths/weaknesses on critical success factors, allowing comparison of weighted scores. Sample matrices are provided for a cinema complex to demonstrate how the tools can be applied.

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336 views

Lesson 3 - EFE CPM Matrix

This document discusses the External Factor Evaluation (EFE) Matrix and the Competitive Profile Matrix (CPM) for strategic management. The EFE Matrix allows companies to compile and assess external opportunities and threats through a 5 step process of listing factors, assigning weights, rating responses, calculating weighted scores, and determining a total score. The CPM identifies a company's competitors and evaluates their strengths/weaknesses on critical success factors, allowing comparison of weighted scores. Sample matrices are provided for a cinema complex to demonstrate how the tools can be applied.

Uploaded by

Ahmad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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STRATEGIC MANAGEMENT

Lesson 3: EFE & CPM Matrix

by
Cheng Jack Kie
Faculty of Industrial Management
[email protected]
Chapter Description

• Expected Outcomes
– Demonstrate the ability to develop an EFE Matrix.
– Demonstrate the ability to develop a CPM Matrix.

• References
– David, F.R. (2013). Strategic Management: Concept & Cases,
14th Edition. Prentice Hall
External Factor Evaluation (EFE)

• This matrix allows companies to compile and assess the key


external forces.
• There are 5 steps to develop EFE matrix
External Factor Evaluation (EFE)

STEP 1
• List the identified external factors
• For opportunities & threats, 15-20 factors can be
included.
• Opportunities are listed first follow by threats.
• Use percentages or ratios, as specific as possible.
External Factor Evaluation (EFE)

STEP 2
• For each of the external factors, assigned a weight.
Range: 0.0 to 1.0 (not important to very important)
• Higher weights are given to Opportunities than to
Threats.
• The total assigned weights = 1.0.
External Factor Evaluation (EFE)

STEP 3
• A rate between 1 & 4 is assigned to the listed external
factors.
• The rate shows the response of the company’s ongoing
strategies to the factor.
a. 4 = the response is superior
b. 3 = the response is above average
c. 2 = the response is average
d. 1 = the response is poor
External Factor Evaluation (EFE)

• Ratings = Company-based
• Weights (Step 2) = Industry-based
• Both threats & opportunities can be a 1, 2, 3, or 4.
External Factor Evaluation (EFE)

STEP 4
• Each factor’s weight X Rating = Weighted Score

STEP 5
• Total up the weighted scores for all variable = total
weighted score.
External Factor Evaluation (EFE)

• Total weighted score indicator:

The highest score = 4.0

The lowest score = 1.0


Total score = 4.0
 The company current
Average score = 2.5 strategies are effective

Total score = 1.0


 The company current
strategies are not effective
External Factor Evaluation (EFE)

A sample of EFE Matrix


for a Local Ten-Theatre
Cinema Complex
Source: David (2013)
The Competitive Profile Matrix (CPM)

• This matrix helps in identifying:


Companies’ competitors + Strength + Weakness
• The weights & total weighted scores:
EFE = CPM
• CPM’s critical success:
include internal + external issues.
The Competitive Profile Matrix (CPM)

• Ratings = strengths and weaknesses:


i. 4 = major strength
ii. 3 = minor strength
iii. 2 = minor weakness
iv. 1 = major weakness
• Critical success factors = not grouped into opportunities
and threats.
• The ratings & total weighted scores can be compared
between the company and it’s competitors.
The Competitive Profile Matrix (CPM)

Example Competitive Profile Matrix


Source: David (2013)
END

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