Developing EFEs based on Fred David's Strategic Management Conceps

1. Developing a Strategic Management Paper
4-1
Understanding where the stakeholders / owners would like
to take the business.
• Vision
• Mission
Taking into account the general environment that affects a
business.
• Industry / Market Analysis
• PESTLE
• Porter’s Five Forces
• CPM
Analyzing the impact of the environment, consolidating the findings and
assessing the results. Strongly consider the CPM to determine the
appropriate factors to include in the EFE.
• Opportunities
• Threats
• EFE
Conducting a general audit of the company’s HR, market (Mix, Target Market),
financial performance and production / operations to determine its capacity to
compete. Strongly consider the CPM to determine the appropriate factors to
include in the IFE.
• Strengths
• Weakness
• IFE

2. Industry / Market Analysis
Evaluate if thorough research was conducted to CLEARLY define the company’s TARGET MARKET. The results should
reveal market players (competitors), market share and a very good idea to position an existing or new product.
Industry Analysis
• Market Growth / Decline
Market Players / Market Share
• Porter’s Five Forces
• CPM
• EFE
• Balanced Scorecard
Product Position
• Perceptual Mapping
• Strategies
It should not focus on the subject
firm. This is discussed in the IFE.

3. Target Market Example
Financial Institutions
The market segments were derived from
the following:
• Demographics / psychographics /
sociological factors.
• Bank Manager interviews.
• Industry information
• Corporate interviews
• Depositor interviews

4. PESTEL - E
Some Tips
• Conduct a thorough study of the industry and market first. This assures
the researcher to pick out factors that are highly relevant to the
company.
• Check if the factors are aligned to the organization’s vision and mission.
• Focus on market innovations and disruptions.
• Have at least 3-5 external forces for each factor to widen EFE choices.
• Focus on the factor’s relevance to the organization’s FUTURE.
• Expect redundancies with the Industry and Market Analysis.

5. Porter’s Five Forces of Competition
Some Tips
• Summarizes the researcher’s findings in the Industry / Market Analysis.
• PESTEL hints should reflect in the “Bargaining Power of Consumers as
well as Suppliers”.
• Recommended strategies or action plans should reflect the findings
under “Potential Entry of New Competitors and Substitution Threats”.
• Justify rivalries with hard facts like advertising spend, controversies,
law suits, media exposure.
• A shrinking market should have a big impact on the researcher’s
findings.

6. EFE Matrix

7. EFE Matrix
Some Tips
• The matrix is only as effective as the amount of research conducted for
the Industry / Market Analysis and PESTLE.
• Chosen external factors are likely to change as the researcher builds
data and formulates ideas that is aligned to the company vision and
necessary to outsmart competitors.
• Strike a balance between external factors that affect the FUTURE of the
business. How far into the future can the researcher see the business?
Can the business afford it?

8. Competitive Profile Matrix
1 – Major Weakness
2 – Minor Weakness
3 – Minor Strength
4 – Major Strength

9. Competitive Profile Matrix
Fred David’s book talks about the Competitive Profile Matrix (CPM) after discussing the External Factor Evaluation
(EFE). Does this mean that the researcher should “perfect and refine” the EFE before starting the CPM?
Not necessarily. The CPM Critical Success Factors (CSF) are primarily derived from the Industry / Market Analysis
that becomes the basis for relevant competitor information research.
A good CPM should compare financial ratios, market share, product performance, market presence etc.
Researchers often include CSFs that do not fit the TARGET MARKET. Oftentimes, there is also a disconnect with the
firm’s vision / mission. This results to irrelevant competitor information research. This confuses both the researcher
and panel members.
Examples:
• Free calls and SMS were included in the CSF for a telecoms company. The resulting action was to further
increase free text and calls instead of focusing on data plans. However, consumer reports cite the rise and
transition to social media apps especially among the younger generation.
• Including Land Bank of the Philippines as a competitor among private Unibanks.

10. Competitive Profile Matrix
A CPM identifies a firm’s major competitors and its
particular strengths and weaknesses in relation to a firm’s
strategic position and VISION.
Critical Success Factors Basis
• What is the company’s vision?
• Does it plan to capture market share?
• Does it plan to overtake market leaders?
• What concrete Critical Success Factors does it need to
realize it’s vision?
• How aggressive should the company move forward?
CPM Bias
• Scores high CSFs without a visible basis.
• Scores high CSFs but is ranked way below market
leaders.
• Common sense.

11. Competitive Profile Matrix
The firm wants to belong to the Top 3 Banks. What
assumptions did the CPM use to meet this vision?
• Banks are ranked according to loans and deposits
instead of net income.
• Consumers look for stability in a bank whether it is
perceived or backed by actual numbers (Risk Profile,
Liquidity Ratio, Advertising).
• Consumers will choose a bank with branches almost
everywhere (Branches, ATMS)
• Market share is measured by Deposits and Loans.

12. EFE Development
RESEARCH ANALYSIS SYNTHESIS EVALUATE
• Industry / Market Analysis
• PESTEL – E
• Market Players
• Market Share
• Competition
• Potential Growth or Decline
• Porter’s Five Forces
• Competitive Profile Matrix
• PESTEL-E
• Industry / Market Analysis
EFE
• What latent
variables/conditions could
affect the market in the
future?
• Should the organization
compete head-on or
benchmark against market
leaders?
• Is it feasible to leave the
market?
• Can the company
compete?
• How does the company
gain competitive
advantage?
• How does it align to the
company’s vision?

13. EFE Development
INDUSTRY /
MARKET ANALYSIS
PESTEL
PORTER’S FIVE
FORCES
EXTERNAL FACTOR
EVALUATION
COMPETITORS
PROFILE MATRIX
DERIVED FROM
ALIGNED
ITERATIVE
VISION