The continuous assessment of the external business environment is critical when determining the strategies that an enterprise should implement. Notably, this paper will evaluate on the external factor evaluation matrix, source of external information, and the competitive profile matrix. Additionally, the paper will give a conclusion for each method of analyzing the external business environment.
The External Factor Evaluation Matrix (EFEM)
Specifically, the external factor evaluation matrix (EFEM) enables a business to evaluate the opportunities and threats in its activities. Basically, an external factor evaluation matrix is developed using a few simple steps. Firstly, an individual identifies the critical success factors that influence the performance of the business. Importantly, he/she categorizes these factors as either opportunities or threats. Secondly, each factor is given a weight of between zero and one based on its overall significance to the business. Thereafter, the individual gives each factor a rating of between one and four depending on how the current business strategically responds to it. In brief, the scores indicate that the business responds to these factors in the following ways: 4 = superior, 3 = above average, 2 = average, and 1 = poor. Further, an overall score of the critical success factors is derived by multiplying their weight by their ratings. Finally, a total score of EFEM is calculated by adding up the sum of all the scores. Importantly, the calculation of EFEM is beneficial to McDonald Corporation as it shows it new business opportunities, or threats that may hinder its future success. Consequently, the knowledge of EFEM enables a business to implement the most appropriate strategies. In conclusion, knowledge of EFEM gives an individual important skill for assessing external business environment, and find ways through which a business can succeed.
Sources of External Information
Notably, information is an important tool in determining the competitiveness of a business. Essentially, modern businesses rely on correct, timely, and accurate information when formulating strategies. Importantly, a business should rely on both published and unpublished sources of information. Additionally, the business should review this information to determine its accuracy. Moreover, more current data is important because it is more accurate than old information. Consequently, businesses may use sources that give current data such as the Standards & Poor’s (S&P’s) Industry Survey. Further, business can rely on various internet websites such as Basically, information is important when determining the products that the business should introduce into the market. In addition to this, information tells the business of the impact of a competitor’s actions. In conclusion, the knowledge of collecting accurate and timely external business information is important in the formation of appropriate strategies. In essence, the relevance, and strength of a business strategy is as strong as the information that advised its formulation.
The Competitive Profile Matrix (CPM)
Generally, the (CPM) compares the business competitiveness in relation to other businesses in the industry. Firstly, an individual identifies critical success factors that affect the selected business for comparison. Subsequently, he/she gives each factor weight of between zero and one depending on its overall significance to each business. Thereafter, he/she calculates the ratings of each factor using a scale of between one and four. Importantly, the ratings reflect the internal and external business competencies, which are ranked as either strengths or weaknesses. As a result, four and three are major and minor strengths respectively. Similarly, two and one are minor and major weaknesses respectively. Noteworthy, the calculation of the score for each critical success factor is derived from the multiplication of its weight and rating. Additionally, the weight of total score is calculated by the sum of the critical success factor scores for each company. Importantly, CPM enables a close comparison of the strengths and weaknesses of a business competitor. Consequently, by the use of this method, McDonalds Corporation may be able to predict the probable strategies that its competitors may be implementing. In conclusion, the CPM is important for businesses as it enables them to identify their competitors’ probable business strategies.