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There should be 5 strategic factors for Opportunities and 5 strategic factors for Threats.
What are external factors?
External factors are those the firm has NO control over. I will be doing reality checks when reading your work, asking, “Does the firm control this activity or not?” For instance, a firm has control over the price it chooses to charge, but they don’t have control over whether or not that price is acceptable to the ultimate consumer.
What do you have to do?
Fill in the table in TemplateSA-EXH 1-EFAS.docx available in this location and Course Resources. The table has five columns: External Factors, Weight, Rating, Weighted Score, and Comments.
Use short names for the factors, but flesh them out in the comments so they make sense when you approach them later on.
The textbook is clear enough to work on all columns but the Comments. Your comments make all the difference in the quality of the EFAS.
Use the template for Exhibit 1 – EFAS
Use the Template EFAS as the template for your work. Ensure that your format displays correctly and is readable.Do NOT copy from the text or from the Template EFAS text! Use your own critical analysis and critical thinking. The template is provided to assist you with the layout–i.e., make it easy for you to construct the chart. The template also gives you a good idea of the appropriate explanations required in the Comments blocks about the why an SF, potential quantified impact, how weighted, and how rated.
Comments Column
Comments are expected to be 4-5 sentences in length and depth and offer a clear explanation of the strategic factor (SF) in 4 aspects:
Keep the 4-5 sentences of your Comments in order for clarity and ease of understanding. The recommended order is: Why SF comments; QPI comments; Weight comments; and finally Rating comments.
How to write the Why SF and QPI comments: For the Why SF, explain WHY you selected this SF, WHY it is important to your firm, and WHAT is the potential impact on the firm in the future.
For the QPI comments, estimate the potential impact on the firm in the future in a quantitative manner using some metric: sales, revenues, costs, market share, profits, logistics pipeline, CSI, etc. Express the quantitative potential impact (QPI) in Dollars $. If you express the potential impact in $, that makes each strategic factor comparable against the other strategic factors. And expressing the impact in sales makes them even more easily comparable. Make sure you are making significant estimates based on the size of your company based on annual revenue values in your 5-Y financials. You develop this estimate.
The monetary value of the QPI is useful to compare the strategic factors and rank them in relevance. Ranking them will help you to assign the Weights (2nd column in the table) to each strategic factor. Use a positive analysis (quantitative) rather than a normative analysis (feelings, desires). Focus on what is the potential gain for your SF opportunities or the potential loss from an SF threat in the future. History lessons are not needed nor applicable. You should estimate and predict the impact in the future. Be creative.
Don’t develop future actions or alternatives here in the EFAS about how a firm may, or should take action on a particular SF. The brainstorming development of those alternative actions comes with the TOWS Analysis that we will start presenting in Module 4.
HINT:To focus your thinking on addressing “why” you selected each SF and “why it is important,” start your “why select/important” sentence with words like this: “I selected this SF because…..” or “This SF is important because…” By using this lead-in phrase you should be able to concisely state why that particular SF is important.
HINT:To focus your thinking on addressing the quantitative potential impact (QPI) in the future of each SF, be sure your QPI sentence contains words like this: “potential impact of $____” or “potential increases to ____ are $____ per year” or “reduction in sales by $____ per year.” Be sure to state the potential impact in dollars so you can compare the potential impacts of your various SF.
How to write the Weight and Rank comments:To assign weights, explain the importance of the SF to the firm’s future survival. Is the SF of vital importance or low importance on a scale of 1 to 0? What is the impact of the SF on the future survival of the firm? What SF has the biggest impact? Which one(s) are the Big Dogs? Make a logical explanation of why the weight you have assigned is what it is. Comparison and ranking between SF is a useful technique to assign the weight. See your potential $$ impacts from your “Why” analysis above. The bigger the $$ impact is, the bigger the weight should be. Remember the weight column adds to 1.0.
HINT:To focus your thinking on addressing the importance of the SF to the firm’s future survival, be sure to include the keyword “survival” in your weight sentence.
To assign ratings, provide an explanation of how well, or how badly, the firm is handling each specific external SF RIGHT NOW – not in the future or not in the distant past – but right now. Use the scale of 1 – 5, poor to outstanding; comparing the firm’s performance against the industry standard rating of 3. Give a logical explanation of why the rating you have assigned is what it is. Do they handle it well or are they lost? Are they performing in average way as other competitors are? Remember the industry average performance is rated at 3.
HINT:To focus your thinking on addressing how well your firm is handling each SF, understand what the 1-5 scale means and then use your rating number from the rating column with matching words (low, average, above average, high, etc) in your rating sentence.
Example of a good comments block:
SF – International Growth Opportunities in SE Asia, Japan, and Korea
This SF was selected because of its very significant potential impact on profit growth. Successful expansion into overseas markets could potentially result in doubling the size of OPC to a firm with $800M in sales per year and an increase in profits from $50M to $100M per year. This SF is weighted highest at .25 since expanding internationally is vital to the future survival of OPC in light of worldwide competitors and markets. I rated this low at 2.5 since OPC does not have any international experience or markets at this time.
EXHIBIT 1
EXTERNAL FACTOR ANALYSIS SUMMARY (EFAS) on OLALLIEBERRY PIE COMPANY (OPC)
External Factors
Opportunities:
O1: Growing Market in Western States
Weight: Rating: Weighted Comments
Score
.05
3.5
.175
This SF was chosen because of its significant potential
impact on sales growth. Population increases of 1-3% per
year in the primary market area should lead directly to
sales growth of at least 2-3% per year and add between
$8M -$12M to top line sales revenues per year.
Capturing those additional revenues from the population
growth are not very important to the OPC survival so the
weight has a relatively low score of .05. I rated this a 3.5
since OPC does an above average job of marketing to new
customers.
O2: International Growth Opportunities
in SE Asia, Japan, and Korea
.25
2.5
.625
This SF was selected because of its very significant
potential impact on profit growth. Successful expansion
into overseas markets could potentially result in doubling
the size of OPC to a firm with $800M in sales per year
and increase profits from $50M to $100M per year. This
SF is weighted highest at .25 since expanding
internationally is vital to the survival of OPC in light of
worldwide competitors and markets. I rated this low at
2.5 since OPC does not have any international experience
or markets at this time.
O3: Aging U.S. Population and
Demographics
.05
4.0
.20
This SF was added because of the potential for increasing
sales to the older population groups as the U.S. population
ages. Potential increases to sales are between $15-$20M
per year due to the exceptional word-of-mouth promotion
network among customers. This SF is weighted relatively
low since increasing sales is important to the firm’s
survival but not as important as other SF. This SF is rated
1
External Factors
Weight: Rating: Weighted Comments
Score
high at 4.0 since OPC has a very good word-of-mouth
marketing program for seniors already in operation.
O4: Internet Availability
.15
2.0
.30
I selected this SF because the expansion of Internet
availability to more and more U.S. families is an
important SF for all food companies to take advantage of.
With consumers’ online orders expected to increase at a
yearly rate of 20% across all consumer goods, OPC has
an outstanding opportunity to take advantage of this trend.
We can expect internet sales to become 25% of our sales
revenues or about $100M per year in the next 5 years.
Internet sales also could boost our market share from 50%
to 70% in the western states. This SF could have a very
significant impact on sales and on survival so the weight
is high at .15. OPC scores well below industry standard
here at 2.0 because their Internet marketing/sales process
is not well developed.
O5:Trend to Healthy Lifestyles
.025
3.5
.0875
I added this SF because the trend is encompassing more
and more of the U.S. and world population with important
potential impact on the sales and market share of OPC.
Potential positive impact of 1% (+$4M/YR) to top line
sales is expected. I weighed this .025 because compared
to other opportunities it is of lesser impact on the survival
of OPC. I rated this 3.5 because OPC has consistently
exceeded industry standard average performance in
providing a healthy product to consumers.
Threats:
T1: U.S. Competition from Raspberry
Pie Company (RPC) and Others
.20
4.0
.80
This SF is important because strong competition from the
RPC and others threaten OPC’s market share and sales.
2
External Factors
T2: Imports from China
T3: Increasing Government Regulations
Weight: Rating: Weighted Comments
Score
RPC has increased its marketing efforts in the western
states. Potential loss of market share from 50% to 40% or
lower would directly result in sales revenues being
reduced by $160M-$200M per year. This is weighted
high at .20 as OPC survival depends on maintaining its
market share against competition. Rated high at 4.0 as
OPC market share has been maintained with an
aggressive marketing program in the western states
.
.10
2.5
.25
I selected this SF because strong worldwide competition
is starting to come from Chinese imports to the west
coast. These low-cost, high- quality products threaten to
take away 10-20% of OPC’s west coast market share and
reduce sales by $40-80M per year. This is weighted
relatively high at .10 since losing that amount of sales
revenues would threaten the survival of the firm. This SF
is rated low at 2.5 because OPC has not countered the
emergence of Chinese competition with a new marketing
effort.
.10
4.0
.40
3
This SF is important because government regulations on
labor use, raw material quality, environment protection
and financial reform are placing an increasing additional
future cost burden on OPC of about 18% ($72M/YR) of
sales. Compliance costs are hurting the bottom line
significantly. These costs are potentially fatal for the
survival of OPC unless relief is obtained so the .10 weight
is high. This SF rating is high at 4.0 because OPC is an
industry leader in lobbying operations to reduce
government regulation.
External Factors
T4: Unionization Pressures
T5: New Product Competition
Weight: Rating: Weighted Comments
Score
.05
4.0
.20
I chose this SF because potential unionization of OPC’s
workforce could add 10-15% ($24M – $36M/YR) to
direct labor costs and reduce the workforce’s efficiency
by 10%. These adverse effects will directly increase costs
and drive our prices higher which may result in lost sales
and market share. Unionization is a small threat to the
survival and expansion of the firm so it is weighted as .05.
OPC has a very proactive employee relations program and
an exceptional corporate culture that obviates
unionization attempts. Rated much higher than industry
standard at 4.0.
.025
Total Scores: 1.00
3.0
.075
3.1125
4
This SF is important because new products from the
frozen pie sector are coming on the market to compete
with OPC’s fresh pie product. This trend will continue as
the population demographics supports easy-to-prepare
food products. This trend could have a negative impact
on future sales at a 2-3% ($8M-$12M/YR) level of
impact. This is not weighted high on survival impact to
OPC as frozen pies will potentially not capture a
significant market share. Rating is industry average at 3.0
as OPC effectively markets the freshness and healthiness
of its Olallieberry pies.
