ASSURANCE OF LEARNING EXERCISE 3A:

DEVELOPING AN EFE MATRIX FOR MCDONALD’S CORPORATION

PURPOSE:
This exercise will provide practice developing an EFE Matrix. An EFE Matrix summarizes the
results of an external audit. This is an important tool widely used by strategists.

INSTRUCTIONS:
1. Join with two other students in class, and jointly prepare an EFE Matrix for McDonald’s
Corporation. Refer back to the Cohesion Case and to Exercise 1A, if necessary, to identify
external opportunities and threats. Use the information in the S&P Industry Surveys that
you copies as part of Assurance of Learning Exercise 1A. Be sure not to include strategies
as opportunities, but do include as many monetary amounts, percentages, numbers, and
ratios as possible.

2. All three-person teams participating in this exercise should record their EFE total weighted
scores on the board. Put your initials after your score to identify it as your team’s.

Compare the total weighted scores. Which team’s score came closest to the instructor’s answer?
Discuss reasons for variation in the scores reported on the board.

Answer:

The following provides the steps and an example of what an EFE Matrix for McDonalds should
look like.

Five Steps for Developing an EFE Matrix:

1) List external factors.

2) Assign a weight from 0-1 with 0 being not important and 1 being very important. The total
weights assigned must equal 1.
3) Assign a 1-4 rating to each external factor based on effectiveness of current strategy. 1 = Poor,
2 = Average, 3 = Above average, and 4 = Superior.
4) Calculate weight * rating.
5) Sum. The highest score is 4 while the lowest is 1. The average is 2.5.
 OPPORTUNITIES Weight Rating Weighted Score

O1: Anticipated 4% growth rate in QSR industry. 0.06 3 0.18

O2: Low fat, low calorie, healthy hamburger – first on market. 0.07 1 0.07
O3: Many restaurants have outdated appearance. 0.06 3 0.18
O4: Respond to social changes by healthy food innovations. 0.04 3 0.12
O5: Increased beverage options (Gourmet coffees). 0.06 3 0.18
O6: Breakfast not available at 25% of locations. 0.06 3 0.18
O7: Joint ventures with retailers can place new locations in high
0.03 4 0.12
traffic areas at lower capital cost.
O8: Continued focus on corporate social responsibility. 0.02 2 0.04
O9: Int’l expansion into emerging markets. 0.06 3 0.18
O10: Diversify portfolio. 0.03 2 0.06

THREATS Weight Rating Weighted Score

T1: More health conscious customers. 0.07 3 0.21
T2: Vulnerability in older, established markets to modern
0.04 3 0.12
upstarts.
T3: Global economic recession = reduced consumer spending. 0.06 4 0.24
T4: Markets in US and EU are mature and saturated. 0.07 3 0.21
T5: Subway and YUM! Brands expanding into developing
markets at a higher rate.
0.06 2 0.12
T6: Litigation 0.03 3 0.09
T7: Brand equity at risk: 80% of restaurants owned by
franchisees.
0.04 3 0.12
T8: Contamination of the food supply could damage sales,
reputation, etc.
0.04 4 0.16
T9: Intense price pressure from competitors. 0.07 4 0.28
T10: Negative public opinion campaigns. 0.03 2 0.06
TOTAL: 1.00 2.92
ASSURANCE OF LEARNING EXERCISE 3C:
DEVELOPING AN EFE MATRIX FOR MY UNIVERSITY

PURPOSE:
More colleges and universities are embarking upon the strategic-management
process. Institutions are consciously and systematically identifying and
evaluating external opportunities and threats facing higher education in your
state, the nation, and the world.

INSTRUCTIONS:
1. Join with two other individuals in class and jointly prepare an EFE Matrix
for your institution.
2. Go to the board and record your total weighted score in a column that
includes the scores by all three-person teams participating. Put your initials
after your score to identify it as your team’s.
3. Which team viewed your college’s strategies most positively? Which team
viewed your college’s strategies most negatively? Discuss the nature of the
differences.

Answer
Use the five steps in developing an EFE Matrix.
 List key external factors as identified in the external-audit process. Include a
total of 10-20 factors from both the opportunities and threats.
 Assign to each factor a weight from .0 (not important) to 1.0 (very
important). These weights show the relative importance. The total of all the
weights should equal 1.0.
 Assign a 1-4 rating to each factor to indicate how effectively the firm’s
current response strategy: 1 = the response is poor, 2 = the response is
average, 3 = the response is above average, and 4 = the response is superior.
 Multiply each factor’s weight by its rating to get a weighted score.
 Sum the weighted scores for each variable to determine the total weighted
score for the organization.
An example is provided below:
Opportunities: Weight Rating WS
Increase in percentage of minority students
1. .05 3 .15
enrolling in college
2. Growth in adults pursuing higher education .10 3 .30
Potential to reach foreign markets through
3. .10 4 .40
international and online programs
Development of programs in new disciplines
4. .10 4 .40
(e.g., homeland security)

Threats:
1. Competition for prospective students .15 2 .30
Foreign institutions retaining high ability
2. .10 2 .20
students
3. Potential for governmental funding decreases .10 2 .20
4. Increased competition for private funding .05 2 .10
Emphasis on career preparation rather than
5. .10 3 .30
comprehensive education
6. Commoditization of education .05 2 .10
Potential for federal regulations of learning
7. .05 1 .05
outcomes
8. Disasters that affect operations .05 1 .05
Total Weighted Score 1.0 2.55
ASSURANCE OF LEARNING EXERCISE 3D:
DEVELOPING A COMPETITIVE PROFILE MATRIX FOR MCDONALD’S
CORPORATION

PURPOSE:
Monitoring competitors’ performance and strategies is a key aspect of an external audit. This
exercise is designed to give you practice evaluating the competitive position of organizations in a
given industry and assimilating that information in the form of a Competitive Profile Matrix.

INSTRUCTIONS:

1. Gather information from Assurance of Learning Exercise 1A. Also, turn back to the
Cohesion Case and review the section on competitors (pages 33-35).

2. On a separate sheet of paper, prepare a Competitive Profile Matrix that includes

McDonald’s, Burger King Holdings, and Yum! Brands, Inc.

3. Turn in your Competitive Profile Matrix for a class work grade.

Answer
The following is what a typical answer might look like.

 List critical success factors identified in the internal and external analysis.

 Assign to each factor a weight from .0 (not important) to 1.0 (very important). These weights
show the relative importance. The total of all the weights should equal 1.0.

 Assign a 1-4 rating to each factor to describe the factor: 1= major weakness, 2 = minor
weakness, 3 = minor strength, and 4 = major strength.

 Multiply each factor’s weight by its rating to get a weighted score.

 Sum the weighted scores for each variable to determine the total weighted score for the
organization.

 Do the same for one or more competing organizations using the same critical success factors
and weights.
 McDonald's YUM! Brands Burger King
Critical Success Factors Weight Rating Score Rating Score Rating Score
Global Presence 0.13 4 0.52 3 0.39 2 0.26
Market Share 0.07 4 0.28 3 0.21 3 0.14
Product Quality 0.09 3 0.27 2 0.18 4 0.36
Customer Satisfaction 0.08 2 0.16 3 0.24 4 0.32
Financial Stability 0.14 4 0.56 2 0.28 3 0.42
Technology 0.08 4 0.32 3 0.24 3 0.16
Product Development 0.05 4 0.20 3 0.15 2 0.10
Brand Awareness 0.16 4 0.64 3 0.48 3 0.32
Price Competitiveness 0.13 4 0.52 3 0.39 3 0.26
Diversification 0.07 3 0.21 4 0.28 3 0.14
TOTALS: 1.00 3.68 2.84 2.48
ASSURANCE OF LEARNING EXERCISE 3E:
DEVELOPING A COMPETITIVE PROFILE MATRIX FOR MY
UNIVERSITY

PURPOSE:
Your college or university competes with all other educational institutions in the
world, especially those in your own state. State funds, students, faculty, staff,
endowments, gifts, and federal funds are areas of competitiveness. Other areas
include athletic programs, dorm life, academic reputation, location, and career
services. The purpose of this exercise is to give you practice thinking
competitively about the business of education in your state.

INSTRUCTIONS:

1. Identify two colleges or universities in your state that compete directly with
your institution for students. Interview several persons, perhaps classmates,
who are aware of particular strengths and weaknesses of those institutions.
Record information about the two competing universities.

2. Prepare a Competitive Profile Matrix that includes your institution and the
two competing institutions. Include at least the following ten factors in your
analysis:
a. Tuition costs
b. Quality of faculty
c. Academic reputation
d. Average class size
e. Campus landscaping
f. Athletic programs
g. Quality of students
h. Graduate programs
i. Location of campus
j. Campus culture

3. Submit your Competitive Profile Matrix to your instructor for evaluation.

 Answer

A template is provided below.

 List critical success factors identified in the internal and external analysis.

 Assign to each factor a weight from .0 (not important) to 1.0 (very

important). These weights show the relative importance. The total of all the
weights should equal 1.0.

 Assign a 1-4 rating to each factor to describe the factor: 1= major weakness,
2 = minor weakness, 3 = minor strength, and 4 = major strength.

 Multiply each factor’s weight by its rating to get a weighted score.

 Sum the weighted scores for each variable to determine the total weighted
score for the organization.

 Do the same for one or more competing organizations using the same critical
success factors and weights.

University 1: University 2: University 3:

W
Critical Success Factors Weight Rating Rating WS Rating WS
S
Tuition costs

Quality of faculty

Academic reputation

Average class size

Campus facilities

Athletic programs

Quality of students

Graduate programs

Location of campus

Campus culture

Totals 1.0