Strategic management is often called a "capstone course" because it requires students to use knowledge from prior courses to chart organizations' futures. Performing an external audit generally requires the most time in strategy formulation, as it involves identifying competitors' strengths and weaknesses. Strategy implementation is often the most difficult stage because it requires commitment from all employees. It is important to integrate both intuition and analysis in strategic management, as neither alone is sufficient for good strategic decisions. Vision and mission statements greatly facilitate reaching agreement on strategies, objectives, and policies.

1. Chapter1
ISSUES FOR REVIEW AND DISCUSSION 1.Explain why Strategic Management often is called a ³capstone
course.´ Answer: Business policy is commonly called a capstone course because students¶ major
responsibility in this class is to use all knowledge gained in prior courses to chart the future direction of
different organizations. 2. What aspect of strategy formulation do you think requires the most time?
Why? Answer: Important aspects of strategy formulation include developing a business mission,
performing an external audit, conducting an internal audit, generating alternative strategies, and
choosing among alternative strategies. Performing an external audit generally takes the most time. For
example, identifying competitors¶ strengths and weaknesses is an essential aspect of the external audit.
Effective use of the Internet can reduce the time required for performing an external audit.
3. Why is strategy implementation often considered the most difficult stage in the strategic-
management process? Answer: Strategy implementation is often considered to be the most difficult
stage in strategic management because it requires discipline, sacrifice, commitment, and hard work
from all employees and managers. It is always more difficult to do something than to say you¶re going
to do it.
25 |P a g e 4. Why is it so important to integrate intuition and analysis in strategic management?
Answer: Neither intuition nor analysis alone is sufficient for making good strategic decisions. Intuition,
based on one¶s past experiences, judgment, and ³gut´ feelings, does not include the use of analytical
strategic-management concepts that have been developed and successfully tested in the business
world. To ignore these techniques that are based on historical learning is like trying to reinvent the
wheel. However, no analytical tools can capture all aspects of a given organization¶s culture and
situation. Nor can analytical tools assimilate all the subjective information that must be considered in
strategic management, such as personalities, emotions, values, beliefs, customs, and ethical factors.
Thus, it is very important to integrate intuition and analysis in strategic management.
5. Explain the importance of a vision and mission statement. Answer: Reaching agreement on formal
vision and mission statements can greatly facilitate the process of reaching agreement on an
organization¶s strategies, objectives, and policies. Organizational success depends on reasonable
agreement on these issues, so a clear mission statement is a most important strategic-management
tool.
6. Discuss relationships among objectives, strategies, and policies. Answer: Long-term objectives and
strategies are products of strategy formulation. Short-term (annual) objectives and policies are products
of strategy implementation. Firms should translate long-term objectives into annual objectives.
Similarly, strategies should be supported with clear policies.
7. Why do you think some chief executive officers fail to use a strategic-management approach to
decision making? Answer: Some chief executive officers, strategists, and organizations have been
successful, to date, without using strategic-management concepts and techniques. However, success

2. today is no guarantee for success tomorrow. The business world is becoming global in scope; technology
is changing the nature of competition in all industries. Strategic management enables organizations to
recognize and adapt to change more readily; successfully adapting to change is the key to survival and
prosperity. There is no good alternative approach to strategic management.
8. Discuss the importance of feedback in the strategic-management model. Answer: Note in the
strategic-management model that feedback is critically important. Changes can occur that impact all
strategic-management activities. Feedback allows these changes to be identified and adjustments to be
made. Feedback in the strategic-management process promotes the creation of a climate for two-way
communication and, thus, allows esprit de corps to be achieved in an organization.
9. How can strategists best ensure that strategies will be effectively implemented? 26 |P a g e Answer:
Strategists can best assure that strategies formulated will be effectively implemented by involving as
many managers as possible in the strategy formulation process.Also, it is important to communicate
effectively why changes are needed. 10. Give an example of a recent political development that changed
the overall strategy of an organization. Answer: Students¶ answers will vary. Some possible examples
might include 1) the recent tariffs placed on steel imported into the US and how that has changed
strategy for steel companies both at home and abroad, 2) the change in guidelines and requirements for
airport safety and subsequent changes in the strategies of airlines, or 3) the political investigations into
the Enron case and potential changes that may result in major accounting/consulting firms.
11. Who are the major competitors of your college or university? What are their strengths and
weaknesses? How successful are these institutions compared to your college? Answer: Answers to this
question will vary by institution. 12. If you owned a small business, would you develop a code of
business conduct? If yes, what variables would you include? If no, how would you ensure that your
employees were following ethical business standards?
Answer: It is advisable for all businesses, large and small, to have a clear code of business ethics. Such
codes provide a guideline for appropriate behavior and aid in decision making. Chris MacDonald states
these guidelines (available at www.ethicsweb.ca) for developing a code of ethics:
j What will be thepurpose of your new code? Is it to regulate behavior? To inspire?j Different kinds of
documents serve different purposes. Is your new document intended to guide people or to set out
requirements? Is it really a Code of Ethics that you need? You might consider creating a Statement of
Values, a Policy, a Mission Statement, and a Code of Conduct. jA code of ethics should be tailored to the
needs and values of your organization. jMany ethics codes have two components. First, anaspirational
section, often in the preamble, that outlines what the organization aspires to, or the ideals it hopes to
live up to. Second, an ethics code will typically list some rules or principles, which members of the
organization will be expected to adhere to.
j Will your new ethics document include some sort of enforcement? If so, what kind? jOften the
principles or values listed in an ethics document will be listed in rough order of importance to the
organization. The ordering need not be strict, but generally the value or principle listed first will have a
natural prominence. j Think carefully about theprocess by which you create your new code. Who will be

3. involved?A small working group? Or all the people affected by the code? How will you distill the needs
of your organization and the beliefs of your members into a document? The process may matter as
much as the final product.
27 |P a g e j How will your new code be implemented? How will it bepublicized, both inside and outside
of your organization? What steps, if any, will be taken to ensure that the values embodied in your code
get implemented in organizational policies and practices? jHow/when will your code be
reviewed/revised? 13. Would strategic-management concepts and techniques benefit foreign
businesses as much as domestic firms? Justify your answer. Answer: The answer to this question is yes.
Many foreign businesses are using strategic- management concepts and techniques effectively. Students
could look in the England-based journalLong Range Planning to read about foreign firms also benefiting
from strategic- management ideas.Another good foreign-based business journal that carries strategic-
management articles is the Journal of Management Studies.
14. What do you believe are some potential pitfalls or risks in using a strategic-management approach to
decision making? Answer: There is a risk of too little top management support for the process. There is a
risk of too little involvement by line managers and employees. There is a risk that top managers will
underestimate the importance of understanding and commitment. 15. In your opinion, what is the
single major benefit of using a strategic-management approach to decision making? Justify your answer.
Answer: The single major benefit is the potential for improved understanding of the business and
industry on the part of all managers and employees. Understanding generally leads to increased
commitment, which, in turn, leads to creativity, innovativeness, and overall cooperativeness. The
process is more important than the plan.Also, the strategic- management process allows an organization
to initiate and influence, rather than just respond and react to its environment. That is, it allows an
organization to be proactive, rather than reactive, in controlling its own destiny. Strategic-management
concepts provide an objective basis for allocating resources and for reducing internal conflicts that can
arise when subjectivity alone is the basis for major decisions.
16. Compare business strategy and military strategy.
28 |P a g e Answer: As discussed in the latter part of this chapter, business and military strategy are
similar in many respects. Many of the ideas developed in business strategy were first formulated as
military strategy. Both military and business organizations have competitors. Afundamental difference
between military and business strategy is that business strategy is formulated, implemented, and
evaluated with the assumption of competition, while military strategy is based on an assumption of
conflict. 17. What do you feel is the relationship between personal ethics and business ethics? Are they,
or should they be, the same? Answer: Personal ethics is the foundation of business ethics. Business
ethics encompass more situations than personal ethics, but a personal ethics doctrine still provides a
basis for all business ethics decisions. 18. Why is it important for all business majors to study strategic
management, as most students will never become a chief executive officer or even a top manager in a
large company?

4. Answer: Strategic management takes place at multiple levels within an organization. Although most
students may never become the CEO of a corporation, they may become the ³branch manager´ or
department head of a larger firm. In these roles, they may be asked to complete a strategic plan for
their branch or department. In addition, employees at all levels are frequently asked to contribute to the
development of their firm¶s strategic plan.As a result, an understanding of the strategic-management
process is important.
19. Explain why consumption patterns are becoming similar worldwide. What are the strategic
implications of this trend? Answer: As a result of improvements in global communications, consumers
across the world are increasingly being exposed to the same advertising, the same cultural events, the
same news, and the same forms of entertainment.As a result, the tastes of consumers across the world
are converging. This development helps to explain why consumption patterns are becoming similar
worldwide.
29 |P a g e 20. What are the advantages and disadvantages of beginning export operations in a foreign
country? Answer: The following are the primary advantages and disadvantages of initiating export
operations in a foreign country. Advantages: yExport operations can absorb excess capacity, reduce unit
costs, and spread economic risks over a wider number of markets. y Firms can gain new customers for
their products and services, thus increasing revenues. y Competitors in foreign markets may not exist, or
competition may be less intense than in domestic markets. Disadvantages: y Firms confront different
and often little understood social, cultural, demographic, and competitive forces when doing business
overseas. yWeaknesses of competitors in foreign lands are often overestimated, and strengths are often
underestimated. yLanguage, cultural, and value systems differ among countries, and this can create
barriers of communication and other problems. 21. Describe the content available on the SMCO
(www.strategyclub.com) website. Answer: The SMCO website provides links to websites with
information useful for case analysis such as corporate websites, business analysis services, news sites,
magazines, governmental sites, and financial ratio analyses. It also provides links to job search websites,
graduate school websites, and websites related to strategic planning. Several software packages are
available for purchase on the site including a template for generating the matrices required for case
analyses.
22. List four financial and four nonfinancial benefits of a firm engaging in strategic planning. Answer:
Businesses engaging in strategic planning experience the following financial benefits. They show
significant improvement in sales, profitability, and productivity compared to firms without strategic
planning activities. Firms using strategic planning generally exhibit superior long-term financial
performance relative to their industry and seem to make more informed decisions with good
anticipation of both short and long- term consequences. They are also prepared for fluctuations in their
external and internal environments.
In addition to the financial benefits, firms using strategic planning also experience nonfinancial benefits.
These include an enhanced awareness of external threats, an

5. 30 |P a g e improved understanding of competitors¶ strategies, increased employee productivity,
reduced resistance to change, and a clearer understanding of performance-reward relationships.
23. Why is it that a firm can sustain a competitive advantage normally for only a limited period of time?
Answer: A firm can sustain a competitive advantage for only a certain period of time due to rival firms.
These competing firms will attempt to imitate the competitive advantage in order to undermine the
leader. 24. Why is it not adequate to simply obtain a competitive advantage? Answer: Because other
firms will constantly attempt to undermine firms with competitive advantages and imitate those
advantages, organizations must constantly strive to achieve a sustained competitive advantage. 25. How
can a firm best achieve a sustained competitive advantage? Answer: A sustained competitive advantage
can best be achieved by 1) continually adapting to changes in external trends and events and internal
capabilities, competencies, and resources, and by 2) effectively formulating, implementing, and
evaluating strategies that capitalize upon those factors.
26. Compare and contrast ISO 14000 and 14001. Answer: ISO 14000 focuses on operating in an
environmentally-friendly manner. The standards were created by the International Organization for
Standardization and provide universal guidelines for standardization. ISO 14000 is a series of standards
in the environmental field. ISO 14001 is part of the 14000 family of standards. 14001 standards offer a
universal technical standard for environmental compliance in fields such as environmental auditing,
environmental performance evaluation, environmental labeling, and life-cycle assessment
Chapter 2
ISSUES FOR REVIEW AND DISCUSSION
1. Compare and contrast vision statements with mission statements in terms of composition and
importance. Answer: Many organizations develop both a mission statement and a vision statement.
Whereas the mission statement answers the question, ³What is our business?´ the vision statement
answers the question, ³What do we want to become?´ Both statements are essential for firm success.
2. Do local service stations need to have written vision and mission statements? Why or why not?
Answer: Less formality and detail characterize strategic management in small businesses such as a local
service station. However, local service stations are not immune to competitive pressures, changes in
technology, changes in demographic factors, and resistance to change. Therefore, it is recommended
that even the smallest organization develop a written mission statement. Such a formal statement
indicates vision and good management, which could enhance a small business's efforts to secure bank
financing and to develop good supplier, customer, and employee relationships.
3. Why do you think organizations that have a comprehensive mission statement tend to be high
performers? Does having a comprehensive mission cause high performance? Answer: Having a
comprehensive mission statement does not guarantee or cause high performance. However, a
comprehensive mission statement can contribute significantly to

6. 38 |P a g e high performance.As described in the chapter, a comprehensive mission statement provides
numerous benefits that usually translate into high performance. 4. Explain why a mission statement
should not include strategies and objectives. Answer: A mission statement should not include strategies
and objectives because the statement needs to be broad in scope to effectively provide a basis for
performing an external and internal audit and for generating and selecting among alternative strategies.
Including specific strategies and objectives in a mission statement could reduce the level of innovative
and creative thinking in an organization.Also, including specific strategies and objectives in a mission
statement jeopardizes the potential for the statement to be widely accepted by all managers and
employees of the organization.Acceptance of a clear mission is a prerequisite for gaining acceptance for
strategies and objectives of the organization.
5. What is your college or university¶s self-concept? How would you state that in a mission statement?
Answer: These answers will vary by institution. See the examples in the chapter. 6. Explain the principal
value of a vision and mission statement. Answer: Many organizations develop both a mission statement
and a vision statement. Whereas the mission statement answers the question, ³What is our business?´
the vision statement answers the question, ³What do we want to become?´ Both the vision statement
and the mission statement ensure unanimity of purpose within the organization and make important
statements about ³who the firm is´ and ³what it wants to become´ to outside stakeholders.
7. Why is it important for a mission statement to be reconciliatory? Answer: A mission statement needs
to be reconciliatory because the claims of a firm's various stakeholders often conflict.An effective
mission statement reconciles major differences among key stakeholders. 8. In your opinion, what are
the three most important components to include in writing a mission statement? Why? Answer: All of
the evaluative criteria described in Chapter 2 are important, but three are particularly important:
customers, products or services, and markets. 9. How would the mission statement of a for-profit and a
nonprofit organization differ? 39 |P a g e Answer: The mission statements of profit versus nonprofit
organizations would not differ in format, except for the survival, growth, and profitability component.
10. Write a vision and mission statement for an organization of your choice. Answer: This is a
worthwhile classroom activity. 11. Conduct an Internet search with the keywords ³vision statement´ and
³mission statement.´ Find company vision and mission statements and evaluate the documents. Write a
one-page report on your findings.
Answer: This is a worthwhile activity for students to perform as a homework assignment followed by
class discussion of the assortment of statements identified. 12. Who are the major stakeholders of the
bank that you do business with locally? What are the major claims of those stakeholders? Answer: The
major stakeholders of a bank include commercial customers, consumer customers, shareholders,
communities, managers, and employees. Each stakeholder group relies upon the organization.
Customers expect the bank to perform in a manner that protects them financially. Shareholders expect
the firm to be profitable. Local communities rely upon the bank to provide jobs and pay taxes.
Employees rely upon the bank for their income.
13. How could a strategist¶s attitude toward social responsibility affect a firm¶s strategy? What is your
attitude toward social responsibility? Answer: Firms must seek to address the concerns of many

7. stakeholder groups. Social policies ultimately affect the environment directly and indirectly. The beliefs
of the primary strategists in the organization will absolutely affect how social policy is addressed in the
organization¶s mission statement and strategies. Some strategists believe that organizations have
tremendous social obligations. Others believe that organizations have no obligation to do any more for
society than is legally required. Most strategists agree that the first social responsibility of any business
must be to make enough profit to cover the costs of the future, because if this is not achieved, no other
social responsibility can be met. Strategists should examine social problems in terms of potential costs
and benefits to the firm, and they should address social issues that could benefit the firm most.
14. List the seven characteristics of a mission statement. Answer: A mission statement has the following
characteristics: 1) it is broad enough to allow for the generation and consideration of a range of feasible
alternative objectives and 40 |P a g e strategies without stifling management; 2) it can reconcile
differences among and appeal to an organization¶s diverse stakeholders; 3) it is less than 250 words; 4)
it arouses positive feelings and emotions about the organization; 5) it should be enduring; 6) it
generates a favorable impression of the firm, and 7) it is useful for judging opportunities and strategies.
15. List the benefits of having a clear mission statement. Answer: Mission statements provide the
following benefits: 1) agreement on the purpose of the organization, 2) standard for allocation of
resources, 3) basis for organizational climate, 4) focal point for individuals to identify with the
organization¶s purpose and direction, 5) facilitation of the translation of objectives into a work
structure, and 6) specification of organizational purposes into objectives. Mission statements are
essential in guiding strategic planning.
16. How often do you feel a firm¶s vision and mission statement should be changed? Answer: This
depends on the individual firm. Vision and mission statements should be evaluated on a regular basis to
determine if they are still appropriate. Firms may wish to change the statements in times of crisis and in
times of success. Ultimately the vision and mission should be in tune with the company and its
environment.
Chapter 3
53 |P a g e ISSUES FOR REVIEW AND DISCUSSION 1. Explain how to conduct an external strategic-
management audit. Answer: An effective approach for conducting an external strategic-management
audit consists of four basic steps: (1) select key variables, (2) select key sources of information, (3) use
forecasting tools and techniques, and (4) construct an EFE Matrix. 2. Identify a recent economic, social,
political, or technological trend that significantly affects financial institutions. Answer: Economic²Interest
rates remain low.
Social²Many states are passing no smoking ordinances.
Political²Eastern European countries are experiencing political instability.

8. Technological²Use of the Internet is doubling every 100 days. 3. Discuss the following statement: Major
opportunities and threats usually result from an interaction among key environmental trends rather
than from a single external event or factor.
Answer: This statement is accurate. It reveals how complex the external audit part of strategy
formulation can be. There are an infinite number of interactions among key external factors. 4. Identify
two industries experiencing rapid technological changes and three industries that are experiencing little
technological change. How does the need for technological forecasting differ in these industries? Why?
Answer: The computer industry, communications industry, and aerospace industry are experiencing
rapid technological change. Three industries that are experiencing little technological change are the
forest products industry, the shipping industry, and the dairy industry. 5. Use Porter¶sfive-forces model
to evaluate competitiveness within the U.S. banking industry. Answer: Porter identifies five competitive
forces that determine the intensity of competition in an industry and the total value of profits created in
a particular industry. The five forces are 1) new entrants, 2) substitute products or services, 3)
bargaining power of suppliers, 4) bargaining power of buyers, and 5) rivalry among existing firms.A key
to selecting appropriate generic strategies is to analyze these competitive forces in terms of trends,
opportunities, and threats facing the firm.
Ask your students to apply an analysis of these forces to the banking industry.
54 |P a g e 6. What major forecasting techniques would you use to identify (1) economic opportunities
and threats and (2) demographic opportunities and threats? Why are these techniques most
appropriate?
Answer: With the advent of sophisticated computers, simultaneous systems of regression equations
have become the most widely used approach for forecasting economic variables. Scenario development
is the most popular of all techniques for social and demographic forecasting, although surveys and
market research are also widely used.
7. How does the external audit affect other components of the strategic-management process? Answer:
In countless ways, external audit results can and often do affect all other components of the strategic-
management model. 8. As the owner of a small business, explain how you would organize a strategic-
information scanning system. How would you organize such a system in a large organization? Answer: In
both small and large organizations, strategists could assign specific publications to particular individuals
who could then monitor their assigned source and regularly report strategic information to a
coordinator.Also, both small businesspeople and chief executive officers of large businesses could
effectively use on-line databases.
9. Construct an EFE Matrix for an organization of your choice. Answer: An EFE Matrix allows strategists
to summarize and evaluate economic, social, cultural, demographic, environmental, political,
governmental, legal, technological, and competitive information. There are five steps in developing an
EFE Matrix as illustrated in Table 3-9.  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

9. 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. While each answer will vary for this question, students
should follow these guidelines.
55 |P a g e 10. Make an appointment with a librarian at your university to learn how to use on-line
databases. Report your findings in class. Answer: This is an interesting and beneficial library exercise.
Many libraries have a business liaison who will come to your class to illustrate the use of these
databases. 11. Give some advantages and disadvantages of cooperative versus competitive strategies.
Answer: Cooperative strategies are generally less costly than competitive strategies. Cooperative
strategies between domestic and foreign companies can facilitate entry into world markets. However,
competitive strategies recognize that survival of the fittest is an underlying philosophy of business not
only in the United States, but also in most of the world. Identifying competitors¶ strengths and
weaknesses is, thus, an integral and vital part of the external audit.
12. As strategist for a local bank, explain when you would use qualitative versus quantitative forecasts.
Answer: Qualitative forecasts are most appropriate when historical data are not available and when
relationships among key variables are expected to vary greatly in the future. In addition, when
conditions are exploratory in nature, qualitative data can be very useful. Quantitative forecasts require
access to quantitative data.
13. What is your forecast for interest rates and the stock market in the next several months? As the
stock market moves up, do interest rates always move down? Why? What are the strategic implications
of these trends?
Answer: As the stock market goes up, interest rates usually go down. An underlying reason for this trend
is that investors find stocks more attractive than certificates of deposit as investment opportunities
when stock prices rise. The primary strategic implications of these trends concern the relative
attractiveness of stock versus debt as a source of capital to finance strategy implementation.As stock
prices move up and interest rates move down, debt becomes more attractive as a source of capital.
14. Explain how information technology affects strategies of the organization where you have worked
most recently. Answer: Answers will vary for each student. If asking this question as a class exercise,
encourage students to think about how information technology might have represented a strength or
weakness for that organization. In addition, mention that rapidly changing information technology can
represent a threat or opportunity for a firm.
56 |P a g e 15.Let¶s say your boss develops an EFE Matrix that includes 62 factors. How would you
suggest reducing the number of factors to20? Answer: Let a group of knowledgeable individuals in the

10. organization evaluate the relative importance of each factor by assigning a 1 = not important, 2 =
somewhat important, and 3 = very important. Then add the ratings each factor receives. The 20 factors
with the highest sum score should be included in the EFE Matrix.
16. Discuss the ethics of gathering competitive intelligence. Answer: Gathering competitive intelligence
information is not corporate espionage because all the information needed is available by ethical
means, mostly accessible through the Internet. Firms owe it to all their stakeholders to gather
competitive intelligence and to perform this activity systematically and ethically.
17. Discuss the ethics of cooperating with rival firms. Answer: The norms of personal ethics serve as a
foundation for business ethics and provide a basis for cooperating with rival firms. Engaging in unethical
practices, even with rival firms, will jeopardize a firm¶s credibility and respect in the industry. 18. Visit
the SEC website at www.sec.gov and discuss the benefits of using information provided here. Answer:
This is a good Internet exercise for students. The SEC website contains a plethora of information
including SEC forms and filings, information for investors, accountants, mutual fund managers, etc.
While the information can be useful for conducting company business and planning, it is also a good
source of environmental information particularly related to regulations and the financial environment.
19. What are the major differences between U.S. and multinational operations that affect strategic
management? Answer: The external environment is much broader for a firm that conducts multinational
operations than for a firm that only sells domestically.As a result, a firm that conducts multinational
operations must consider a broader range of information in its external analysis, which may affect how
its strategies are structured and implemented.
57 |P a g e 20. Why is globalization of industries a common factor today? Answer: The following are
trends that are contributing to the globalization of industries around the world: y Corporations in every
corner of the globe are taking advantage of the opportunity to share in the benefits of worldwide
economic development. y Markets are shifting rapidly and in many cases are converging in terms of
tastes, trends, and prices. y Innovative transport systems are accelerating the transfer of technology,
and shifts in the nature and location of production systems are reducing the response time to changing
market conditions. y More and more countries around the world are welcoming foreign investment and
capital. y E-commerce and the instant transmission of money and information across continents. 21. Do
you agree with I/O theorists that external factors are more important than internal factors in a firm
achieving competitive advantage? Explain both your and their position. Answer: While I/O theorists
claim that industry factors are more important than internal factors, research findings suggest that only
20% of a firm¶s profitability can be explained by industry factors and 36% explained by internal factors.
Regardless, it is not a question of whether external or internal factors are more important. Rather,
effective integration and understanding of both external and internal factors is the key to securing and
keeping a competitive advantage.
22. Define, compare, and contrast the Weights vs Ratings in an EFEM vs IFEM. Answer: The weight in an
EFE Matrix indicates the relative importance of that factor to being successful in the firm¶s industry. The
rating indicates how effectively the firm¶s current strategies respond to each key external factor. Thus,

11. the weight allows more important factors to receive more consideration while the rating evaluates how
well the firm handles each factor. Weights are industry-based but ratings are company-based.
The weight in an IFE also indicates the relative importance of the factor to the firm¶s successfulness in
the industry. However, in the IFE the factors under consideration are internal factors rather than
external factors. Ratings in the IFE indicate whether the factor is a major or minor weakness or strength.
Like in the EFE, weights industry-based while ratings are company- based. The IFE is presented in
Chapter 4.
23. Develop a Competitive Profile Matrix for your university. Include 6 factors. Answer:  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. While each answer will vary for this question,
students should follow these guidelines. A template is provided below. University 1: University 2: Critical
Success Factors Weight Rating Score Rating Score Tuition costs Quality of faculty Academic reputation
Average class size Campus landscaping Athletic programs Quality of students
Graduate programs
Location of campus
Campus culture Totals 1.0 24. List the 10 external areas that give rise to opportunities and threats.
Answer: The ten external areas are economic, social, cultural, demographic, environmental, political,
government, legal, and technological.