COMPREHENSIVE STRATEGY FORMULATION FRAMEWORK
The Strategy Formulation Framework is a systematic approach to developing strategies
that align with an organization’s vision, mission, and goals. It ensures that strategic decisions
are well-informed, consider internal and external factors, and are actionable. Below is a detailed
framework divided into three main stages: Input, Matching, and Decision-Making.
Stage 1 (Input Stage) : Consist of EFE, IFE and Competitive Profile Matrix
The Internal Factor Evaluation (IFE) Matrix and External Factor Evaluation (EFE) Matrix
are strategic tools used to analyze the internal and external environment of an organization.
These tools help in identifying key internal strengths and weaknesses (IFE) and external
opportunities and threats (EFE).
Steps to Creating the IFE Matrix
1. Identify Key Internal Factors: The company/organization must list down 10-20
factors, including both strengths and weaknesses. Example: strong brand reputation
(strength); lack of skilled worker (weakness)
2. Assign weights: Assign a weight to each factor based on its importance to the
organization’s success (0.0 = not important to 1.0 = very important). The total weight
must equal to 1.0
3. Rate each factor: Assign a rating from 1 to 4 where 4 is major strength, 3 is minor
strength, 2 is minor weakness, and 1 is major weakness.
4. Calculate weighted scores: Multiply each factor's weight by its rating to get the
weighted score.
5. Determine the Total Weighted Score: Sum all weighted scores. Scores close to 4.0
indicate strong internal performance; scores near 1.0 indicate weak performance.
Score Range Performance Level
3.50 to 4.00 Very Strong Internal Performance
2.50 to 3.49 Strong Internal Performance
1.50 to 2.49 Weak Internal Performance
1.00 to 1.49 Very Weak Internal Performance
If the total weighted score is 2.50 or higher, the organization is leveraging its internal
strengths effectively and mitigating its weaknesses to some extent.
If the total weighted score is below 2.50, the organization is struggling with internal
weaknesses or failing to capitalize on its strengths.
IFE Matrix Sample
Internal Factors Weight Rating Weighted Score
Strong brand reputation 0.15 4 0.60
High production efficiency 0.10 3 0.30
Poor customer service 0.20 1 0.20
Innovative product design 0.25 4 1.00
Limited market penetration 0.30 2 0.60
Total 1.00 2.70
Steps to creating the EFE Matrix
1. Identify key external factors: List 10–20 factors, including opportunities (e.g., market
expansion, technological advancements) and threats (e.g., new competitors,
regulatory changes).
2. Assign Weights: Assign a weight to each factor based on its impact on the
company’s success (0.0 = not important to 1.0 = very important). Total weights must
equal 1.0.
3. Rate each factor: Assign a rating from 1 to 4:
4 = Excellent response to the opportunity/threat
3 = Above-average response
2 = Below-average response
1 = Poor response
4. Calculate weighted scores: Multiply the rate by each factor
5. Determine the total weighted score: Sum all weighted scores. Scores close to 4.0
suggest strong responses to external factors, while scores near 1.0 suggest weak
responses.
Score Range Performance Level
3.50 to 4.00 Very Strong External Performance
2.50 to 3.49 Strong External Performance
1.50 to 2.49 Weak External Performance
1.00 to 1.49 Very Weak External Performance
If the total weighted score is 2.50 or higher, the organization is effectively
capitalizing on external opportunities and managing threats.
If the total weighted score is below 2.50, the organization is struggling to take
advantage of opportunities or to address external threats adequately.
EFE Matrix Sample:
External Factors Weight Rating Weighted Score
Growing e-commerce 0.25 4 1.00
market
Increasing competition 0.20 2 0.40
Economic recovery 0.15 3 0.45
Technological 0.30 4 1.20
advancements
Regulatory challenges 0.10 1 0.10
Total 1.00 3.15
After getting the weighted scores for both IFE and EFE, we plot them in an IE Matrix
or Internal-External Matrix
(IFE score on x-axis and EFE score on y-axis)
CPM: is a strategic management tool used to evaluate an organization's performance
relative to its key competitors by assessing critical success factors.
Steps:
1. Identify Critical Success Factors: These are key areas that affect industry
success, e.g., customer service, market share, product quality, brand reputation,
etc.
2. Assign Weights: Allocate weights to each factor based on its importance (0.0 =
not important, 1.0 = extremely important). The total weight must equal 1.0.\
3. Rate each Competitor: Assign ratings from 1 to 4 for each factor:
1 = Major Weakness
2 = Minor Weakness
3 = Minor Strength
4 = Major Strength
4. Calculate weighted scores: Multiply the weight by the rating for each factor. Sum
these to get a total score.
Critical Success Weight Competitor Competitor Competitor
Factors A B C
Brand reputation 0.20 4 (0.80) 3 (0.60) 2 (0.40)
Customer service 0.15 3 (0.45) 2 (0.30) 4 (0.60)
Market share 0.25 3 (0.75) 4 (1.00) 2 (0.50)
Product Quality 0.20 4 (0.80) 3 (0.60) 2 (0.40)
Advertising 0.20 3 (0.60) 2 (0.40) 4 (0.80)
Effectiveness
Total weighted score 1.00 3.40 2.90 2.70
Company A (3.40): Leads the industry due to strong brand reputation and product
quality.
Competitor B (2.90): Excels in market share but lags in customer service and
advertising.
Competitor C (2.70): Has strengths in advertising but weaker overall compared to
Company
Use of the CPM Matrix
Identify Strengths and Weaknesses: Understand where your organization excels
or falls behind relative to competitors.
Strategic Focus: Prioritize areas needing improvement, such as enhancing
customer service or market share.
Competitive Positioning: Highlight where competitors are vulnerable and focus
resources accordingly.
