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CS Professional · Strategic Management and Corporate Finance · Strategic Analysis and Planning

Meridian Engineering Ltd is assessing a unit using weighted industry attractiveness factors. Market size has weight 0.40 and rating 4, profitability has weight 0.35 and rating 3, and competitive intensity has weight 0.25 and rating 2 (ratings out of 5, higher is better). What is the weighted industry attractiveness score?

The weighted score is 0.40 times 4 plus 0.35 times 3 plus 0.25 times 2, which equals 1.60 plus 1.05 plus 0.50, or 3.15. Weighting reflects each factor's importance, unlike a simple average of 3.00 that treats them equally.

  1. A3.15Correct
  2. B3.00
  3. C2.85
  4. D3.65

Explanation

Score = (0.40 x 4) + (0.35 x 3) + (0.25 x 2) = 1.60 + 1.05 + 0.50 = 3.15. The weights sum to 1.00. A simple average of 4, 3 and 2 gives 3.00, which ignores the weights and is wrong.

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