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

Sundaram Foods Ltd. assigns weights to external factors in an External Factor Evaluation (EFE) matrix, weights summing to 1.00, and rates each from 1 (poor response) to 4 (superior response). Opportunities: growing demand (weight 0.30, rating 4); export incentives (0.20, rating 3). Threats: rising raw material cost (0.25, rating 2); new low-cost entrant (0.25, rating 1). What is the total weighted score and its meaning?

The total weighted score is 2.55, calculated as 1.20 plus 0.60 plus 0.50 plus 0.25. Since the EFE matrix average is 2.50, the firm is responding slightly better than average to its external opportunities and threats.

  1. A2.55, above the average of 2.50, so the firm responds slightly better than averageCorrect
  2. B2.55, below the average of 3.00, so the firm responds poorly
  3. C2.30, below the average of 2.50, so the firm responds poorly
  4. D1.45, as only threats are scored, so the firm is highly vulnerable

Explanation

Weighted scores: 0.30x4=1.20; 0.20x3=0.60; 0.25x2=0.50; 0.25x1=0.25. Total = 2.55. The EFE average is 2.50, so 2.55 is marginally above average. Option 2 uses the wrong average of 3.00, and the others use wrong totals.

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