Question

For Mcdonalds, what is the purpose of an "External Factor Evaluation (EFE) Matrix"? How does it relate to a company’s strategy? Using the company in Discussion Question 1, identify the organization’s external three (3) opportunities and three (3) threats.

Answer 1

For McDonalds, the External factor evaluation matrix is used for the identification and evaluation of external environment of the company, which have a significant influence on the business of the company. To develop a holistic and comprehensive strategic plan, the management at McDonalds must evaluate the internal as well as the external organization considerations. The external organization considerations are the external factors, which affect the business processing of the company. These external factors are important to be taken into consideration, as the organization does not have any control on them, but they have considerable impact on the business of the company. Some of the external organizations or aspects are competitors, suppliers and vendors, customers, labor market, etc.

The generic business strategy of the company is to develop the business and maintain its competitive advantage in the market, so as to facilitate its mission of becoming the leading quick-service based restaurant brand. The analysis of EFE Matrix helps McDonalds in evaluating the external factors and moulding its business strategy to make the factors favourable for the company.

The opportunities for McDonalds are:

• New outlets development opportunity in developing countries like India and China
• The company can capitalize on the growing dining out market across the globe
• The company can evolve its business model to capitalize on the alignment of consumers towards healthy lifestyle and food

The threats for McDonalds are:

• Recession may affect the retail sales of the company
• Changing demographics is changing the inclination of the consumers towards more healthy food items
• Stiff competition from various brands like Burger King, Wendy’s and Yum! Brand