Firm Strategy Evaluator 2017 Spring Strategic Management

Firm Strategy Evaluator2017 Spring Strategic Management Ol421 Nu

Review and correct the company's internal and external factor evaluation matrices (IFEM and EFEM), ensuring that weightings sum to 1.0, accurately reflect the company's bankruptcy status, and assign appropriate ratings in alignment with the company's financial condition. Adjust the Internal/External (I/E) matrix to categorize the company correctly as in the harvest/divest category, especially considering its bankruptcy. Ensure that the financial status ratings correspond to the company's actual situation, including its stock price and financial weaknesses. Reassess and update all matrices and strategic assessments to accurately represent the company's financial health and strategic position based on the provided data and critical feedback.

Paper For Above instruction

The company, Pride of the Middle East, currently depicted in the strategic management matrices, must be reevaluated to reflect its actual financial distress, notably its bankruptcy status. According to the feedback, critical errors exist in the internal and external factor evaluation matrices (IFEM and EFEM), as well as the I/E matrix, which collectively guide strategic decision-making. Addressing these issues involves multiple adjustments to accurately portray the organization's condition, strategic posture, and external environment.

Firstly, the internal factors weighted scores in the IFEM are incorrectly calculated. The total weightings should sum to exactly 1.0; however, in the current scenario, they add up to 1.45. This discrepancy inflates the perceived internal strengths and weaknesses and skews strategic insights. To correct this, each weight associated with internal factors must be proportionally adjusted so that their sum equals 1.0, thus maintaining methodological integrity and ensuring comparability with industry standards. For example, if the sum of weights is 1.45, each weight should be divided by 1.45 to normalize the total to 1.0.

Secondly, the ratings assigned within the IFEM must reflect the company's poor financial health, specifically its bankruptcy. The previous evaluation characterized the company as “very strong” internally, which is inconsistent with its current situation. Given the company's bankruptcy, it should be rated as having major internal weaknesses. Standard rating scales typically assign a rating of 1 or 2 to major weaknesses, reflecting the organization's critical deficiencies. For example, if the scale ranges from 1 (major weakness) to 4 (major strength), the company should be rated closer to 1 or 2 for key factors, not 4. Therefore, all internal factors should be rated accordingly to reflect a very weak internal position.

Thirdly, the external factors evaluated in EFEM also need adjustment. The matrix must depict actual external opportunities and threats faced by a bankrupt company, which could include economic downturns, high competition, or industry decline. The previous version’s scores, including some potential opportunities, may be overestimated given the company's distress. Instead, external pressures should be viewed as threats, with appropriate ratings assigned. For example, opportunities might be downgraded, and threats might be rated as high (4), especially if the industry environment is adverse, and the company is unable to capitalize on external factors.

Furthermore, the I/E matrix, which categorizes the company's strategic posture, should reflect its dire condition. The company should fall into the 'harvest' or 'divest' category, indicating it is in a retrenchment or liquidation phase, not growth or build. This involves assigning the corresponding strategic quadrant in the SPACE or TOWS matrix—likely in the lower-left quadrant—rather than a growth position. This change recognizes the critical financial status and lack of viable competitive strength.

Additionally, the financial status ratings must be consistent with the company's actual financial situation. The previous data shows an extremely low stock price of $0.01 per share, no shareholder wealth, and a negative profit after tax and ROA. These indicators should be reflected with appropriate ratings such as ‘bankrupt,’ ‘bankruptcy imminent,’ or similar, depending on the rating scale used. The matrices should also incorporate the absence of financial strengths and the presence of significant weaknesses, such as high inventory levels, capacity issues, and high rework, all contributing to a poor internal assessment.

In summary, the corrected matrices need to:

• Normalize the weightings so they sum to 1.0 in IFEM.
• Adjust ratings downward to reflect the bankruptcy and poor internal strength, perhaps rating most factors as ‘major weaknesses’.
• Revalue external factors to emphasize threats and industry decline rather than opportunities.
• Reposition the company in the strategic space matrix to the 'harvest/divest' quadrant.
• Update financial ratings and indicators, such as share price and profitability measures, to match the real financial condition.

This comprehensive revision ensures the strategic analyses align with the company’s true position, providing accurate insights to inform appropriate strategic decisions—be it restructuring, divestiture, or liquidation.

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