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Analysis of IFE, EFE and QSPM matrix on business development strategy

How to cite this article;

Zulkarnain, Arif., Wahyuningtias, Dianka., & Putranto, Trias S. (2017). Analysis of IFE, EFE and QSPM matrix on business development strategy. Proceeding of The 4th Friendly City Conference. October 12th, 2017. Medan. Indonesia

 

 

Analysis of IFE, EFE and QSPM matrix on business development strategy

A Zulkarnain,  D Wahyuningtias and T S Putranto

Hotel Management Department, Bina Nusantara University

Jl. KH Syahdan No.9, Palmerah, Jakarta 11480, Indonesia

Email: arief.zulkarnain@binus.edu, dwahyuningtias@binus.edu

Abstract. IFE matrix, EFE matrix and QSPM matrix are business strategy tools that can be used to identify threat, opportunity, weakness, strength as internal external business factors. Danti’s Deli Bakery main business is to provide pastry product and distribute to other food and everage outlet all around Jakarta. Thus, Danti’s Deli Bakery requires development strategy in order to growth and stays competitive. This is descriptive research. Data was collected from focus group discussion, questionnaire, interview, observation and literature review. The purposes of this research are (1) to identify and evaluate internal and external factors, (2) to formulate alternative strategy toward business development program, and (3) to recommend effective business strategies. The result shows that Danti’s Deli Bakery should apply product differentiation strategy. Implementation of this study is providing recommendation for pastry and bakery industry to establish successful business strategy.

Keywords: business strategy, IFE, EFE and QSPM matrix, Bakery

 

1.Introduction

Based on data from the Ministry of Cooperatives and Small and Medium Enterprises and Statistic Centre Agency (2016) mentions the growth of SMEs during the year 2016 showed symptoms better than the previous year. The total number of centers in 2016 as many as 7,437 centers. The highest number of food sector (40 percent), handicrafts and others (23 percent), and clothing (16 percent). The food sector is a dominant player and constantly growing. Many companies will always compete to be superior to other companies.

The bakery business in general is a promising prospect because the need to get alternative food is still wide open, especially the people in urban areas.

Hill & Westbrook suggest SWOT is strategic planning process for analysing and positioning an organization (2016) [1]. The company must set the target market, and communicate the unique advantages of its positioning and also have to develop several important factors from its competitors’ unparalleled offerings and services, such as the taste of the cake, the shape of the cake, and the packaging.

Ghorbani et. al., state strengths, weaknesses, opportunities and threats (SWOT) and quantitative strategic planning matrix (QSPM) analysis techniques were directed to recognize the essential management strategies. [2]

The operations problems are such as the maximum unused production capacity due to lack of storage, and limited product differentiation, background of the formulation of appropriate strategies. A research is needed, which strategy is appropriate to be used in further development.

Companies must make strategic plans to gain competitive advantage. The formulation of the problem in this study can be detailed as follows,

  • What are the external and internal factors affecting Danti’s Deli’s business?
  • What are the alternative business development strategies available to Danti’s Deli based on the factors that affect the company’s condition?
  • Which business development strategy is a priority for Danti’s Deli?

The purposes of this research are:

  1. To identify external factors and internal factors that influence the performance of Danti’s Deli.
  2. To formulate alternative strategies of business development of Danti’s Deli.
  3. To determine the priority of Danti’s Deli business development strategy.

 

  1. Literature review

2.1 Strategy

AG Lupu et, al., state A SWOT analysis recognizes and focus on internal and external attributes that are useful and beneficial to accomplishing the goal of company. [3] Companies need those matrices that are in accordance with all sizes and types of corporate organizations, so they can be used to assist in identifying, evaluating and choosing the most appropriate strategies. In order to elevate the strengths point of society economy and income of the population there for the strategy target is needed. [4]  Strategy is needed to be able to determine the strengths and weaknesses of the company which can be used to become the leading company in the competition. To become effective the strategic management is significantly needed to elevate the strength factor in the competition. [5] TOWS matrix was used to improve another of resources management strategies. [6]

 

2.2 External Factor Evaluation and Internal Factor Evaluation

The SWOT analysis aims to analyze and evaluate business processes during corporate strategic planning. Focus on internal and external factors that will be used in achieving company’s goals. [3] External forces influence the type of product developed, the characteristics of the market segmentation and positioning strategy, the type of services offered, and the business choices that they want to acquire or sell.

Internal analysis is an attempt to determine the organizational capability in operations and achieve performance. Determination of internal strategic factors can be done by comparing and evaluating the past performance of the company, key competitors of the company, and industry.

The internal strengths and weaknesses, external threats and opportunities can be summarized into ; the SO strategy, the ST strategy, the WO strategy and the WT strategy. [7] Aspects analyzed include aspects of operations management, marketing, finance, production, research and development, human resources, and management information systems.

 

2.3 Quantitative Strategic Panning Matrix (QSPM)

QSPM is a technique that objectively indicates which is the best alternative strategy. Evaluate alternative strategies based on external and internal strategic factors that have been identified previously. QSPM requires subjective decisions, making decisions throughout the process increasing the likelihood that the final strategy decision for the organization. The function of QSPM analysis is to define the comparative interest of the application of different strategy. The result of analysis QSPM can be define by the significance strategies that could be applied the relative interest by companies. [8]

An important component of QSPM is the weighting of each of the previously identified internal and external factors as well as the attractiveness score (AS) of a value indicating relative attractions for each chosen strategy. The highest attractiveness score indicates the alternative strategy which is the main choice.

 

  1. Methodology

3.1. Research method

This research was conducted at Danti’s Deli production house in Cibinong, Bogor District. The time of study began in February 2017 until April 2017. The method used is descriptive method. With this method can be determined external and internal strategic factors, alternative strategies, up to strategy priorities. The required data consists of primary data. Primary data is data obtained through interviews, discussions and Focus Group Discussions (FGD) activities to particular respondents. Secondary data is data obtained from internal source company, literature study, print and electronic media, and other information related to the research topic (Sugiyono, 2010). [9]

 

3.2. Data collection and technique

The data collection in this research is conducted by using several techniques. Primary data obtained from the observation and this activity is done by interviewing and filling out questionnaires by internal respondents of the company and external respondents companies (experts). Secondary data were obtained from various sources: companies, related institutions, the internet, and other literature studies related to this study.

Primary data collection techniques are conducted; interviews, questionnaires and forum discussion groups. Primary data collection techniques using purposive sampling technique is intentional sampling of some respondents who have been determined based on position, position, knowledge, and other factors that indicate the competence of respondents to the research topic. There are selected 6 people as respondents. Three respondents from Danti’s Deli internal party and three external respondents selected based on expert competence.

Analytical analysis are:

  1. Internal Factor Evaluation Analysis.
  2. External Factor Evaluation Analysis.
  3. SWOT Analysis.
  4. QSPM Analysis.

 

  1. Research finding

The results of external environmental analysis that resulted in several factors of opportunity and threat, after evaluation by weighting method and rank obtained value as seen below.

 

     Table 1. Results of Evaluation of External Factors

 

EXTERNAL FACTORS RATING WEIGHT SCORE
Opportunity
Increased public consumption of wheat flour 3 0.109 0.328
Increased cake business growth 3 0.095 0.286
The growth of bakery innovation 3 0.109 0.328
The development of cake business technology

 

3 0.113 0.339
Application of  information technology

 

2 0.079 0.157
TOTAL 1.438

 

Threat
The main raw material price increase 3 0.106 0.319
Fluctuation  Needed 3 0.099 0.297
consumer tastes follow the trend 3 0.102 0.306
New competitor 2 0.100 0.200
High transportation costs

 

2 0.087 0.174
TOTAL 1.295
TOTAL EFE 2.734

 

Weight value> 0, 1 indicates a very important role, while

Weight value <0, 1 indicates less important role

 

Internal factor evaluation is done by searching the average value of each internal key factor which is then compiled in an evaluation matrix for each factor, as shown below.

 

     Table 2. Internal Factor Evaluation Results

 

INTERNAL FACTOR RATING WEIGHT SCORE
Strength
Strong owner commitment 4 0.097 0.389
Have specifically products 4 0.097 0.389
Employee Competencies 3 0.091 0.272
Have good quality of the product 4 0.102 0.407
Employee loyalty to company 3 0,080 0.239
Total 1.696

 

Weakness
Marketing function is not maximized 2 0.112 0.224
Limited business capital 2 0.129 0.257
Limited and difficult access  to the production place 1 0.101 0.101
Products requiring special treatment 1 0.102 0.102
Skill of  production employee 1 0.090 0.090

 

TOTAL 0.774
TOTAL  IFE 2.470

 

Weight value> 0, 1 shows a very important role,

while the weight value <0, 1 indicates less important role

 

 

Table 3. Matriks TOWS

 

Matriks TOWS Strength Weakness
1. Strong owner commitment

2. Have specifically products

3. Employee Competencies

4. Have good quality of the product

5. Employee loyalty to company

1. Marketing function is not maximized

2. Limited business capital

3. Limited and difficult access  to the production place

4. Products requiring special treatment

5. Skill of  production employee

Opportunity    
1. Increased public consumption of wheat flour

2. Increased cake business growth

3. The growth of bakery innovation

4. The development technology of cake production

5. Application of  information technology

   
Open own outlets (O1, O3, O5, S1, S3, S4) Improve marketing function
Expanding partnership with pastry shop in Jabodetabek (O1, O2,S1,S4) (O1, O2, W1, W4, W3, O5)
 
 
 Threat    
1. The main raw material price increase

2. Fluctuation Needed

3. consumer tastes follow the trend

4.  New competitor

5. High transportation costs

Applying for a bank credit (W2, T1, T2, T3)
Diversification product variants
(T3, T4, S1, S3, T5) Investments in appropriate processing technology (W4, T1, T2,W5)
 

Priority strategy is done by using QSPM Matrix. The six established strategic alternatives are then determined by the attractiveness score (AS) of each external and internal factor. The interest rate of each factor will be multiplied by the weight of each factor to get the total attractiveness score (TAS).

 

Table 4. Total Attractiveness Score

Parameter Total Attractiveness Score (TAS)
Strategy
A B C D E F
Opportunity
Increased public consumption of wheat flour 0.437 0.437 0.437 0.219 0.328 0.437
Increased cake business growth 0.381 0.381 0.381 0.095 0.286 0.191
The growth of bakery innovation 0.437 0.328 0.437 0.328 0.328 0.328
The development of cake business technology 0.113 0.226 0.452 0.452 0.339 0.226
Application of  information technology 0.315 0.315 0.236 0.157 0.236 0.157
Threats
The main raw material price increase 0.426 0.426 0.426 0.319 0.106 0.160
Fluctuation  Needed 0.396 0.198 0.396 0.099 0.099 0.149
consumer tastes follow the trend 0.407 0.204 0.306 0.306 0.102 0.204
New competitor 0.400 0.300 0.300 0.300 0.100 0.350
High transportation costs 0.261 0.174 0.261 0.087 0.174 0.261
Strength
Strong owner commitment 0.389 0.194 0.389 0.389 0.292 0.389
Have specifically products 0.389 0.340 0.389 0.389 0.194 0.292
Employee Competencies 0.363 0.272 0.363 0.272 0.181 0.363
Have good quality of the product 0.407 0.407 0.407 0.407 0.204 0.407
Employee loyalty to company 0.080 0.159 0.080 0.319 0.159 0.239
Weakness
Marketing function is not maximized 0.448 0.448 0.448 0.224 0.224 0.280
Limited business capital 0.515 0.515 0.515 0.515 0.515 0.322
Limited and difficult access  to the production place 0.202 0.404 0.202 0.202 0.101 0.353
Products requiring special treatment 0.407 0.407 0.407 0.407 0.306 0.255
Skill of  production employee 0.090 0.090 0.269 0.359 0.180 0.269
Total 6.864 6.226 7.102 5.845 4.454 5.631
Priority 2 3 1 4 6 5

 

  1. Discussions and conclusions

The alternative strategies generated from the analysis of SWOT analysis, while taking into account the vision, mission, goals and objectives of the Danti’s Deli cake company are as follows: improving the marketing function, enhancing partnerships with cake shops in Jabodetabek, creating new product variations, On appropriate production technology, increasing capital with bank credit, opening a cake shop using its own brand.

 

No. Strategies Action should be taken
1 Add or Diversification product variants 1.  1. Improve the ability of employees by participating in product development training that is usually held by the Ministry of Industry, Trade and Cooperatives. So it will get new ideas about product development

2.  Become an active member of bakery and bakery associations such as APEBI and ABI, so the company can get product insight from other cake entrepreneurs

3.  Seek independently from various sources of information (print or electronic media) that exist about how to differentiate a product

4.  Differentiate the product by baking the cake by modifying the main ingredients, such as the addition by using rice flour, sago flour, and others.

2 Improve marketing function 1.  Improving the ability of employees by attending product marketing training that is usually held by the Ministry of Industry, Trade, and Cooperatives. So that will get new ideas about the ways of marketing the product

2.  Recruiting special employee marketing department in order to work with the maximum

3.  Have a personal homepage or blog to market their products

3 Expanding partnership with pastry shop in Jabodetabek 1.  Become an active member of bakery and bakery associations such as APEBI and ABI, so the company can get product insight from other cake entrepreneurs

2.  Immediately print legal aspect labels on product packaging

3.  Attend the exhibitions

4 Investments in appropriate processing technology 1.                        1. Re-inventory what tools are in accordance with the    conditions of Danti’s Deli.

2.                        2. Gradually invest in production technology that can support Danti’s Deli products

5 Open own outlets  with own brand 1.    Improve the ability of employees by participating in product development training that is usually held by the Ministry of Industry, Trade and Cooperatives. Get new ideas about cake trends, become clearly about the flow of business establishment.

2.    Become an active member of bakery and bakery associations such as APEBI and ABI, so the company can get product insights from other cake entrepreneurs, as well as their experience that already has a pastry shop

6 Enhancement for a bank credit 1.  Applying for a bank credit

 

Structured strategic priorities are:

(1)        Diversification product variants.

(2)        Improve marketing function.

(3)        Expanding partnership with pastry shop in Jabodetabek.

(4)        Investments in appropriate processing technology.

(5)        Open own outlets with own brand.

 

 

References          

[1] B. Phademrod, R. M. Crowder and G. B. Wills 2016 Important- Performance Analysis based SWOT analysis, International Journal of Information Management, p. 1
[2] A. Ghorbani, V. Raufirad, P. Rafiaani and H. Azadi 2015 Ecotourism sustainable development strategies using SWOT and QSPM, Tourism Management Perspectives, vol. 16, pp. 290-297
[3] A. G. Lupu, A. Dumencu, M. V. Atanasiu, C. E. Panaite and G. Dumitraşcu 2016 SWOT analysis of the renewable energy sources in Romania, IOP SCIENCE, vol. 147, pp. 1-10
[4] V. Romanyuk, A. Grinkevich, K. Akhmadeev and G. Pozdeeva 2016 Strategic planning features of subsurface management in Kemerovo Oblast,  IOP SCIENCE, vol. 43, pp. 1-4
[5] V. Romanyuk, A. Grinkevich, K. Akhmadeev and G. Pozdeeva  2016 Strategic planning features of subsurface management in Kemerovo Oblast, IOP SCIENCE, vol. 43, pp. 1-4
[6] A. D. P. Fitri, H. Boesono, A. Sabdono and N. Adlina 2017 Resources Management Strategy For Mud Crabs (Scylla spp.)In Pemalang Regency,  IOP SCIENCE, vol. 55, pp. 1 – 6
[7] L. Zhikanga 2017 Research on Development Strategy of Automobile Reverse Logistics Based on SWOT Analysis, Procedia Engineering, vol. 174, pp. 324-330
[8] M. I. Walukow and S. A. Pangemanan 2015 Developing Competitive Strategic Model Using Quantitative Strategic Planning Matrix (QSPM) Approach for Handicraft Ceramic Industry in Pulutan, Minahasa Regency, Procedia – Social and Behavioral Science, vol. 211, pp. 688 – 695
[9] Sugiyono 2010 Metode Penelitian Kuantitatif Kualitatif dan R&D, Bandung: Alfabeta

 

 

 

 

 

 


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