Elsewedy Electric – 2009

Case Notes Prepared by: Dr. Victor Sohmen

Case Authors: Marina Apaydin, Alaa AbdelRahman,
Maha Eshak, and Mira Ezzo

A. Case Abstract

Elsewedy Cables (www.elsewedyelectric.com), an Egyptian multinational with a

market share of over 50 percent of the Egyptian market, owns more than 23
production facilities in 12 different countries, exporting to 110 countries across the
globe. Elsewedy Cables is considered one of the oldest and most successful industrial
and trading business groups across the Middle East and North Africa (MENA) region.
It is the leading manufacturer of integrated cables and electrical products in the
Middle East. Elsewedy Cables has many different departments, which manage and
produce several electrical products including transformers, wires and cables, energy
management, telecom electrical products, wind energy generation, and other
turnkey projects. The company is seeking further growth internationally, and is
determined to find the right opportunities and strategies for expansion. Mohamed
Elsewedy, the managing director of several segments at Elsewedy Cables, recently
confronted some difficult strategic decisions regarding the expansion of the
company. This case considers the company’s strategic position and market
opportunities, and how the strategic decision-making process for growth might be
executed.

B. Vision Statement (Actual)

“Elsewedy Electric (Cable Division) seeks to be the industry leader in high-quality

electrical products at competitive prices in the international arena.”

C. Mission Statement (Actual)

“Elsewedy Electric (Cable Division) is an Egyptian high-quality electrical products

manufacturer, seeking international expansion from its present supply,
manufacturing, marketing, and distribution base in Egypt.”

Mission Statement (Proposed)

With our skilled and dedicated workforce (9), our mission at Elsewedy Electric (Cable
Division) is to be a producer of electrical solutions (wire and cables, electrical
products, turnkey projects, and wind energy) (2) targeted to customers (1) in the
Middle East, North Africa, and Europe (3, 5) who value reliable products and services
(2), at reasonable prices (8) without compromising our long-standing reputation for
high quality (4, 7, 8), as we make the most of our knowledge and experience (4) to

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expand and transform the company from a manufacturing to a “solutions”
multinational (6, 7).
1. Customer
2. Products or services
3. Markets
4. Technology
5. Concern for survival, profitability, and growth
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees

D. External Audit

CPM – Competitive Profile Matrix

The Competitive Profile Matrix (CPM) identifies a firm’s major competitor(s) and its
particular strengths and weaknesses in relation to its strategic position. Elsewedy
Electric’s relative strengths and weaknesses based on the case details are portrayed
in the weighted scores. There are five main local and six key global competitors
identified in the case, but only three local and two international competitors are
described. These five competitors may be considered as representative of the overall
competition faced by Elsewedy. Their weighted scores are estimates based on their
strengths and weaknesses in terms of the critical success factors explicitly or
implicitly reflected in the case.

Overall, it is seen that NKT Cables is a close competitor to Elsewedy Electric, with
Energia trailing far behind, Prysmian and El Giza consolidating their strengths in
product quality, and Electro capturing significant market share commensurate with
its size and capabilities. To combat the strengths of its competitors, Elsewedy Electric
would do well to increase its customer base with a clear-cut market expansion and
penetration plan, and a more focused product line. Further, with its low-cost
advantage through commendable vertical integration, Elsewedy Electric could
embark aggressively on a coherent expansion drive backed by efficient advertising
and image-building.

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 Elsewedy El Giza Electro Energia Prysmian NKT
Cables Cables
LOCAL COMPETITORS INTERNATIONAL
COMPETITORS

Rating

Rating

Rating

Rating

Rating

Rating

ScoreWeighted
ScoreWeighted

ScoreWeighted

ScoreWeighted

ScoreWeighted

ScoreWeighted
Weight
Critical Success Factors
Price Competition 0.08 3 0.24 2 0.16 3 0.24 3 0.24 3 0.24 3 0.24
Global Expansion 0.11 4 0.44 3 0.33 1 0.11 4 0.44 4 0.44 4 0.44
Management 0.07 3 0.21 3 0.21 2 0.14 2 0.14 3 0.21 2 0.14
Technology 0.09 3 0.27 2 0.18 3 0.27 3 0.27 3 0.27 4 0.36
Product Lines 0.10 4 0.40 3 0.30 2 0.20 3 0.30 3 0.30 4 0.40
Customer Loyalty 0.10 3 0.30 4 0.40 3 0.30 3 0.30 3 0.30 3 0.30
Market Share 0.09 4 0.36 3 0.27 4 0.27 2 0.18 3 0.27 3 0.27
Advertising 0.07 2 0.21 4 0.28 3 0.21 2 0.14 4 0.14 3 0.21
Product Quality 0.10 3 0.30 4 0.40 2 0.20 4 0.40 4 0.40 4 0.40
Product Image 0.10 3 0.30 4 0.40 2 0.20 3 0.30 3 0.30 4 0.40
Financial Position 0.09 3 0.27 3 0.27 2 0.18 3 0.27 3 0.27 3 0.27
TOTAL 1.00 3.30 3.20 2.32 2.98 3.14 3.43

Opportunities

1. The European market is promising, with the advantage of tariff-free

transportation across EU nations
2. Middle Eastern and North African nations such as Syria, Saudi Arabia, and
Algeria are turning out to be profitable markets
3. Excess capacity from Egypt can be channeled to the newly emerging
European market
4. The financial crisis has proved to be an opportunity for expansion into Europe
5. Egypt’s varied natural resources and industrial products could be attractive
for backward integration
6. The acquisition of Iskraemeco has expanded opportunities for electrical
services
7. Wind Energy is a promising division which promotes generation of alternative
power

Threats

1. Expansion into the European market connotes the risk of tackling new
cultures
2. The company faces competition from five local and six international firms
3. Co-operation with competitors as Elsewedy’s favored customers may backfire
if the latter switch loyalties
4. Italy and Spain could be risky markets in terms of relationships with Egypt

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External Factor Evaluation (EFE) Matrix

An External Factor Evaluation (EFE) Matrix allows strategists to summarize and

evaluate economic, social, cultural, demographic, environmental, political,
governmental, legal, technological, and competitive information. Elsewedy is in a
comfortable position as the industry leader in Egypt with 55 percent market share
(and 8th in global ranking). This provides the necessary capability to harness
opportunities in the external environment because of a favorable industrial climate in
the MENA and Europe. Consequently, the threats facing Elsewedy are far fewer than
the opportunities.

Key External Factors Weight Rating Weighted

Score

Opportunities
1. The European market is promising, with the
advantage of tariff-free transportation across 0.12 4 0.48
EU nations
2. Middle Eastern and North African nations such
as Syria, Saudi Arabia, and Algeria are turning 0.08 3 0.24
out to be profitable markets
3. Excess capacity from Egypt can be channeled
to the newly emerging European market 0.08 3 0.24

4. The financial crisis has proved to be an

opportunity for expansion into Europe 0.10 4 0.40

5. Egypt’s varied natural resources and industrial

products could be attractive for backward 0.07 3 0.21
integration
6. The acquisition of Iskraemeco has expanded
opportunities for electrical services 0.10 4 0.40

7. Wind Energy is a promising division which

promotes generation of alternative power 0.08 3 0.24

Threats
1. Expansion into the European market connotes
the risk of tackling new cultures 0.07 2 0.14

2. The company faces competition from five local

and six international firms 0.12 4 0.48

3. Co-operation with competitors as Elsewedy’s

favoured customers may backfire if the latter 0.08 2 0.16
switch loyalties
4. Italy and Spain could be risky markets in terms
of relationships with Egypt 0.10 2 0.20

Total 1.00 3.19

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The average total weighted score is considered to be 2.5. A total weighted score of
4.0 indicates that an organization is responding in an outstanding way to existing
opportunities and threats in its industry. In other words, the firm’s strategies
effectively take advantage of existing opportunities and minimize the potential
adverse effects of external threats. A total score of 1.0 indicates that the firm’s
strategies are not capitalizing on opportunities or avoiding external threats. The total
weighted score of 3.19 suggests that Elsewedy has been proactive in identifying the
opportunities and threats it faces, and has embarked on a serious review of its
potential for growth, its capabilities, and its limitations. Firm action has been planned
for expansion into new markets.

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Product Positioning Matrix

After markets have been segmented so that a firm can target particular customer
groups, the next step is to find out what customers want and expect. Many firms
have become successful by filling the gap between what producers see, and
customers perceive, as good service. Product positioning entails developing
schematic representations that reflect how a firm’s products or services compare
with their competitors’ regarding dimensions most important to success in the
industry. Two such matrices are presented below for Elsewedy and its competitors as
indicated above.

Product Positioning Matrix for Price and Product Image

Product Image
(High)

NKT Cables El Giza

Elsewedy
Prysmian Energia

Electro
Price (low) Price (High)

Product Image
(Low)

As depicted in the Product Positioning Matrix above for Price vs. Product Image,
Elsewedy has a good product image consistent with a reasonable price – though the
image is not as high as that of the local El Giza and the international NKT Cables of
Denmark. Despite its strong presence with high market share in the Middle East and
North Africa (MENA), Elsewedy needs to build up its image further in Europe and
other parts of the world. As the company has begun to give more attention to
providing “electrical solutions” rather than being just a “manufacturer” – through
after-sales service and consulting – its image in the market should become
wholesome and prominent. The spread of Elsewedy’s manufacturing and distribution
centres outside of Egypt into other parts of the Middle East – and into North Africa
and Europe – is salutary. This would again be consistent with keeping the prices at
reasonable levels through more economical and streamlined logistics following the
expansion drive.

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 Product Positioning Matrix for Market Share and Quality

Quality (High)

Elsewedy
NKT Cables
Energia El Giza
Prysmian

Market Share Market Share (High)

(low)

Electro

Quality (Low)

It can be seen from the above Product Positioning Matrix for Market Share vs.
Quality that Elsewedy is clearly ahead of the pack. NKT Cables, Energia, and El Giza
are also reputed for quality, but lag behind Elsewedy in market share. Electro, being
a government-owned company, is sluggish in reacting to market needs, quality
requirements, and marketing policies because of its slack financial control. Prysmian,
on the other hand, has a moderate position in both market share and product
quality, as it is still developing its services. Elsewedy needs to capitalize on its image
as a high-quality producer, and extend the same image to its services and consulting
aspects to retain and build on its commendable market share.

E. Internal Audit

Strengths

1. Elsewedy is a highly reputed firm in the MENA with four diversified segments
2. The company has an extensive and wide variety of electrical products and
services
3. Elsewedy has the largest production in Egypt with over 50 percent of the
market share
4. The Elsewedy family owns 75 percent of the company, allowing speedy
decision-making
5. The company has successfully entered the U.K. and France in the EU

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 6. It is a price leader producing quality electrical goods and services
competitively
7. In 2007 Elsewedy acquired Iskraemeco, the Slovakian energy solutions
company
8. Elsewedy is currently well established internationally in MENA and Western
Europe
9. The company targets all three sectors: public, private, and professional end-
users
10. Elsewedy has strong business links with competitors as its favored customers

Weaknesses

1. “Elsewedy targets almost everyone” – this suggests a lack of focus

2. The wire and cables sales in Egypt are predicted to decline when New Cairo is
completed
3. Turnkey projects with potential contribution from the other segments are
executed mostly in Egypt and Africa only

Financial Information (Income Statement only)

Summary Income & Expenditure* of Elsewedy Electric (2011-

Estimated)
Wire & Electrical Turnkey Wind TOTAL
SEGMENTS Cables Products Projects Energy
Sales 8,262 2,448 2,038 2,825 15,574
Sales Growth from 2010-2011 26% 18% 15% 352% 41.0%
Gross Profit 1,664 785 509 742 3,700
Gross Profit Margin % 20.1% 32.0% 25.0% 26.2% 23.8%
Source: Adapted from Company Financial Statements, and from Authors’ Estimates
*Amounts are in Millions L.E.

It is evident from the Income Statement results of Elsewedy and its four segments
that gross profit is nearly 24 percent due to robust performance by all four
segments. The three-and-a-half-fold increase in sales growth by the Wind Energy
segment is remarkable, and is indicative of the future potential of this products-and-
services segment – fuelled by the Elsewedy Wind Energy Group (SWEG) set up in
October 2008. The production of proprietary wind turbine parts in Egypt with Spanish
collaboration and other joint ventures is indicative of astute strategic initiatives. Of
the three remaining segments, the wire & cables segment has returned the highest
profit margin of 26 percent. This is not surprising, considering the upgradation of the
manufacturing facilities in Egypt, Sudan, and Syria – with new factories set up in
2010 in Algeria, Saudi Arabia, Qatar, and Libya. With 32 percent of this capacity in
low-competition countries, the future looks bright for the wires & cables segment.
The recession affected profitability for the electrical products segment, but Elsewedy
has survived that. All the segments are being transformed into “electrical solutions”
rather than “electrical products.” This again, augurs well for the future profitability of
Elsewedy. The plan to initiate a production centre in Italy for the European market
will help to streamline logistics strategies in the process of a profit and service-
oriented expansion.
Internal Factor Evaluation (IFE) Matrix

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A summary step in conducting an internal strategic-management analysis is to
construct an Internal Factor Evaluation (IFE) Matrix. This strategy-formulation tool
summarizes and evaluates the major strengths and weaknesses in the functional
areas of a business, and it also provides a basis for identifying and evaluating
relationships among them. Itemized below are the strengths and weaknesses of
Elsewedy – from the information provided, far more strengths than weaknesses
could be identified.

Key Internal Factors Weight Rating Weighted

Score

Strengths
1. Elsewedy is a highly reputed firm in the MENA
with four diversified segments 0.10 4 0.40
2. The company has an extensive and wide
variety of electrical products and services 0.09 4 0.36

3. Elsewedy has the largest production in Egypt

with over 50 percent of the market share 0.10 4 0.40

4. The Elsewedy family owns 75 percent of the

company, allowing speedy decision-making 0.06 2 0.12

5. The company has successfully entered the U.K.

and France in the EU 0.07 3 0.21

6. It is a price leader producing quality electrical

goods and services competitively 0.06 3 0.18

7. In 2007 Elsewedy acquired Iskraemeco, the

Slovakian energy solutions company 0.09 3 0.27

8. Elsewedy is currently well-established

internationally in MENA and Western Europe 0.09 4 0.36

9. The company targets all three sectors: public,

private, and professional end-users 0.06 3 0.18

10. Elsewedy has strong business links with some

competitors as its favoured customers 0.05 2 0.10

Weaknesses
1. “Elsewedy targets almost everyone” – this
suggests a lack of focus 0.09 3 0.27

2. The wire and cables sales in Egypt are

predicted to decline when New Cairo is completed 0.07 2 0.14

3. Turnkey projects with potential contribution

from the other segments are executed mostly in 0.07 3 0.21
Egypt and Africa only
Total 1.00 3.20

Regardless of how many factors are included in an IFE Matrix, the total weighted
score can range from a low of 1.0 to a high of 4.0, with the average score being 2.5.
Total weighted scores well below 2.5 characterize organizations that are weak

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internally, whereas scores significantly above 2.5 indicate a strong internal position.
In light of this, Elsewedy’s position with a score of 3.20 is stable, considering that it
is in a strong growth and expansion mode with a focus on respectable profits.

F. SWOT Strategies

Any organization, whether military, product-oriented, service-oriented,

governmental, or even athletic, must develop and execute good strategies to win. A
good offense without a good defense, or vice versa, usually leads to defeat.
Developing strategies that use strengths to capitalize on opportunities could be
considered an offense, whereas strategies designed to improve upon weaknesses
while avoiding threats could be termed defensive. Taking into consideration the
above identified External Audit of the Opportunities and Threats (OT) and the
Internal Audit of Strengths and Weaknesses (SW), a SWOT Matrix can be compiled
and is presented below as: SO (strengths-opportunities) Strategies; WO
(weaknesses-opportunities) Strategies; ST (strengths-threats) Strategies; and, WT
(weaknesses-threats) Strategies. Matching key external and internal factors is the
most difficult part of developing a SWOT Matrix, requiring good judgment – and
there is no one best set of matches.

Strengths Weaknesses
1. Elsewedy is a highly 1. “Elsewedy targets
reputed firm in the almost everyone” – this
MENA with four suggests a lack of focus
diversified segments 2. The wire and cables
2. The company has an sales in Egypt are
extensive and wide predicted to decline
variety of electrical when New Cairo is
products and services completed
3. Elsewedy has the 3. Turnkey projects with
largest production in potential contribution
Egypt with over 50 from the other
perrcent of the market segments are executed
share mostly in Egypt and
4. The Elsewedy family Africa only
owns 75 percent of the
company, allowing
speedy decision-
making
5. The company has
successfully entered
the U.K. and France in
the EU
6. It is a price leader
producing quality
electrical goods and
services competitively
7. In 2007 Elsewedy
acquired Iskraemeco,

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 the Slovakian energy
solutions company
8. Elsewedy is currently
well-established
internationally in MENA
and Western Europe
9. The company targets
all three sectors:
public, private, and
professional end-users
10. Elsewedy has
strong business links
with some competitors
as its favoured
customers

Opportunities S-O Strategies W-O Strategies

1. The European market is 1. Promote Elsewedy’s 1. Market expansion in
promising, with the high reputation to Europe could target all
advantage of tariff-free expand into the three market sectors –
transportation across European market from private, government,
EU nations its initial inroads into and professional end-
2. Middle Eastern nations the U.K. and France users – as modeled in
such as Syria, Saudi 2. Existing profitable Egypt
Arabia, and Algeria are markets in the MENA 2. All the four segments
turning out to be should be consolidated (especially wire & cables
profitable markets to fuel the expansion and turnkey projects)
3. Excess capacity from into Europe could be operated in
Egypt can be channeled 3. Expand on the Wind Europe with existing
to the newly emerging Energy segment to know-how and
European market gain market leadership marketing prowess from
4. The financial crisis has and high profits in the MENA markets
proved to be an area
opportunity for 4. Invest in electrical
expansion into Europe services to balance the
5. Egypt’s varied natural current prominence of
resources and industrial the electrical products
products could be segment
attractive for backward
integration
6. The acquisition of
Iskraemeco has
expanded opportunities
for electrical services
7. Wind Energy is a
promising division
which promotes
generation of
alternative power
Threats S-T Strategies W-T Strategies
1. Expansion into the 1. Elsewedy could avail of 1. Expansion into Europe
European market its high reputation as a should be a combination

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 connotes the risk of
tackling new cultures
2. The company faces
competition from five
local and six
international firms 2. The company should
3. Co-operation with some
competitors as favored
customers may backfire
if the latter switch
loyalties
4. Italy and Spain could be
risky markets in terms
of relationships with 3. The strategic
Egypt
price leader in MENA,
U.K., and France to
establish its
manufacturing 2. The intention to
presence in Italy
deploy its wide variety
of electrical products
and services
aggressively as 3. Elsewedy could
“electrical solutions” to
tackle competitors for
market expansion
acquisition of
Iskraemeco to enhance
quality and after-sales
services can be used as
a pattern for successful
future acquisitions to
effect horizontal
integration
of aggression and
caution to avoid a lack
of focus.
establish European
production in Italy
should be reviewed in
light of political and
cultural risks.
collaborate in turnkey
projects with
competitors for more
equitable relationships
and low-risk market
expansion.

SO Strategies use a firm’s internal strengths to take advantage of external

opportunities. Elsewedy can capitalize on its high reputation as a price leader with
high-quality products, and make concerted efforts to expand into the European
market.

WO Strategies aim at improving internal weaknesses by taking advantage of

external opportunities. Consistent with expanding and relocating production facilities,
Elsewedy could gain depth in their diversification strategy. All three sectors
(government, private, and end-user professionals) could be targeted to varying
extents.

ST Strategies use a firm’s internal strengths to avoid or reduce the impact of

external threats. Elsewedy could use its strength in existing markets in MENA to
expand into Europe, providing “electrical solutions” to customers.

WT Strategies are defensive tactics directed at reducing internal weaknesses and

avoiding external threats. Elsewedy could take a defensive stance by consolidating
its position in the home turf (primarily Egypt), whilst setting up manufacturing
facilities in Italy – and other new overseas locations – by combining aggression and
caution.

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G. SPACE Matrix

The Strategic Position and Action Evaluation (SPACE) Matrix below indicates whether
aggressive, conservative, defensive, or competitive strategies are most appropriate
for a given organization. The axes of the SPACE Matrix represent two internal
dimensions (Financial Strength [FS] and Competitive Advantage [CA]) and two
external dimensions (Environmental Stability [ES] and Industry Strength [IS]).
These four factors are perhaps the most important determinants of an organization’s
overall strategic position.

FS
Conservative +7
Aggressive
ELSEWEDY
+6

+5

+4

+3

+2

+1

CA IS
-7 -6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 +7

-1

-2

-3

-4

-5

-6

-7
Defensive
Competitive
ES

Financial Strength (FS) Environmental Stability (ES)

Return on Investment 4 Risk involved in business -2
Leverage 5 Technological Changes -2
Liquidity 4 Price Range of Competing Products -3
Working Capital 4 Competitive Pressure -3
Cash Flow 4 Barriers to Entry -1

Financial Strength (FS) Average 4.2 Environmental Stability (ES) Average -2.2

Competitive Advantage (CA) Industry Strength (IS)

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Market Share -1 Growth Potential 6
Product Quality -1 Financial Stability 3
Customer Loyalty -3 Ease of Market Entry 3
Product life cycle -3 Resource Utilization 4
Technological Know-How -2 Profit Potential 5
Control over suppliers & distributors -2 Technological know-how 4
Productivity, capacity utilization 5

Competitive Advantage (CA) -2.0 Industry Strength (IS) Average 4.2

Average

Y-axis: FS + ES = 4.2 + (-2.2) = +2.0

X-axis: CA + IS = (-2.0) + (4.2) = +2.2

The directional vector of the SPACE Matrix above indicates that Elsewedy is on an
aggressive growth trajectory in a stable industry. According to the results of the
SPACE Matrix, it is recommended that Elsewedy embark on an Aggressive
Strategy that balances all extant external and internal realities impinging on the
company. The company is already backward integrated (acquiring raw material for
production of textiles); forward integrated (taking ownership of distribution channels
and nodes such as warehouses and retail store chains); and, with scope for further
horizontal integration (acquiring similar firms towards oligopoly or monopoly) with
the acquisition of the Slovakian energy solutions company Iskraemeco in 2007. It
appears from the overall strategic thrust of the various analyses including the CPM,
EFE, IFE, SWOT, Financial Information, and Product Positioning Matrix, that Elsewedy
is unlikely to adopt an unrelated diversification strategy as the electrical giant’s
mainstay is electrical products, services, and solutions. Elsewedy will also need to
embark on a market penetration and market development strategy, together with
product development to meet quality, price, and demand for various market
segments that could be targeted in MENA and Europe.

H. Grand Strategy Matrix

All organizations can be positioned in one of the Grand Strategy Matrix’s four
strategy quadrants. The Grand Strategy Matrix is based on two evaluative
dimensions: competitive position and market (industry) growth. Any industry whose
annual growth in sales exceeds 5 percent could be considered to have rapid growth
(Elsewedy’s annual sales growth is a whopping 41 percent!). Appropriate strategies
for an organization to consider are listed in sequential order of attractiveness in each
quadrant of the matrix. Firms located in Quadrant I of the Grand Strategy Matrix are
in a strong strategic position with rapid market growth. For these firms,

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continued concentration on current markets (market penetration and market
development) and products (product development) is an appropriate strategy (see
also the SPACE Matrix above). It is unwise for a Quadrant I firm to shift notably from
its established competitive advantage(s). When a Quadrant I organization has
excessive resources, then backward, forward, or horizontal integration may be
effective strategies – as in the case of Elsewedy. When a Quadrant I firm is too
heavily committed to a single product, then related diversification may reduce the
risks associated with a narrow product line. Elsewedy has a broad product line across
its four related segments (Wire and Cables, Electrical products, Turnkey Projects,
Wind Energy). Quadrant I firms can afford to take advantage of external
opportunities in several areas. They can take risks aggressively when necessary – as
recommended for Elsewedy (see SPACE Matrix).

Rapid Market
Growth Quadrant I
Quadrant II
ELSEWEDY

Strong
Weak
Competitive Competitive
Position
Position

Quadrant III
Quadrant IV
Slow Market Growth

1. Market development
2. Market penetration
3. Product development
4. Backward integration
5. Forward integration
6. Horizontal integration
7. Related diversification

According to its Quadrant I location in the Grand Matrix, Elsewedy is in a strong

competitive position, and underscores the competitive stance reflected in the SPACE
Matrix, with the possible addition of Related Diversification by branching into various
strategic business units located in various countries to optimize production, market
expansion, product diversification, and overall profits. When a Quadrant I firm is too

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heavily committed to a single product, then related diversification may reduce the
risks associated with a narrow product line. Quadrant I firms can afford to take
advantage of external opportunities in several areas; they can take risks
aggressively when necessary.

I. The Quantitative Strategic Planning Matrix (QSPM)

The only analytical technique in the literature designed to determine the relative
attractiveness of feasible alternative actions is the Quantitative Strategic Planning
Matrix (QSPM), which comprises Stage 3 of the strategy-formulation analytical
framework. This technique objectively indicates which alternative strategies are best.
The QSPM uses input from Stage 1 analyses and matching results from Stage 2
analyses to decide objectively among alternative strategies. That is, the EFE Matrix,
IFE Matrix, and Competitive Profile Matrix that make up Stage 1, coupled with the
SWOT Matrix, SPACE Matrix, and Grand Strategy Matrix that make up Stage 2,
provide the needed information for setting up the QSPM (Stage 3). The QSPM is a
strategic decision-making tool that allows strategists to evaluate alternative
strategies objectively, based on previously identified external and internal critical
success factors. Like other strategy-formulation analytical tools, the QSPM requires
good intuitive judgment.

The left column of a QSPM consists of key external and internal factors (from Stage
1), and the top row consists of feasible alternative strategies (from Stage 2).
Specifically, the left column of a QSPM consists of information obtained directly from
the EFE Matrix and IFE Matrix. In a column adjacent to the Critical Success Factors,
the respective weights received by each factor in the EFE Matrix and the IFE Matrix
are recorded. The top row of a QSPM consists of alternative strategies derived from
the SWOT Matrix, SPACE Matrix, and Grand Strategy Matrix. These matching tools
usually generate similar feasible alternatives. However, not every strategy suggested
by the matching techniques has to be evaluated in a QSPM. Strategists should use
good intuitive judgment in selecting strategies to include in a QSPM.

Strategy 1 Strategy 2 Strategy 3

Expansion Deploy Existing
into Europe products profitable
should be a and services markets in
combination aggressively the MENA
of as should be
aggression “electrical consolidated
and caution solutions” to fuel the
to avoid a for market expansion
lack of focus expansion into Europe

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Key Factors Weight AS TAS AS TAS AS TAS

Opportunities
1. The European market is
promising, with the 0.12 4 0.48 4 0.48 1 0.12
advantage of tariff-free
transportation across EU
nations
2. Middle Eastern nations
such as Syria, Saudi 0.08 -- -- -- -- -- --
Arabia, and Algeria are
turning out to be
profitable markets
3. Excess capacity from
Egypt can be channeled 0.08 3 0.24 2 0.16 2 0.16
into the newly emerging
European market
4. The financial crisis has
proved to be an 0.10 3 0.30 2 0.20 4 0.40
opportunity for expansion
into Europe
5. Egypt’s varied natural
resources and industrial 0.07 -- -- -- -- -- --
products could be
attractive for backward
integration
6. The acquisition of
Iskraemeco has 0.10 2 0.20 4 0.40 3 0.30
expanded opportunities
for electrical services
7. Wind Energy is a
promising division which 0.08 2 0.16 3 0.24 3 0.24
promotes generation of
alternative power
Threats

1. Expansion into the

European market 0.07 4 0.28 1 0.07 1 0.07
connotes the risk of
tackling new cultures
2. The company faces
competition from five 0.12 2 0.24 3 0.36 3 0.36
local and six international
firms
3. Co-operation with some
competitors as favored 0.08 -- -- -- -- -- --
customers may backfire if
the latter switch loyalties
4. Italy and Spain could be
risky markets in terms of 0.10 2 0.20 1 0.10 3 0.30
relationships with Egypt
TOTAL 1.0 2.10 2.01 1.95

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Strengths
1. Elsewedy is a highly
reputed firm in the MENA 0.10 4 0.40 4 0.40 3 0.30
with four diversified
segments
2. The company has an
extensive and wide 0.09 3 0.27 3 0.27 3 0.27
variety of electrical
products and services
3. Elsewedy has the largest
production in Egypt with 0.10 -- -- -- -- -- --
over 50 percent of the
market share
4. The Elsewedy family
owns 75 percent of the 0.06 -- -- -- -- -- --
company, allowing
speedy decision-making
5. The company has
successfully entered the 0.07 4 0.28 2 0.14 1 0.07
U.K. and France in the EU
6. It is a price leader
producing quality 0.06 4 0.24 3 0.18 4 0.24
electrical goods and
services competitively
7. In 2007 Elsewedy
acquired Iskraemeco, the 0.09 3 0.27 4 0.36 3 0.27
Slovakian energy
solutions company
8. Elsewedy is currently well
established 0.09 4 0.36 4 0.36 4 0.36
internationally in MENA
and Western Europe
9. The company targets all
three sectors: public, 0.06 4 0.24 2 0.12 3 0.18
private, and professional
end-users
10. Elsewedy has strong
business links with some 0.05 3 0.15 4 0.20 3 0.15
competitors as its favored
customers
Weaknesses
1. “Elsewedy targets almost
everyone” – this suggests 0.09 -- -- -- -- -- --
a lack of focus
2. The wire and cables sales
in Egypt are predicted to 0.07 -- -- -- -- -- --
decline when New Cairo
is completed
3. Turnkey projects with
potential contribution 0.07 -- -- -- -- -- --
from the other segments
are executed mostly in

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 Egypt and Africa only
SUBTOTAL 1.00 2.21 2.03 1.84
SUM TOTAL 4.31 4.05 3.79
ATTRACTIVENESS SCORE

J. Recommendations

Strategy #1: Elsewedy should expand into Europe with a combination of aggression
and caution in order to avoid a lack of focus – contrary to the observation, “Elsewedy
targets almost everyone.”

K. Epilogue

Elsewedy, based in Egypt as a well-established and highly-regarded manufacturer of

a broad range of electrical products and services, is poised to expand into the
international arena, specifically Europe. It is resolved to transform itself from a
manufacturing firm to an “electrical solutions” company. This of course broadens its
mandate to include an after-sales and consulting role, apart from production of high-
quality electrical products, wire and cables, turnkey projects, and wind energy
equipment. These four related segments of operation provide corporate, small
business, government, and professional end-user customers with a comprehensive
choice of electrical solutions to enhance customer satisfaction. With an international
presence in over 110 countries, the company enjoys significant sales revenue and

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profits fuelled by a commanding market share in most areas of operation – 55
percent locally (MENA), and 8th in the world market.

Following a multi-pronged analysis using judgment and reasoning coupled with

numerical and graphical outputs, three strategic choices were presented for
Elsewedy:

(1) Expansion into Europe should be a combination of aggression and caution to

avoid a lack of focus.

(2) The company should deploy its wide variety of electrical products and services
aggressively as “electrical solutions” to tackle competitors for market expansion.

(3) Existing profitable markets in the MENA should be consolidated to fuel the
expansion into Europe.

As the Sum Total Attractiveness scores for the three possible and related strategies
are only 0.26 apart, all three strategies could be used, in the order of priority of their
scores.

According to the comprehensive and decisive Quantitative Strategic Planning Matrix

(QSPM), the first choice, with the highest weight (4.31), has emerged as the first
option among the three promising alternatives. It is therefore recommended that
Elsewedy embark on expanding its operations into Europe with a combination of
aggression and caution to avoid a lack of focus. This could be buttressed by the
secondary strategy of deploying the company’s wide variety of electrical products
and services aggressively as “electrical solutions” to tackle competitors for market
expansion. Thirdly, existing profitable markets in the MENA should be consolidated to
fuel this timely and ambitious expansion into a promising European arena.

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