INTERNAL FACTOR EVALUATION

(IFE) & EXTERNAL FACTOR
EVALUATION (EFE)

Ms. Rhea Martesano, MPA
Aklan State University

Definition

Internal Factor Evaluation (IFE) Matrix is a strategy tool
used to evaluate firm’s internal environment and to
reveal its strengths as well as weaknesses.

External Factor Evaluation (EFE) Matrix is a strategy
tool used to examine company’s external
environment and to identify the available
opportunities and threats

When using the EFE matrix we identify the key external opportunities and threats that are affecting or might affect a company. When looking for the strengths. • IFE Matrix. Where do we get these factors from? Simply by analysing the external environment with the tools like PEST analysis. Porter’s Five Forces or Competitive Profile Matrix. Strengths and weaknesses are used as the key internal factors in the evaluation. ask which areas of your company you could improve and at least catch up with your competitors? • The general rule is to identify 10-20 key external factors and additional 10-20 key internal factors.• EFE Matrix. but you should identify as many factors as possible. . ask what do you do better or have more valuable than your competitors have? In case of the weaknesses.

all the factors would be equally important.0 (low importance) to 1. Weights • Each key factor should be assigned a weight ranging from 0. The number indicates how important the factor is if a company wants to succeed in an industry. If there were no weights assigned. The sum of all the weights must equal 1.0 (high importance).30 or more) because the success in an industry is rarely determined by one or few factors.0. which is an impossible scenario in the real world. . Separate factors should not be given too much emphasis (assigning a weight of 0.

Strengths can only receive ratings 3 & 4. Ratings • EFE Matrix. 3 – minor strength. The ratings in external matrix refer to how effectively company’s current strategy responds to the opportunities and threats. The numbers range from 4 to 1. The numbers range from 4 to 1. as well as weights. 3 – above average response. • IFE Matrix. . are assigned subjectively to each factor. weaknesses – 2 & 1. where 4 means a major strength. where 4 means a superior response. 2 – minor weakness and 1 – major weakness. 2 – average response and 1 – poor response. Ratings. The ratings in internal matrix refer to how strong or weak each factor is in a firm. The process of assigning ratings in IFE matrix can be done easier using benchmarking tool.

The firm can receive the same total score from 1 to 4 in both matrices. In internal evaluation a low score indicates that the company is weak against its competitors. Total weighted score is simply the sum of all individual weighted scores. In external evaluation a low total score indicates that company’s strategies aren’t well designed to meet the opportunities and defend against threats. Weighted Scores & Total Weighted Scores • The score is the result of weight multiplied by rating.5 is an average score. Each key factor must receive a score. The total score of 2. .

This way you would know what competitors are doing right and what their strategies lack. . Using the Tool Step 1. Try to look at which factors could benefit the company and which ones would harm it. Do the PEST analysis first. The information from the PEST analysis reveals which factors currently affect or may affect the company in the future. capabilities. functional areas and value chain analysis and recognize the strong and weak points of the organization. you can gather some of the factors from there. Look again into the company’s resources. You should also analyze your competitors’ actions and their strategies. organizational structure. At this point. In case you have done a SWOT analysis already. Identify the key external/internal factors EFE matrix. IFE matrix. culture. so you’ll have to do additional analysis to identify more key internal factors for the matrix. the factors can be either opportunities or threats and your next task is to sort them into one or the other category. The SWOT analysis will usually have no more than 10 strengths and weaknesses.

this time you or the members of your group will have to decide what ratings should be assigned. Therefore. Using the Tool Step 2. SWOT matrix for strategies or IE matrix. Step 3. but only the ratings from 1-2 can be assigned to each weakness and 3-4 to each strength. Although. The same process is with ratings. Find out what the analysts say about the industry’s success factors and then use their opinion or analysis to assign the appropriate weights. Ratings from 1-4 can be assigned to each opportunity and threat. We assign weights based on industry analysts’ opinions. it is a more difficult process than identifying the key factors. Assign the weights and ratings Weights and ratings are assigned subjectively. Use the results IFE or EFE matrices have little value on their own. . You should do both analyses and combine their results to discuss new strategies or for further analysis. They are especially useful when building advanced SWOT analysis.

demographic. business trends. government. and environmental variables: • Economic variables • Political. What should you include in EFE Matrix? External factors can be grouped into the following groups: • Social. cultural. and legal variables .

and environmental factors.Trends in housing. demographic. business .Education .Aging population .Immigration & emigration rates .Per-capita income .Number and type of special interest groups . . careers.. shopping.Number of marriages and/or divorces .. cultural.Widening gap between rich & poor .Ethnic or racial minorities .Percentage or one race to other races . What should you include in EFE Matrix? Examples of factors: • Social.Number of births and/or deaths .

Import and export factors and barriers ..Level of competitiveness (see the Michael Porter's Five Forces model) . investments.Level of disposable income .Industry properties .Government spending .Product life cycle (see the Product life cycle page) .Economies of scale .Foreign exchange rates .Level of savings.Inflation . .Growth of the economy .Barriers to market entry .Product differentiation . and capital spending . What should you include in EFE Matrix? Economic factors.Stock market trends ..

Taxation . .Worldwide trend toward similar consumption patterns .Government regulations and policies .Elections and political situation home and abroad .Level of government subsidies .Internet and communication technologies (e-commerce) . business trends & legal factors..International trade regulations . antitrust legislation) . government. trade marks.Terrorism . What should you include in EFE Matrix? Political.Protection of rights (patents.Globalization trends ..

EFE Matrix Example .

IFE Matrix Example .

The best thing about CPM that it include your firm and also facilitate to add other competitors make easier the comparative analysis. • The CPM score is measured on basis of critical success factors. Competitive Profile Matrix (CPM) • Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry. • Competitive profile matrix show the clear picture to the firm about their strong points and weak points relative to their competitors. each factor is measured in same scale mean the weight remain same for every firm only rating varies. .

• Competitive profile matrix show the clear picture to the firm about their strong points and weak points relative to their competitors. . Competitive Profile Matrix (CPM) • Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry. • The CPM score is measured on basis of critical success factors. each factor is measured in same scale mean the weight remain same for every firm only rating varies. The best thing about CPM that it include your firm and also facilitate to add other competitors make easier the comparative analysis.

. • The CPM score is measured on basis of critical success factors. Competitive Profile Matrix (CPM) • Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry. each factor is measured in same scale mean the weight remain same for every firm only rating varies. • Competitive profile matrix show the clear picture to the firm about their strong points and weak points relative to their competitors. The best thing about CPM that it include your firm and also facilitate to add other competitors make easier the comparative analysis.

• The higher rating show that firm strategy is doing well to support this critical success factors and lower rating means firm strategy is lacking to support the factor. Critical Success Factors • Critical success factors are extracted after deep analysis of external and internal environment of the firm. .

0 – The response is above average represented by 3.rating range from 1. – Rating is applied to each factor.0 .0 – The response is superior represented by 4.0 and can be applied to any factor. Highest the rating better the response of the firm towards the critical success factor . • There are some important point related to rating in CPM.0 to 4.0 – The response is average is represented by 2. – The response is poor represented by 1. Rating • Rating in CPM represent the response of firm toward the critical success factors.

• Total Weighted Score The sum of all weighted score is equal to the total weighted score.5 consider as weak. The weight range from 0. .5 is consider as strong in position.5 any company total weighted score fall below 2.• Weight Weight attribute in CPM indicates the relative importance of factor to being successful in the firm’s industry. The average weighted score for CPM matrix is 2.0 means important.0 means not important and 1.0(high). The other dimension of CPM is the firm with higher total weighted score considered as the winner among the competitors. • Weighted Score Weighted score value is the result achieved after multiplying each factor rating with the weight.0 otherwise the calculation would not be consider correct. sum of all assigned weight to factors must be equal to 1. The company total weighted score higher then 2.0 (low) to 4. final value of total weighted score should be between range 1.

• Example .

Sources • David.wikipedia. F. (2009). IFE matrix. Strategic Management: Concepts and Cases. FT Prentice Hall • Wikipedia (2014).org/wiki/IFE_matrix . Available at: http://en.R. 12th ed.