Internal (factor) evaluation matrix

 The IEM is a summary of the internal audit

 Summaries internal strength and weaknesses within the
functional area’s of the business.
 Identifies and evaluates cross-functional relationships; e.g.
marketing and finance.
Internal factor evaluation (IFE) Process
 List key internal factors as identified in the internal-audit
process. Use a total from ten to twenty internal factors
including both strengths and weaknesses.
 Assign a weight ranging from 0 (not important) to 1.0 (very
important). The weight indicates the relative importance of
the factor to being successful in the firm’s industry. The sum
of all the weights must equal 1.0.
 Assign a 1-4 rating to each factor to indicate whether that
factor represents a major weakness (1), minor weakness (2),
minor strength (3), or major strength (4).
 Multiply each factor’s weight by its rating to determine a
weighted score for each variable.
 Sum the weighted scores for each variable to determine the
total weighted score for the organization.
 Total weighted scores of below 2.5 indicate an internally
weak organization.
Ryanair Internal Evaluation matrix
Strengths Weight Rating Weighted Score
1. Owning 42 bases allows Ryanair to operate at a lower cost then
0.06 4 0.24
competitors.
2. 92% of bookings being done over the internet lower cost by
0.04 4 0.16
lower workers needed and telephone usage.
3. Ryanair being the second largest airlines in Europe is a well
0.07 4 0.28
known company among European flyers.
4. 90% of Ryanair’s flights arrive on time. 0.04 4 0.16
5. Ryanair has created a niche in the market by offering many direct
0.04 4 0.16
flights.
6. 284 new routes will allow Ryanair to capture new passenger
0.05 4 0.20
business.
7. Profits increased by 204% due to an increase in planes, routes
0.10 4 0.40
and passengers.
8. The down turn in the economic cycle and low fares has lead to
0.05 3 0.15
an increase in traffic growth by 14%.
9. Ryanair forecast generating over $1 billion in surplus cash. 0.10 4 0.40
10. Have 51 new planes. 0.05 3 0.15
Ryanair Internal Evaluation matrix
Weaknesses Weight Rating Weighted Score
1. Low customer loyalty because of a no refund policy and relax
0.05 1 0.05
attitude on canceling of flights.
2. Poor customer service leaves an opening for competitors to
0.06 1 0.06
capture our customers.
3. Ryanair advertisements may be viewed as poor do to the use of
0.02 1 0.02
vulgar, explicit, and sexual material.
4. Ryanair’s lack of major city destinations. 0.05 2 0.10
5. Low market growth opportunities. 0.05 2 0.10
6. Staff cost increased by 8%. 0.04 2 0.08
7. Ryanair charges customers for many ancillaries items that are
0.06 1 0.06
free on most other airlines.
8. Maintenance cost increased by 29%. 0.07 1 0.07
TOTALS 1.00 2.84
ABC Approach
Competitiveness in Value Chain
Analysis Through……………..
 Cost Advantage
 Differentiation
 Linkages
Upstream

Vertical
Integration

Downstream
Cost Drivers of Value Chain
 Economies of Scale
 Learning
 Capacity Utilization
 Linkages among activities
 Interrelationships among business units
 Degree of Vertical Integration
 Timings of Market Entry
 Firms’ Policy of Cost or Differentiation
 Geographic Location
 Regulatory Institutions (Union, Taxes etc..)
Value Chain and Decisions
 Is there any efficiency in performing activity yourself ?
 Is the activity Core Competency?
 What is the risk quotient attached if ………..?

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