EFE, IFE & CPM

Matrix
External Factor
Evaluation Matrix
(EFE Matrix)
 • EFE matrix
allows strategies
to summarize
and evaluate
external factors
affecting an
organization

• The EFE matrix is

a good tool to
visualize and
prioritize the
opportunities
External Factor Evaluation and threats that
a business is
Matrix (EFE Matrix) facing
• External factors assessed in the EFE matrix are the ones that are
subjected to the will of-
• Economic
• Social
• Cultural
• Demographic
Environmental
• Environment
• Political Analysis
• Governmental
• Legal
• Technological
+
• Competitive
information Industry
Analysis
 1. LIST KEY FACTORS:

• List key external factors as

identified in the external-
audit process based on your
PEST and Porter’s Industry
Analysis.
• Include a total of 10-15
factors
• Divide the factors into two
groups: Opportunities and
Threats
• Be as specific as possible with
your factors.
Choose 4-5 most important
opportunities
and
4-5 most threats for your
industry.
(10 mins)
 How to create the EFE Matrix:
Opportunities
1. 141 million possible investors in Europe
2. Low P/E ration in the industry which should attract value investors
3. Increased desired for wireless services by the customer across the
world
4. Growing youth population in US who are heavy internet users on
the go
5. Sports marketing can be used to target customers

Threats
1. New government laws for telecom industry
2. Rising cost of employee health care required by government
3. Global economic unrest
4. Weak consumer spending
5. Increase overlap of telecommunication territories
6. Increased numbers of app for free calls and texts
7. Increase number of competitors
2. Assign Assign a weight to each factor.

Weights
The value of each weight should be
between 0.0 and 1.0 or 0%-100%
• 0.0 or 0% = Not Important
• 1.0 or 100% = Very Important

The weight indicated the relative

importance of that factor to being
successful in the firm’s industry.
• It answers the question of ‘How important is
this opportunity in this industry’/ ‘How big of a
danger is this threat to this industry?’
• Weights are industry specific.
 While the assigning of the weight is
subjective, you should be looking into
primary and secondary data to justify your
2. Assign weights.
Weights
The sum of all weight assigned to the factors
must equal to 1 or 100%
 How to create the EFE Matrix:
Opportunities Weight
1. 141 million possible investors in Europe 0.06 6%
2. Low P/E ration in the industry which should attract value investors 0.06 6%
3. Increased desired for wireless services by the customer across the 0.02 2%
world
4. Growing youth population in US who are heavy internet users on the go 0.17 17%
5. Sports marketing is easily available to target customers 0.10 10%

Threats Weight
1. New government laws for telecom industry in US, Europe & China 0.09 9%
2. Rising cost of employee health care 0.06 6%
3. Global economic unrest 0.02 2%
4. Weak consumer spending 0.08 8%
5. Increase overlap of telecommunication territories 0.10 10%
6. Increased numbers of app for free calls and texts 0.15 15%
7. Increase number of competitors 0.09 9%

Total 1.00 100%

-Distribute weights among the factors.
-Make sure the weight adds up to
1.0/100%
-Remember, higher the weight, more
important the factor.

(10 mins)
 Assign a rating to each factor.

3.Rate Rating should be between 1

Factors and 4.

Rating indicates how

effective the firm’s current
strategies respond to the
factor.
 Higher the rating, better the response of
the firm to exploit opportunities and
defend the threats
• 1 = the response is poor.
• 2 = the response is below average.
• 3 = the response is above average.
• 4 = the response is superior.
3.Rate
Factors

Weights are
Both threats and
industry-specific.
opportunities can
Ratings are
receive 1-4
company-specific.
 How to create the EFE Matrix:
Opportunities Weight Rating
1. 141 million possible investors in Europe 0.06 1
2. Low P/E ration in the industry which should attract value investors 0.06 3
3. Increased desired for wireless services by the customer across the 0.02 2
world
4. Growing youth population in US who are heavy internet users on the 0.17 2
go
5. Sports marketing is easily available to target customers 0.10 3

Threats Weight Rating

1. New government laws for telecom industry 0.09 1
2. Rising cost of employee health care 0.06 3
3. Global economic unrest 0.02 2
4. Weak consumer spending 0.08 2
5. Increase overlap of telecommunication territories 0.10 4
6. Increased numbers of app for free calls and texts 0.15 1
7. Increase number of competitors 0.09 1

Total 1.00
4. Multiply weights by ratings
• Multiply each factor weight
with its rating. This
will calculate the-
•  Weighted Score for each
factor.

5. Total all weighted scores

• Add all weighted scores for
each factor.
• This will calculate the Total
Weighted Score for the
company
 How to create the EFE Matrix:
Opportunities Weight Ra Weighted
ting Score
1. 141 million possible investors in Europe 0.06 1 .06
2. Low P/E ration in the industry which should attract value investors 0.06 3 .18
3. Increased desired for wireless services by the customer across the 0.02 2 .04
world
4. Growing youth population in US who are heavy internet users on 0.17 2 .34
the go
5. Sports marketing is easily available to target customers 0.10 3 .30

Threats Weight Ra Weighted

ting Score
1. New government laws for telecom industry 0.09 1 .09
2. Rising cost of employee health care 0.06 3 .18
3. Global economic unrest 0.02 2 .04
4. Weak consumer spending 0.08 2 .16
5. Increase overlap of telecommunication territories 0.10 4 .40
6. Increased numbers of app for free calls and texts 0.15 1 .15
7. Increase number of competitors 0.09 1 .09

Total 1.00 2.23

• Remember! - The highest possible
total weighted score for an
organization is 4.0 ad the lowest
total weighted score is 1.0
•  In external evaluation a low total
score indicates that company’s
strategies aren’t well designed to
meet the opportunities and defend
against threats and vice-versa.
• Companies should at minimum try to
achieve a score of high 2s (2.8/2.9)
to position themselves better than
the average competitors and should
always be striving to be on the mid
3s( 3.4/3.6).
Internal FACTOR EVALUATION
Matrix
(IFE Matrix)
• 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

• When looking for the

strengths, ask what do you do
better or have more valuable
than your competitors have?
In case of the weaknesses, ask
which areas of your company
you could improve and at least
catch up with your
competitors?
 • Identify key internal factors
• Conduct internal audit and
identify both strengths and
weaknesses in all your
business areas.
• It is suggested you identify 10
IFE Matrix: to 15 most important internal
Step 1 factors that comprises of a
company’s strengths and
weakness.
• You are focusing on YOUR
company’s CURRENT
strengths and weaknesses.
Internal Factor Evaluation
Strengths
1. One of the world’s most valuable brand
2. Market leader in soft drink
3. Differentiation in soft drink offered
4. Strong financial position & Profit
Weaknesses
1. Bigger long-term debt
2. New coke formula was a failure
3. Bad image in India
4. Product offerings is restricted to beverages
5. Bad relationship with Chinese government
6. Not enough product in healthy drink
 • Assign Weights
• Each key factor should be assigned a
weight ranging from 0.0 (low
importance) to 1.0 (high importance).
• The weight assigned to a given factor
indicates the relative importance of the
factor to being successful in the firm's
industry.
• Hence Weight is industry specific
IFE Matrix: • Regardless of whether a key factor is an
Step 2 internal strength or weakness, factors
with the greatest importance in your
organizational performance should be
assigned the highest weights.
• Weights and ratings are assigned
subjectively.
• The sum of all the weights must equal
1.0. or 100%
Internal Factor Evaluation Weight
Strengths
1. One of the world’s most valuable brand 0.11
2. Market leader in soft drink 0.15
3. Differentiation in soft drink offered 0.09
4. Strong financial position & Profit 0.10
Weaknesses
1. Bigger long-term debt .05
2. New coke formula was a failure .15
3. Bad image in India .10
4. Product offerings is restricted to .10
beverages
5. Bad relationship with Chinese .10
government
6. Not enough product in healthy drink .05
Total 1.0
 • Assign Ratings
• The ratings in internal matrix
refer to how strong or weak
each factor is in a firm.
• The numbers range from 1 to
4., where:
• 1 – major weakness
IFE Matrix: • 2 – minor weakness
• 3 – minor strength, and
Step 3 • 4 - major strength

• Strengths can only receive

ratings 3 & 4, weaknesses – 1
& 2.
• Ratings are company specific.
Internal Factor Evaluation Weight Rating
Strengths
1. One of the world’s most valuable brand 0.11 4
2. Market leader in soft drink 0.15 4
3. Differentiation in soft drink offered 0.09 4
4. Strong financial position & Profit 0.10 3
Weaknesses
1. Bigger long-term debt .05 2
2. New coke formula was a failure .15 1
3. Bad image in India .10 1
4. Product offerings is restricted to beverages .10 1
5. Bad relationship with Chinese government .10 2
6. Not enough product in healthy drink .05 1
Total 1.0
 • Multiply
• Multiply each factor’s weight
by its rating
• This will give you the
Weighted Score for each
factor
IFE Matrix: • Sum
Step 4 & 5 • The last step in constructing
the IFE matrix is to sum the
weighted scores.
• This provides the Total
Weighted Score for your
business.
Internal Factor Evaluation Weight Rati Weighte
ng d Score

Strengths
1. One of the world’s most valuable brand 0.11 4 .44
2. Market leader in soft drink industry 0.15 4 .60
3. Strong differentiation soft drink products 0.09 4 .36
4. Strong financial position & Profit 0.10 3 .30
Weaknesses
1. Bigger long-term debt .05 2 .10
2. New coke formula was a failure .15 1 .15
3. Bad image in India .10 1 .10
4. Product offerings is restricted to beverages .10 1 .10

5. Bad relationship with Chinese government .10 2 .20

6. Not enough product in healthy drink .05 1 .05

Total 1.0 2.40
 • Total weighted scores below 2.5
indicates a company
with internally weak business.
• Between 2.5-3.0 indicate average
IFE Matrix: internal position.
• Scores of 3.0 or above indicates
a strong internal position.