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INTERNAL FACTOR EVALUATION

INTERNAL FACTOR EVALUATION

IFE (Internal factor evaluation) matrix is one of the best strategic tool to perform internal audit of any firm. IFE is use for internal analysis of different functional areas of business such as finance, marketing, IT, operations, accounts, Human Resources Key External and Internal Factor

3.10 The Internal Factor Evaluation (IFE) Matrix - Refreshing ...

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.

+Analysis of the External Environment

v Every company deals with internal and external factors that affect their business. These

v External factors involve trends related to things such as oil price changes, political instability,

v Government regulation and many more. External environment impacts every company; it’s all about how every company adjusts to external trends and prepares for them before they occur. The best companies always try to anticipate these external factors and respond strategically to them

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Benefits

Both matrices have the following benefits:

v  Easy to understand. The input factors have a clear meaning to everyone inside or outside the company. There’s no confusion over the terms used or the implications of the matrices.

v  Easy to use. The matrices do not require extensive expertise, many personnel or lots of time to build.

v  Focuses on the key internal and external factors. Unlike some other analyses (e.g. value chain analysis, which identifies all the activities in the company’s value chain, despite their importance), the IFE and EFE only highlight the key factors that are affecting a company or its strategy.

v  Multi-purpose. The tools can be used to build SWOT analysis, IE matrix, GE-McKinsey matrix or for benchmarking.

Limitations

v  Easily replaced. IFE and EFE matrices can be replaced almost completely by PEST analysis, SWOT analysis, competitive profile matrix and partly some other analysis.

v  Doesn’t directly help in strategy formation. Both analyses only identify and evaluate the factors but do not help the company directly in determining the next strategic move or the best strategy. Other strategy tools have to be used for that.

v  Too broad factors. SWOT matrix has the same limitation and it means that some factors that are not specific enough can be confused with each other. Some strengths can be weaknesses as well, e.g. brand reputation, which can be a strong and valuable brand reputation or a poor brand reputation. The same situation is with opportunities and threats. Therefore, each factor has to be as specific as possible to avoid confusion over where the factor should be assigned.

IFE Matrix

IFE is a strategy tool used to evaluate firm’s internal environment and to reveal its strengths as well as weaknesses

IFE - Internal Factor Evaluation Matrix - Example

Factor

Weight

Rating

Extended

Strengths

 

 

 

 

Well known for quality & reliable service

0.16

4

0.64

 

Low turnover provides continuity & customer knowledge

0.07

3

0.21

 

Represent a full line of top quality component manufacturers

0.15

4

0.60

 

Strong balance sheet with very little debt

0.11

3

0.33

 

Almost 60% of customers come from referrals

0.13

4

0.52

Weaknesses

 

 

 

 

Strictly a local company

0.05

2

0.10

 

Unknown to the general public

0.02

2

0.04

 

Use distributors for parts purchases, incurring higher costs

0.08

2

0.16

 

0.13

1

0.13

 

Less than 5% of customers buy service contracts

0.10

1

0.10

 

 

 

 

 

Total

1.00

 

2.83

 

COMPETITIVE MATRIX ANALYSIS. 

One of the best tools you can use to define new opportunities for growth is the Competitive Matrix Analysis.  Using it will help you find opportunities to innovate with new or improved products, services and marketing strategies.

A competitive matrix is used to critically profile and compare your company against your known competitors.  It is an analytical tool that helps you establish your company’s competitive advantage in an easy to use and read format.  At one glance you should be able to see your company’s competitive landscape, your position in a given market and possible opportunities to differentiate your company’s products and services from the competition.


 

 


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