An External Factor Evaluation (EFE) Matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information. EFE Matrix indicates whether the firm is able to effectively take advantage of existing opportunities along with minimizing the external threats. Similarly, it will help the strategists to formulate new strategies and policies on the basis of existing position of the company. Show
External factors are extracted after deep internal analysis of external environment. Obviously there are some good and some bad for the company in the external environment. That’s the reason external factors are divided into two categories opportunities and threats. Opportunities are the chances exist in the external environment, it depends firm whether the firm is willing to exploit the opportunities or may be they ignore the opportunities due to lack of resources. Threats are always evil for the firm, minimum no of threats in the external environment open many doors for the firm. Maximum number of threats for the firm reduce their power in the industry. Developing an EFE matrix is an intuitive process which works conceptually very much the same way like creating the IFE matrix. An External Factor Evaluation (EFE) Matrix can be developed in five steps:
Regardless of the number of key opportunities and threats included in an External Factor Evaluation (EFE) Matrix, the highest possible total weighted score for an organization is 4.0 and the lowest possible total weighted score is 1.0. The average total weighted score is 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 effect 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 External Factor Evaluation (EFE) Matrix is similar to Internal Factor Evaluation (EFE) Matrix. The major difference between the EFE matrix and the IFE matrix is the type of factors that are included in the model. While the IFE matrix deals with internal factors, the EFE matrix is concerned solely with external factors. Reference: Strategic Management Concepts: A Competitive Advantage Approach by Fred R. David. Related Posts:
What is the range for a firms total weighted score in a competitive profile matrix?The answer is C) 1 to 4. The range for a firm's total weighted score in an External Factor Evaluation Matrix is C) 1 to 4.. The external factor evaluation matrix expands the SWOT analysis of opportunities and threats.
What is the range for a firm's total weighted score in an external factor evaluation matrix quizlet?Regardless of the number of key opportunities and threats included in an External Factor Evaluation Matrix, the highest possible total weighted score for an organization is 4.0, and the lowest possible total weighted score is 0.0.
What is a competitive profile matrix CPM?A Competitive Profile Matrix (CPM) is an analytical tool that provides necessary information of competitive advantage based on critical success factors and serves as the basis for an organization's strategy. This paper provides for understanding the basic concepts of CPM and its usability in strategy formulation.
What does a CPM total weighted score of 1.88 imply for a company?A score of 1.88 means the company is losing the battle to be successful versus rival firms. Substantial strategy changes are likely needed especially in areas in the CPM where the firm scores a 1 or 2 versus rival firms' scores of 3 or 4.
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