External Factor Evaluation (EFE) matrix:

It is a strategic-management tool often used for assessment of current

business conditions. The EFE matrix is a good tool to visualize and
prioritize the opportunities and threats that a business is facing.

The EFE matrix is very similar to the IFE 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.

External factors assessed in the EFE matrix are the ones that are subjected
to the will of social, economic, political, legal, and other external forces.

Steps:
Developing an EFE matrix is an intuitive process which works conceptually
very much the same way like creating the IFE matrix.

1. List factors:

The first step is to gather a list of external factors.

Divide factors into two groups: Opportunities and Threats.

2. Assign weights:

Assign a weight to each factor. The value of each weight should be

between 0 and 1 (or alternatively between 10 and 100 if you use the 10 to
100 scale). Zero means the factor is not important. One or hundred means
that the factor is the most influential and critical one.  The total value
of all weights together should equal 1 or 100.

3. Rate factor:

Assign a rating to each factor. Rating should be between 1 and 4. Rating

indicates how effective the firm’s current strategies respond to the factor.
1 = the response is poor. 2 = the response is below average. 3 = above

average. 4 = superior. Weights are industry-specific. Ratings are

company-specific.
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 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.

INTERNAL FACTOR EVALUATION (IFE)

MATRIX :
Internal factor evaluation matrix (IFE) is one of the best strategic tool for
internal audit of the company.

 IFE is use for internal audit of functional area of business such as finance,
marketing, IT, operations, accounts and others depend upon the nature of
business and its size.

Steps:
It includes the following five steps.

1. List key internal factors:

List key internal factors as identified in the internal audit process.
Use a total of from ten to twenty internal factors, including both
strengths and weaknesses. List strengths first and then
weaknesses. Be as specific as possible, using percentages, ratios,
and comparative numbers.

2. assign a weight:

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 Assign a weight that ranges from 0.0 (not important) to 1.0 (all
important) to each factor. The weight assigned to a given factor
indicates the relative importance of the factor to being successful in
the firm’s industry. Regardless of whether a key factor is an
internal strength or weakness, factors considered to have the
greatest effect on organizational performance should be assigned
the highest weights. The sum of all weights must equal 1.0.

3. rating a factor:
Assign 1 to 4 rating to each factor to indicate whether that factor
represents a major weakness (rating = 1), a minor weakness (rating
= 2), a minor strength (rating = 3), or a major strength (rating = 4).
Note that strengths must receive a 4 or 3 rating and weaknesses
must receive a 1 or 2 rating. Ratings are thus company based,
whereas the weights in Step 2 are industry based.

4. Multiply each factor’s weight by its rating:

Multiply each factor’s weight by its rating to determine a
weighted score for each variable

5. Sum the weighted scores for each variable:

Sum the weighted scores for each variable to determine the total
weighted score for the organization.

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.

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.
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 IFE matrix only internal factors are evaluated and in EFE matrix
external factors are evaluated but CPM include both internal and
external factors to evaluate overall position of the firm with respective
to their major competitors.

Steps:
The competitive profile matrix  consists of following steps mentioned
below.

1. Critical Success Factors:
Critical success factors  are extracted after deep analysis of
external and internal environment of the firm. Obviously there
are some good and some bad for the company in the external
environment and internal environment.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.

2. Rating:
Rating in CPM represent the response of firm toward the
critical success factors. Highest the rating better the response of
the firm towards the critical success factor ,rating range from
1.0 to 4.0 and can be applied to any factor.

There are some important point related to rating in CPM.

 Rating is applied to each factor.

 The response is poor represented by 1.0
 The response is average is represented by 2.0
 The response is above average represented by 3.0
 The response is superior represented by 4.0

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3. Weight:
Weight attribute in CPM indicates the relative importance of
factor to being successful in the firm’s industry. The weight
range from 0.0 means not important and 1.0 means important,

sum of all assigned weight to factors must be equal to 1.0

otherwise the calculation would not be consider correct.

4. Weighted Score:
Weighted score value is the result achieved after multiplying
each factor rating with the weight.

5. Total Weighted Score:

The sum of all weighted score is equal to the total weighted
score, final value of total weighted score should be between
range 1.0 (low) to 4.0(high). The average weighted score for
CPM matrix is 2.5 any company total weighted score fall below
2.5 consider as weak. The company total weighted score higher
then 2.5 is consider as strong in position.The other dimension
of CPM is the firm with higher total weighted score considered
as the winner among the competitors.