First Discussion: What is IFE?

IFE is a strategic management tool for auditing or evaluating major strengths and weaknesses in
functional areas of a business.

IFE matrix also provides a basis for identifying and evaluating relationships among those areas.

Main Points: The function of the IFE in an organization

- it summarizes and evaluates the strengths and weaknesses of a company/ organization and it
provides a better understanding on the relationship between the functional areas such as the
management, marketing, finance, production, research &development (R&D) and finance

Main Points: The importance of considering IFE in an organization

- The company should analyze the internal factors. The main questions to consider are whether
the business is using its internal competencies. Does the company have the internal strengths
and weaknesses, to be able to exploit the opportunities and overcome external threats? Using
the internal factors, will enable the business to better manage its business and will give it the
competitive advantages needed in order to be successful.
- In analyzing the internal strengths and weaknesses the company can evaluate its potential
growth strategies and this enables the company to build an effective, long-term strategic plan
and make necessary internal changes if needed.

Second Discussion: The Steps in doing an IFE Matrix

STEP 1:

- Internal factors identified in the internal audit process are listed.

- Total internal factors can be 10 to 20, both strengths &
- weaknesses.
o Strengths are listed first, follow by weaknesses.
o Use percentages or ratios, as specific as possible.

STEP 2:

- For each of the internal factors, assigned a weight.

Range: 0.0 to 1.0 (not important to very important)
- The weight = the relative importance of the factor to be successful in the industry.
- Highest weight = Factors with greatest effect, regardless internal strength or internal weakness.
- The sum of all weights = 1.0.
STEP 3:

- A rate between 1 & 4 is assigned to the listed factors.

i. a major weakness (rating = 1)
ii. a minor weakness (rating = 2)
iii. a minor strength (rating = 3)
iv. a major strength (rating = 4)
- Strengths = 3 or 4 rating & weaknesses =1 or 2 rating.
- Ratings = company-based, whereas the weights (Step 2) = industry-based.

STEP 4:

- Each factor’s weight X Rating = Weighted Score

STEP 5:

- Total up the weighted scores for all variable = total weighted score.

TOTAL WEIGHT SCORE INDICATOR:

EXAMPLE:

Conclusion of example: Nestle shows a strong internal position because they have gained a total of 2.99
weighted score although it significantly suggests improving on promotional, and marketing strategies in
order to further enhance its sales market and widen its target customers/consumers. They should also
seek in considering lowering its prices in a cost-efficient manner in order to attract those low-income
groups for long term results in gaining sales. Nestle should also maintain its good reputation, high
quality and strong brand image as it is definitely one of its strength.