The EFE and IFE matrices are analysis methods that strongly resemble a SWOT analysis that represents an internal analysis (strength and weakness of an organisation) and external analysis (opportunities and threats of an organisation). The letters EFE are an acronym for External Factor Evaluations, which shows how effectively the company’s current strategy responds to external opportunities and threats.
It’s viewed as a strategy tool that’s used to investigate a company’s external environment and to identify the available opportunities and threats. It must always be combined with the IFE matrix, which stands for Internal Factor Evaluations. This strategy tool is used to evaluate the internal environment of companies and discover both the strengths and weaknesses.
What are the IFE and EFE Matrix?
The EFE and IFE matrix is a business tool that can be used in the following business areas:
- It can be used for strategic business analysis.
- It can be used for managing the business.
The IFE and EFE matrix is a tool (without software) to help businesses develop strategies and evaluate the business’ strengths and weaknesses. This tool is a handy tool because it helps to identify and manage the opportunities and threats that arise internally and externally during the life cycle of a business.
How to fill in an IFE and EFE matrix:
The IFE matrix helps us to see both our strengths and weaknesses of internal factors that affect our business. The best way to use this tool is to fill in the first quadrant of the matrix, which is located in the upper left corner. However, you should always add the good points and the bad points. The IFE matrix will be more effective to use if you include negative and positive factors. If the internal factors could push you to success, you should also include it. After completing this part, we move onto the external factors and we start to fill in the lowest quadrant, which is located in the lower left corner.
In this business tool, we have to think of the opportunities and threats of the following 3 broad categories:
- Risks arising from within the organisation.
- Factors from external sources.
- Opportunities and threats of competitors.
The first group of opportunities and threats are those that arise within the business. They are also called internal opportunities and threats or company specific opportunities and threats. The most important point is that it’s necessary to expand the company’s vision, allowing management to recognize the external threats and advantages that the business can utilize. The second group of external factors includes factors such as consumer behaviour, government regulations, technology and the macro economy. These factors are usually beyond the control of the organization. Only a few businesses can influence or change the actions of the consumer, government policies, competitors and macro-economy. The third group contains factors coming from the competition. It’s very important to not only see the competition’s strengths and weaknesses but also to monitor their activities. Competition will always affect the business in many ways.
When the first two quadrants have been completed, you should fill in the cell in the upper right corner with the score of the IFE internally to EFE externally. If the IFE is greater than EFE, the business is good, because it has more internal strengths and weaknesses that can be used to exploit opportunities and overcome external threats. When you make an IFE > EFE, and you have completed this business tool, the business can be rated as good.
When you have completed the lower right quadrant, the last step is to fill in the cell in the lower right corner with 1, 2, 3, 4, 5 or 6. The cell in the lower right corner is used to rate the intensity of the IFE and EFE factors. This business tool must help to plan, develop, improve and develop strategies in various business areas. This is the most important benefit of using this business tool.
If a business has more strengths and external opportunities and threats, it will be awarded a score of 6. If the organisation has more internal weaknesses and threats, it will be given a score of 1. However, if everything is very equal, you will get a score of 2.
Brief History of the EFE and IFE Matrix
If we look at the history of the EFE and IFE matrix, we will see that it’s a business tool that contains strategic analysis elements. It was first developed by Roberto A. Cárdenas, who was a professor at the New York University Stern School of Business. This business tool was created to help businesses make decisions about growth and to evaluate the implementation of the existing strategy. In 1979, the EFE and IFE research method was used by the Business School at Iona College.
In 2002, two professors, Donald L. Hambrick (Professor of Management Practice at Columbia University) and Kenneth G. De Meuse (Professor of Management Practice at Columbia University) published an article in which they described the seven dimensions of the EFE and IFE matrix. This business tool was extended to include the following seven different factors: strategy (what you do); structure (how you organize yourself); systems (how you control a process or a product); skills (the content of the workers’ knowledge); style (your general approach); structure (the way your organisation runs); and the environment (the market you are in).
If you want to use this business tool effectively, you must use it to understand the opportunities and threats of external factors and also the strengths and weaknesses of the internal factors. This is a very powerful business tool because it can be used to help a business to improve its overall performance in running the business.
Use of the EFE and IFE Matrix
The EFE and IFE matrix is a popular business tool that has been used by companies around the world to run their businesses more effectively. While the IFE matrix is used internally and shows the company’s strengths and weaknesses, the EFE matrix shows the outside factors that affect a company’s business activities. There are many ways the company can use this matrix.
When using the EFE matrix, management should first look at the factors that impact external factors and that have an influence on businesses. For example, when there are changes in a country’s regulations, the government can change the rules that the business needs to follow. There are several external factors that influence a business.
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.
How to use the EFE and IFE matrix
The EFE and IFE questionnaires are very valuable business tools to be used at the beginning and the end of the business. It would be useful for a business to fill in EFE and IFE questionnaires before and after a strategic plan or a strategic planning program.
When planning a new strategy, the company has to assess the existing strengths and weaknesses in order to determine future opportunities and threats. During this analysis, the company can evaluate its potential growth strategies. It can analyze external opportunities and threats and also its organizational capabilities.
Since the company is analyzing the environment, such as threats, it should also conduct a similar analysis internally. It should determine its strengths and weaknesses. It’s certainly better to recognize the internal factors that allow the company to exploit opportunities and manage threats. This enables the company to build an effective, long-term strategic plan.
After running the program and implementing the strategy, the company can fill in the IFE and EFE questionnaires, to evaluate its success in overcoming external factors and its internal strengths and weaknesses. It shows the company’s ability to exploit chances and overcome threats. This business tool can be used effectively if the company analyzes the changes after the program and maps the changes in the internal and external factors. It also useful to analyze the company’s achievements and initiatives that should remain in place during the future. The two EFE and IFE questionnaires can help a business to prepare for the future. It can help management to better understand its competitive strengths and weaknesses. Using this business tool, a company can evaluate its execution of strategies and also can get valuable feedback from the employees. The personal evaluations of employees can be used by management to effectively run the business.
FAQs Regarding EFE and IFE
What is the EFE matrix?
The EFE matrix (external factor evaluation) is an evaluation of the environmental factors that can affect a business. This is a business tool that was created to show the external factors that affect a business. This business tool enables a company to determine its external factors, which can have a negative or a positive influence on its operations. You can use this business tool to help the business to determine its strengths and weaknesses in the future.
What is an IFE matrix?
The IFE matrix (internal factor evaluation) is also a business tool to be used by a company to determine the internal factors that can affect its business. It enables a company to determine its internal strengths and weaknesses, in order to build its strategies and to make internal changes. You must analyze the internal strengths and weaknesses of your company to determine its potential for growth.
How does the EFE/IFE matrix help with your business?
The EFE matrix and the IFE matrix show the external and internal factors that can influence a company’s business activities. The business environment, such as the market forces, influences the business. If the business can determine its strengths and weaknesses, it can build effective strategies. This business tool enables the company to determine its strengths and weaknesses, in order to build an effective strategy. It can help to determine the potential growth of a business. It enables a company to better manage internal factors. This business tool can also help to achieve a good competitive advantage.
The EFE and IFE matrix are very useful business tools. It gives the company the tools to make the whole analysis of a business. The company can learn and develop itself. The EFE and IFE matrix enables the company to better manage its business, businesses and processes. It gives the company a good overview of its assets and skills, its customers and competitors, and the internal factors of the business, including the company’s strengths and weaknesses. It provides a comprehensive review of the business, making it possible to recognize the threats and the opportunities.
How can you improve the EFE and IFE matrix in your business?
The EFE and IFE matrix can be improved with the right planning. The business can use an evaluation or planning process to improve key elements of its growth controls. The business must make an appropriate analysis of strengths and weaknesses. It must be measured over time and with a process, an ongoing improvement process. It can be integrated with other business tools. This will make the business organization more effectively.
Where can you find more tools for EFE and IFE?
Nowadays, you can find many ebooks, courses and videos, related to EFE and IFE. You can also find a lot of information about the usefulness of this business tool in the Internet, in many reviews, forums and social media. You can always choose the right tools or material for your business to be more effective in running the business.
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