EFE Matrix

EFE (EXTERNAL FACTOR EVALUATION) MATRIX
EFE Matrix is an analytical technique related to the SWOT analysis. EFE is an acronym of
the External Factor Evaluation. EFE Matrix evaluates the external position of the organization
or its strategic intents.
Evaluation process of EFE matrix
 Process the table of internal factors (such as key 5S and 5W of SWOT)

 Assign to each factor a weight in the range from 0.00 to 1.00 according to the
importance of the strengths or weakness - the sum of weights must be equal to 1.00
 Rate factors as follows:
o 4 points - major O
o 3 points - minor O
o 2 points - minor T
o 1 point - major T
 Multiply the weight and rating for each factor - the result is a weighted ratio
 Sum of the weighted ratios of individual factors - result is an overall weighted ratio
Overall evaluation - resulting weighted ratio evaluates the internal position of the organization
or strategic intent. The best possible score is 4, the worst is 1. Average values are around 2.5.
Where to use EFE Matrix in practice?
Strategy of the organization or mutual evaluation and comparison of different strategic

intentions can be evaluated with EFE Matrix. The intention with the best result of overall
weighted average should be chosen. EFE Matrix results should be combined with the results
of IFE matrix. CEO and senior management makes the strategic decisions based on IFE matrix.
Benefits
 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.
 Easy to use. The matrices do not require extensive expertise, many personnel or lots of
time to build.
 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 EFE only highlight the key factors that are affecting a company
or its strategy.
 Multi-purpose. The tools can be used to build SWOT analysis, IE matrix, GE-
McKinsey matrix or for benchmarking.
Limitations
 Easily replaced. EFE matrices can be replaced almost completely by PEST analysis,
SWOT analysis, competitive profile matrix and partly some other analysis.
 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.
 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.
CPM (COMPETITIVE PROFILE) MATRIX
CPM, or the CPM Matrix, stands for Competitive Profile Matrix and is a powerful strategic
analysis tool. CPM allows business owners, stockholders and other interested parties to see
the strengths and weaknesses of all major competitors in an industry on a single page.
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.
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.
The competitive profile matrix consists of following attributes mentioned below.
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.
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.[sky]
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
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.
WEIGHTED SCORE
Weighted score value is the result achieved after multiplying each factor rating with the weight.
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.

EFE Matrix

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EFE Matrix

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EFE (EXTERNAL FACTOR EVALUATION) MATRIX

Evaluation process of EFE matrix

 Process the table of internal factors (such as key 5S and 5W of SWOT)

Where to use EFE Matrix in practice?

Strategy of the organization or mutual evaluation and comparison of different strategic

The competitive profile matrix consists of following attributes mentioned below.

CRITICAL SUCCESS FACTORS

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 above average represented by 3.0

 The response is superior represented by 4.0

TOTAL WEIGHTED SCORE

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