Example of Industry Analysis EFE (The External Factor Evaluation Matrix)
It helps strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information. There have five steps involved in developing it as following below:
1. List all key external factors as identified in the external-audit process. Include as many as up to twenty, including both opportunities and threats affecting the firm and its industry. Be specific in narration.
2. Assign to each factor a weight that ranges from 0.0 (not important) to 1.0 (very important). The weight indicates the relative importance of that factor to being successful in the firm’s industry. The sum of all the factors must equal to 1.0. Weights are industry based.
3. Assign a 1 to 4 rating to each key external factor to indicate how effectively the firm’s current strategies respond to the factor. 4 superior, 3 above average, 2 average, and 1 poor. Ratings are based on effectiveness of the firm’s strategies. Ratings are company based.
4. Multiply each factor’s weight by its rating to determine a weighted score.
5. Sum the weighted scores for each variable to determine the total weighted score for the organization.
Explanation: Regardless of the number of variables, the highest possible total weighted score for an organization is 4.0 and the lowest is 1.0. A total weighted score of 4.0 indicates outstanding response in its strategies and the 1.0 indicates the poor response in its strategies.
Model EFE Matrix for UST, Inc.
Key External Factors & ...