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.
What is the 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:
- 4 points - major O
- 3 points - minor O
- 2 points - minor T
- 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.