Internal and External Factor Evaluation Matrix

What is an internal factor evaluation matrix and an external factor evaluation matrix

Well, these are two distinct tools that operate in the same manner

Basically, each is an ytical technique that you use to evaluate the strategic position of the firm

with regard to internal factors or external factors that give rise to a strength or weakness of the firm

So is the firm strong or weak in the context or with regard to this internal or external factor and how that factor affects the company

So generally, you're going to use this tool to evaluate internal factors separately from external factors, so you're not going to mix them together

So in that way, they're really two separate matrices, but they're carried out the same way

They're very similar to a SWOT ysis, where you're looking at strength, weaknesses, opportunities, and threats

The major difference is you're using an ytical approach. That is, you're giving

numbers or you weighting the strength of a factor or its effect on you or its importance to you And then you are identifying whether you are strong or weak in that regard So by using these importance weightings and then you rating yourself on a number scale

it gives some quantitative results concerning your strategic position. So you can look at a

number and say, okay, we are strong with regard to internal factors or we are weak with regard to

external factors depending on whatever ysis you're doing. Okay, so basically each factor is

weighted, right, based upon importance and then you score yourself based upon that weighted factor

You multiply the two, that gives you a score. You sum up all of the scores and that gives you your

internal factor rating and then your external factor rating for your external factors and you

use this again. So let's take a look at each piece of the puzzle. First, create a table of either

internal factors that are relevant to you or important to you in the firm or external factors

that are important for your success in the marketplace. Okay, all of these need to be related

to your competitive strategic position something that goes to your core competency or gives you some advantage in the marketplace Okay next you going to assign them a weighting The weighting needs to be between 0 and 1

So 0.15, 0.30. 0.30 is going to be twice as important for success of the firm strategically

than the one you rated at 0.15. Okay, so they need to be relative to each other

Now, all of these factors together need to add up to 1, okay, or 100%

Now, after you've given weight to the important strategic factors, then you are going to rate yourself, rate the company on those factors

If you identify a factor that has an importance of 0.15 and you say that is a major strength of the company, okay

you would give yourself a 4 and you'd multiply it by .15 to get your score for that factor rating

If it's a minor strength, that is you're not that strong in that area, you would give yourself a 3 and do the multiplication

If it a weakness you would give yourself if it a minor weakness a 2 If it a major weakness a 1 And once again the low scores for weaknesses and the high scores for strength tend to offset each other in terms of the output So it reflected equally in the score

So with that being said, once you've multiplied these weightings by your rating, it gives you a

weighted ratio, you sum all of these up, and then you have a summarized weighted ratios, right

for your strategic position. So it takes all of the factors and puts them together in one score

that you can use to evaluate your strategic position. You could use this to compare yourself to other companies

if you were able to evaluate the other company on those same factors

But it can also be used for internal comparison. That is, you can evaluate how strong you were with regard to these factors

at one point in time and then another point in time. So once again, it's a useful tool to understand your strategic position and it can help you in developing strategy for the organization or understanding the effectiveness of your existing strategy

So these are the internal factor evaluation matrices and the external factor evaluation matrices