|Methods and techniques|
IFE matrix or Internal Factor Evaluation matrix was created by Fred R. David and is strategic management and analysis tool closely related to SWOT analysis, TOWS analysis. It involves identification of key internal factors affecting business organization. Method of IFE matrix is a subjective one but with numbers in the construction. Overall scores are used for further analysis, setting priorities for business plans and strategic goals. IFE matrix are also used to visualize impact of internal factors on organization. Tool is closely related to EFE matrix and from both of them there is a possibility to build IM matrix.
Internal Factors example
Strengths are the fields from which company may get the most profit and efficiency. Mostly strengths should cover weaknesses and that means that the company has a good management strategic. Strengths examples:
- good position on a market (high market value)
- profitable, high value of shares
- good financial situation
- high level of marketing and / or promotion
- recognizable brand
- high quality products
Weaknesses are the fields which the company should take care of because those can generate losses two ways: directly or any other companies on the market can expose weak areas and that leads to losses. Weaknesses examples:
- unprofitable operations, low Return on Investment (RoI)
- high cost of doing business
- poor motivation of employees
- low quality products, and too expensive ones.
How to create IFE matrix
- List advantages (strengths) and disadvantages (weaknesses) in the 1st column. For the best results mention not less than 10 but not more than 20.
- Match the characteristic with the Appropriate weight (range from 0.00 – 1.00). When adjusting the position with the weight remember to use greater values for the ones which have the biggest impact on company's efficiency. Similarly for the less important ones use smaller scales. All weights needs to sum up to 1.0. Numbers should be included in the 2nd column.
- All positions from 1st column needs to be rated from 1 to 4. Weaknesses can receive 1 (major) or 2 (minor) mark. Similarly strengths can receive 3 (minor) or 4 (major) rating. Above scales should be entered in the 3rd column.
- Calculate the value of each factor by multiplying weight (2nd column) by factor (3rd column).
- Sum up the values of each single factor at the bottom of the table. The result is called “overall weighted ratio”. When the total is <2.5 that means that the company is in a poor condition, but if total >2.5 the company's situation is excellent. In the situation if total equals to 2.5 there is a message for the company that a lot of improvements can be done. Company should work on strategy / procedures.
SWOT analysis vs IFE matrix
The main difference in IFE matrix and SWOT analysis is the way the features are positioned. In IFE we have them positioned by factors and weights. What is more SWOT analysis has a lot of different characteristics when IFE matrix should not include more than 20 of them. Fulfilling every part of SWOT analysis can lead to over-analysis of one single object. It will never be an issue with IFE matrix as taking too many points into consideration results with each factor being underestimated. Even in the situation if we are subjective and give untruthful weight for one of the characteristics it will not abolish our matrix because this single one has a small weight (not important on the all picture). It is crucial to realize that each of the characteristics is not as material as number (weights, factors).
- Capps III, C. J., & Glissmeyer, M. D. (2012). Extending the competitive profile matrix using internal factor evaluation and external factor evaluation matrix concepts. Journal of Applied Business Research, 28(5), p. 1059.
- David, F.R. (2009). Strategic Management: Concepts and Cases 12th ed., FT Prentice Hall
- David, M. E. & David, F. R. (2009). The Quantitative Strategic Planning Matrix (QSPM) applied to a retail computer store. The Coastal Business Journal, 8(1), p. 42-52.
- Sarkar K. (2017). Developing revamp strategies for TRU sports and increase option mix of TRU. National Institute of Fashion Technology p. 56-59
- David, M. E., David, F. R., & David, F. R. (2009). The Quantitative Strategic Planning Matrix (QSPM) applied to a retail computer store. p. 42-52
- Sarkar K. Developing revamp strategies for TRU sports and increase option mix of TRU p. 58
Author: Ewelina Kruszewska