IFE matrix

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:

• income
• 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

1. List advantages (strengths) and disadvantages (weaknesses) in the 1st column. For the best results mention not less than 10 but not more than 20.
2. 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.
3. 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.
4. Calculate the value of each factor by multiplying weight (2nd column) by factor (3rd column).
5. 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).

Advantages of IFE matrix

The IFE matrix is a strategic management tool that helps to identify key internal factors and their impact on a business organization. It has a number of advantages, including:

• Allowing a structured and systematic evaluation of key internal factors. The IFE matrix breaks down the internal factors into categories and assigns a score to each factor, which helps to prioritize areas for improvement.
• Visualizing the impact of internal factors on the organization. The IFE matrix allows for a quick visual evaluation of the strengths and weaknesses of the organization, which can be used to prioritize goals and objectives.
• Helping to create a strategic plan. The IFE matrix can be used to identify areas of opportunity, and then create a plan to capitalize on them.
• Being closely related to other tools, such as SWOT analysis and TOWS analysis, which helps to create a comprehensive view of the organization.
• Providing a basis for further analysis, such as the creation of an Internal-External Matrix (IE Matrix).

Limitations of IFE matrix

One of the limitations of the IFE matrix is that it is a subjective tool and the numbers used in the construction of the matrix can be subjective. The overall scores used to analyze the matrix can be biased leading to inaccurate results. Additionally, the IFE matrix relies heavily on the internal factors of a business and does not take into account external factors such as the competitive environment and the economy. As a result, the information gathered from the IFE matrix is incomplete and can be misleading. Finally, the IFE matrix does not consider the dynamics of the business and does not take into account how the internal factors might evolve over time, which may lead to inaccurate conclusions when creating strategies.

Other approaches related to IFE matrix

Other approaches related to IFE matrix include:

• SWOT analysis - SWOT analysis is a tool used to identify the Strengths, Weaknesses, Opportunities and Threats of an organization in order to create an effective strategy. It is related to IFE matrix as it helps to identify a company's internal and external environment.
• TOWS analysis - TOWS analysis is a tool used to identify possible strategies an organization can use to help achieve its goals and objectives. It is related to IFE matrix as it considers the internal factors of an organization in order to develop strategies.
• EFE matrix - The External Factor Evaluation (EFE) matrix is used to assess the external factors affecting a company's operations. It is related to IFE matrix as it considers the external environment of an organization to identify the opportunities and threats.
• IM Matrix - The Internal-External (IE) matrix is a tool used to identify the strategies of an organization in order to achieve its goals. It is derived from the IFE and EFE matrices, as it considers the internal and external environment of an organization to identify the most suitable strategy.

In summary, other approaches related to IFE matrix include SWOT analysis, TOWS analysis, EFE matrix and IM matrix. These approaches all consider an organization's internal and external environment in order to develop effective strategies.

IFE matrix — recommended articles

BCG growth-share matrix — SPACE method — ADL matrix — EFE matrix — Goal intensity matrix — Key success factors — Internal analysis — Strategic management — Altman Z score

References

• 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

Footnotes

Author: Ewelina Kruszewska