1. Introduction
External factors evaluation (EFE) matrix is a tool used by strategic managers to identify how external factors such as economic, political, legal, technological, social and competitive environment affect an organization. It is a helpful tool used to quickly identify key external forces affecting the organization and allows managers to allocate resources and create a strategy to better address those pressures.
2. Characteristics of an Effective EFE Matrix
An effective EFE matrix is based on accurate information. Managers should conduct a detailed review of the external environment with research. Managers should look for patterns in the external environment that might be opportunities or threats. The review should focus on both current and future trends as well as opportunities and risks.
After recognizing the key external factors, a score should be assigned to each. This score reflects the organizations relative strengths and weaknesses in each area. Scoring should be based on a number of criteria, such as the strength of the external organizations in the market, the potential for growth and the financial impact.
Finally, the result of the EFE matrix should be used to create a strategy for addressing the external factors. The strategy should involve examining the external opportunities and using resources to capitalize on them. It should also involve creating ways to reduce risk or lessen the impact of the external forces.
3. Benefits of an EFE Matrix
EFE matrix offers several key benefits. By providing a clear view of the external environment, it allows organizations to quickly identify competitive advantages and weaknesses. This helps the organization adjust their strategy to account for external forces. Furthermore, by allowing organizational leaders to understand the overall environment, it can help the organization make better decisions in the future.
The EFE matrix also helps organizations to better allocate resources. By providing a clear picture of the external environment, an EFE matrix allows managers to more accurately assess the costs and benefits of a particular strategy. This can be helpful in determining the most effective way to allocate resources.
Finally, an EFE matrix can provide a platform for understanding the external environment across different industries. Managers can use the matrix to easily compare different industries and their respective external environments. This information can be used to help make important decisions.
4. Conclusion
External factors evaluation matrix is a helpful tool for assessing the external environment of an organization. An effective EFE matrix is based on accurate information and assigns scores to each factor to reflect the strength and weakness of an organization in that area. The EFE matrix offers several key benefits, such as allowing an organization to quickly identify competitive advantages and weaknesses and aiding in allocating resources. Furthermore, it provides a platform for understanding the external environment across different industries. These benefits can be used to help organizations create effective and successful strategies to address the external pressures they face.
