Reference no: EM133677110

Choose 6-10 external factors for analysis, 5 maximum opportunities, and 5 maximum threats (total factors will depend on the nature of the industry).

Each factor should be presented and discussed completely under its own heading. An APA-format citation MUST be included for each factor listing where you found your information.

Five pages or less (excluding chart).
Chart must begin the assignment and be on one page only.
Note: All external factors should be derived from your external research; i.e., you should not present speculation, made-up/fictitious personal beliefs and assertions, or "common knowledge" as researched factors. You must, therefore, only present factors that you can prove through your research and citations. Plagiarism will result in a zero for this assignment.

For each factor create a topic heading. Write a paragraph or two, as necessary, discussing the nature of the factor, how it will impact the firm, and its importance to the future strategy of the firm (i.e., explain why you assigned the rating score that you did) and cite the source of your information.

THE EXTERNAL FACTOR EVALUATION (EFE) MATRIX

An External Factor Evaluation (EFE) Matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information. Illustrated in Table 1, the EFE Matrix can be developed in five steps:

1) List key external factors as identified in the external-audit process. Include a total of from eight to ten factors, including both opportunities and threats affecting the firm and its industry. List the opportunities first and then the threats. Be as specific as possible, using percentages, ratios, and comparative numbers whenever possible.

2) Assign to each factor a weight that ranges from 0.0 (not important) to 0.9 (very important). The weight indicates the relative importance of that factor to being successful in the firm's industry. Opportunities often receive higher weights than threats, but threats too can receive high weights if they are especially severe or threatening. Appropriate weights can be determined by comparing successful with unsuccessful competitors or by discussing the factor and reaching a group consensus. In the end, the weight assigned is wholly up to you and your considered judgment... the more important a factor is to future success, the greater the weight assigned. The sum of all weights assigned to the factors must equal 1.0.

3) Assign a 1-to-4 rating to each key external factor to indicate how effectively the firm's current strategies respond to the factor, where 4 = the response is superior, 3 = the response is above average, 2 = the response is average, and 1 = the response is poor. Ratings are based on the effectiveness of the firm's strategies to date in your judgment. It is important to note that both threats and opportunities can receive a 1, 2, 3, or 4.

4) Multiply each factor's weight by its rating to determine a weighted score.

5) Sum the weighted scores for each variable to determine the total weighted score for the organization.

Regardless of the number of key opportunities and threats included in an EFE Matrix, the highest possible total weighted score for an organization is 4.0 and the lowest possible total weighted score is 1.0. The average total weighted score is 2.5. A total weighted score of 4.0 indicates that an organization is responding in an outstanding way to existing opportunities and threats in its industry. In other words, the firm's strategies effectively take advantage of existing opportunities and minimize the potential adverse effect of external threats. A total score of 1.0 indicates that the firm's strategies are not capitalizing on opportunities or avoiding external threats.

An example of an EFE Matrix is provided in Table 1 for UST, Inc., the manufacturer of Skoal and Copenhagen smokeless tobacco. Note that the Clinton administration was considered to be the most important factor affecting this industry, as indicated by the weight of 0.20. The Clinton administration was threatening to go after smokeless tobacco as it had against the traditional big tobacco firms. The total weighted score of 2.10 indicates that UST is below average in its effort to pursue strategies that capitalize on external opportunities and avoid threats. It is important to note here that a thorough understanding of the factors being used in the EFE Matrix is more important than the actual weights and ratings assigned.