Internal Factor Evaluation Matrix (IFE Matrix)¶
Overview¶
The Internal Factor Evaluation (IFE) Matrix is a strategic tool used in the strategy formulation process. It summarizes and evaluates the major strengths and weaknesses in the functional areas of a business. The IFE Matrix provides a foundation for identifying and assessing the internal factors that are critical to the success of an organization.
Steps to Develop an IFE Matrix¶
The IFE Matrix can be developed in five key steps:
Step 1: List Key Internal Factors¶
- Action: Identify and list key internal factors, including both strengths and weaknesses, as determined during the internal audit process.
- Details: Typically, a total of 10 to 20 internal factors are included. Strengths should be listed first, followed by weaknesses. Be as specific as possible, using percentages, ratios, and comparative numbers to define these factors.
Step 2: Assign Weights¶
- Action: Assign a weight to each factor, ranging from 0.00 (not important) to 1.00 (all-important).
- Details: The weight reflects the relative importance of the factor in the firm’s industry. Factors that have the greatest effect on organizational performance should be given the highest weights. The sum of all weights must equal 1.0.
Step 3: Assign Ratings¶
- Action: Assign a rating to each factor to indicate its nature:
- 1 = Major Weakness
- 2 = Minor Weakness
- 3 = Minor Strength
- 4 = Major Strength
- Details: Note that strengths should receive a rating of 3 or 4, while weaknesses should receive a rating of 1 or 2. Ratings are company-based, meaning they are specific to the organization, while weights are industry-based.
Step 4: Calculate Weighted Scores¶
- Action: Multiply each factor’s weight by its rating to determine a weighted score for each variable.
- Details: This step converts the subjective ratings into quantifiable scores that reflect the importance of each factor to the organization.
Step 5: Determine the Total Weighted Score¶
- Action: Sum the weighted scores for each factor to determine the total weighted score for the organization.
- Details: The total weighted score provides an overall measure of the organization’s internal strengths and weaknesses.
Evaluating the IFE Matrix¶
- Scoring: Regardless of the number of factors included, the total weighted score can range from a low of 1.0 to a high of 4.0, with the average score being 2.5.
- Scores below 2.5: Indicate that the organization is weak internally.
- Scores above 2.5: Indicate that the organization has a strong internal position.
The IFE Matrix is an important tool for strategy formulation. In multidivisional firms, each division or strategic business unit should construct its own IFE Matrix. These divisional matrices can then be integrated to develop an overall corporate IFE Matrix.
Example of an IFE Matrix¶
| Key Internal Factors | Weight | Rating | Weighted Score |
|---|---|---|---|
| Strengths | |||
| Strength 1 | 0.05 | 3 | 0.15 |
| Strength 2 | 0.10 | 4 | 0.40 |
| Strength 3 | |||
| Strength 4 | |||
| Strength 5 | |||
| Weaknesses | |||
| Weakness 1 | 0.01 | 1 | 0.01 |
| Weakness 2 | 0.07 | 2 | 0.14 |
| Weakness 3 | |||
| Weakness 4 | |||
| Total | 1.0 | <2.5> |
The above matrix is a simplified example that shows how to list key internal factors, assign weights, assign ratings, and calculate weighted scores. The total weighted score (in this case <2.5>) provides a clear indicator of the organization’s internal strengths and weaknesses.
Assurance of Learning Exercise: Constructing an IFE Matrix for Your University¶
Instructions¶
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Form a Team: Join with two other individuals to form a three-person team. Develop a team IFE Matrix for your university, using the strengths and weaknesses identified in previous exercises.
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Diagram the IFE Matrix: Go to the board and diagram your team’s IFE Matrix.
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Compare with Others: Compare your team’s IFE Matrix to those of other teams. Discuss any major differences.
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Strategy Formulation: Based on your IFE Matrix, discuss what strategies could allow your university to capitalize on its major strengths and improve upon its major weaknesses.
This exercise provides an opportunity to apply the concepts of the IFE Matrix to a real-world scenario, such as evaluating the strengths and weaknesses of an educational institution.
By following these steps, the IFE Matrix can be effectively used to identify and assess the key internal factors that impact an organization's strategic decision-making process.
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