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Internal Evaluation Matrix

IFE

This is a strategical tool to evaluating the major weak points with the strong points of the company portfolio. It also helps to recognize the relationship amongst functioning areas. The Internal Evaluation Matrix is used for formulating company strategies.
Using the IFE matrix coupled with an EFE Matrix is a tool used to formulate strategies and is used to evaluate the company's performance and recognizing the strengths and weaknesses. The IFE matrix has the same concept as the Balanced Scorecard more or less.

How do I produce an IFE MATRIX?

It can be produced using these 5 steps

Internal Factors that are Key:

Do a thorough assessment and recognize the strong points as well as the weak. It is recommended that there should be at least 10 to 20 components but the more there are the better. The number of components used is not relative to the weighted score but it helps to lessen the estimation errors which arise from imminent ratings. Do the strong points first and then the weak ones. Try and be as accurate as possible. You can use percentage, ratio and compare numbers. 

Weights

Once the strong points and the weak points have been identified the substance of the IFE matrix assigns a weight which is between 0 and 1 for each component. It is an indicator of the importance. If a component has a factor of 0 it is not important. Extremely important will be weighted 1 and if there are more than 10 components it might be better to use 0 to 100 as the scale. It does not matter whether it is a weak point or strong point they should be given a factor according to the importance of the organization. Once you have assigned numbers to each component it should add up to 1 or to 100 depending which scale you use.
These weighted scales are relative to the industry; therefore, each component should be given a weighted figure according to how important they are to the success of the company in that particular industry.

Rating

Use 1 as the X rating for each component. Us the scale that you prefer. Practitioners will normally use 1 - 4 which range from very weak (=1), minor weakness (=2), small strength (=3), and very strong (=4). With this scale the strong points will have number 3 & 4 and the weak points will have 1 & 2.
It is important to note the difference between the factors applied. Weights are industry based and rating company based.

Multiply

Now the IFE matrix can be calculated. The component's score is multiplied by the rating which will = the weighted score for each component.

Sum

The final step of obtaining an IFE matrix is adding all the weighted scores which show the total for the company.

Example 1 of an IFE Matrix Table

Weight X rating = Weighted Score  

Description

WEIGHT

RATING

WEIGHTED SCORE

Internal Strengths

 

1. Largest Manufacturer in the market

10%

4

0.40

2. Suppliers Major airlines

12%

4

0.48

3. Good reputation and image

4%

3

0.12

4. Close proximity to the airport

8%

4

0.32

5. Strong management team

4%

3

0.12

6. Increasing Cash flow

5%

3

0.15

7. Loyal Employees

4%

3

0.12

8. Access to cheap and reliable financing

3%

4

0.12

9. History of minimal service complaints

4%

3

0.12

10. Financial Ratios

5%

4

0.20

Internal Weaknesses

 

Saturated Market

10%

1

0.10

Sensitive oil to prices

15%

2

0.30

Little Diversification

8%

2

0.16

Absence of strategic Partner

4%

1

0.04

Limited Access to International Markets

4%

1

0.04

Major weakness(1),Minor Weakness (2),Minor Strength (3), Major Strength (4)

TOTAL

100%

 

2.79

Example 2 of an IFE Matrix Table

Description

WEIGHT

RATING

WEIGHTED SCORE

Internal Strengths

 

Shopping under one roof

15%

4

0.60

Customer Oriented

13%

4

0.52

Financial Position

10%

3

0.30

Brand Image

12%

4

0.48

Wide range of services

10%

4

0.60

Internal Weaknesses

 

Lack of formal mission statement

8%

2

0.16

Slowing speed of the depart lines

10%

2

0.20

Don’t have any research and development facility

6%

1

0.06

Wal - Mart’s top management is dominated

8%

2

0.16

Undifferentiated products and services

8%

2

0.16

Major weakness(1),Minor Weakness (2),Minor Strength (3), Major Strength (4)

TOTAL

100%

 

3.04

Which value do you use in the IFE MATRIX?

No matter how many components are used the maximum score you can have is 4 and the minimum of 1. That is if you have used this scaling method. The average score could be 2.5

Important Note

Why is the average not 2 but 2.5? As an example, let's consider 4 components of which all have a weight of 0.25. They are rated 1, 4, 1, 4, which equates to 0.25, 1, 0.25, 1 and the sum of these equal the weighted score which is 2,5. 
Therefore any component way below this figure is weak and those much higher are rated as strong.

What if there is an internal component that is both strong and weak in the IFE Matrix.

If this situation arises then use the component in each column of the IFE analyses. The same component must be used as a weak point and a strong point and ensure that you apply a weight and rating in both cases.

Benefits of an IFE analyses 

To start we need to understand that the IFE matrix is very subjective but so is TOWS or a SWOT analysis. The IFE matrix reduces this by adding calculations to the general idea.
Each component's score is done intuitively for adding to the IFE table and by having to add these figures makes the result achieved a little more realistic.

What is the difference between an IFE Matrix and a SWOT matrix way of analyses?

Greater degree of accuracy
The major difference between the two is quite obvious and that being the figures that are applied in the IFE analyses. This is different but leads us to another difference. It is recommended that when doing a SWOT analysis that only a few factors are taken into consideration which is the opposite doing an IFE matrix. 
Doing SWOT analyses if you take into account a huge amount of components it will result in it being over analyzed and the purpose of the exercise is lost. This is not the case with the IFE Matrix. By including more components actually, results with the components having only a small impact. This results in if we use an unrealistic rate for a component the impact will be less because that component will only account for a small fraction of the end result of the IFE analyses.
The importance of understanding the individual components that have been used in the analyses outweighs the actual importance of the figures.

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