The External Factor Evaluation (EFE) Matrix

Industry Analysis:
The External Factor Evaluation (EFE) Matrix

Key External
Factors

Weight

Rating

Weighted
Score

Opportunities
1.
X
2.
X
3.
X
4.
X
5.
X
6.
X
7.
X

Threats
8.
x
9.
x
10.
x
11.
x
12.
x
13.
x
14.
x
15.
x

Total

1.0

Note: Adapted from David, F. (2013). Strategic management concepts and cases: A
competitive advantage approach (14th ed.). Upper Saddle River, NJ: Prentice
Hall.
Directions
1.
List primary external factors, including opportunities and threats,
and using statistics, percentages, ratios, and other quantitative data whenever
possible.

2.
Consider each factor in weighing how important it is to success in
the industry. Each factor’s weight
should be between 0.0 (not important) and 1.0 (very important). The sum of all
weights must equal 1.0. Opportunities
generally are weighted higher than threats.

3.
For each factor, assign a rating between 1 and 4 to indicate the
potential to successfully manage or capitalize on that factor: 4 = ability to
manage or capitalize is superior; 3 = ability is above average; 2 = ability is
average; 1 = ability is poor.

4.
Multiply each factor’s weight by the rating for a weighted score.

5.
The highest possible rating is 4 and the lowest is 1. An assessment may be made as to the potential
to successfully capitalize on opportunities and to manage threats.