External Factor Evaluation Matrix (EFE Matrix) is a tool for analyzing the external environment, the approach is to identify the key factors affecting the future development of the enterprise from the aspects of opportunities and threats, determine the weights according to the size of the degree of influence of each factor, and then rate the key factors according to the degree of effective response of the enterprise to each key factor, and finally calculate the total weighted score of the enterprise. The EFE Matrix helps strategy makers summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information.
The five steps in building an EFE matrix are as follows:
1) List the external factors identified during the external analysis process, including opportunities and threats affecting the firm and its industry.
2) Assign each factor a weight (0.0 to 1.0) based on the level of importance, which indicates the relative importance of the factor in influencing the success of the firm in the production process.
3) According to the degree of effective response of the current strategy of the enterprise to each key factor for each key factor scoring, the range of 0 ~ 4 points, "4" represents a very good response, "1" represents a very poor response.
4) Multiply the weight of each factor by its score to get a weighted score for each factor.
5) Add up the weighted scores of all the factors to get the total weighted score of the organization.