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Advantages and Disadvantages of External Factor Evaluation

What are the pros and cons of using an external factor evaluation (EFE) matrix and an internal factor evaluation (IFE) matrix?

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For Instructional Purpose. Please Derive Your Answer from the Detailed Instruction.

The question is in relation to conducting SWOT analysis for an organization. Here is a brief introduction before proceeding to answering the question.

To achieve a positive strategic plan, an organization must conduct a SWOT analysis on a continuous basis (Pearce & Robinson, 2013). Critical knowledge and implementation of competitive analysis is essential in performing an internal factor evaluation (i.e., strengths and weaknesses) of an organization. Numerous surveillance of an organization's external environment is necessary in performing an external factor evaluation (i.e., opportunities and threats) of an organization. The summative pattern or matrix used for the internal factor evaluation (IFE) and the external factor evaluation (EFE) have their advantages and disadvantages.

Advantages of Evaluating EFE

Increases Organization's Perception of Environmental Shifts: Changes in technological advancements, the economy, government regulations, sociocultural trends, future trends and events are external forces an organization needs to continuously monitor for its competitive success. For example, by performing external surveillance, X organization can identify changes in technological advancement that helps its Y competitor in advancing the production of its products and (or) services (P&S) to increase its sales and earn larger share of its market industry. If X organization acts speedily, it can upgrade or align with the technological changes its Y competitor employs and improve the production of its P&S as well. Positive implementation of the new technology by X organization should yield the same of better increase in sales and market share of the industry.

Enhance Decision-Making in Allocating Resources: Observing variations in the economy can assist an organization in making good decision about managing its assets in a prudent manner. For example, identifying that its P&S are not selling as expected, an organization can survey the economy and find out that there is economic crisis whereby most consumers of its P&S have lost their jobs and purchasing its P&S less than expected. When this happens, an organization needs to readjust allocating its financial resources from producing more of its P&S ...

Solution Summary

Pros and Cons of External Factor Evaluation and Internal Factor Evaluation.