Question

explain IFE, EFE, CPM and QSPM matrixes. What are they ?, how they are constructed ?, how they are used ? Elaborate your answer by providing detailed information about factors composing matrixes.

Answer 1

I. IFE Matrix: IFE (Internal factor evaluation) matrix is one of the best strategic tool to perform internal audit of any firm. IFE is used for internal analysis of different functional areas of business such as finance, marketing,IT, operations, accounts, Human Resources and others depend upon the nature of business and its size.

Important components of IFE Matrix:

1. Internal Factors: Internal factors are the the outcome of detailed internal audit of a firm Obviously, every company have some weak and strong points, therefor the internal factors are divided into two categories namely strengths and weakness.

2. Strengths: Strengths are the strong areas or attribute of the company, which are used to overcome weakness and capitalize to take advantage of the external opportunities available in the industry. The strengths could be tangible or intangible; such as brand image, financial position, income, human resource.

3. Weaknesses: Weaknesses are the risky areas which needs to be addressed on priority to minimize its impact. The competitors always searching for the loop holes in your company and put their best effort to capitalize on the identified weaknesses.

II. EFE Matrix: External Factor Evaluation Matrix is an analytical technique related to the SWOT analysis. EFE is an acronym of the External Factor Evaluation. EFE Matrix evaluates the external position of the organization or its strategic intents.

Where to use EFE Matrix in practice?

Strategy of the organization or mutual evaluation and comparison of different strategic intentions can be evaluated with EFE Matrix. The intention with the best result of overall weighted average should be chosen. EFE Matrix results should be combined with the results of IFE matrix. CEO and senior management makes the strategic decisions based on IFE matrix.

III. CPM Matrix: Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry. Competitive profile matrix show the clear picture to the firm about their strong points and weak points relative to their competitors. The CPM score is measured on basis of critical success factors, each factor is measured in same scale mean the weight remain same for every firm only rating varies. The best thing about CPM that it include your firm and also facilitate to add other competitors make easier the comparative analysis.

Critical Success Factors:

Critical success factors are extracted after deep analysis of external and internal environment of the firm. Obviously there are some good and some bad for the company in the external environment and internal environment.The higher rating show that firm strategy is doing well to support this critical success factors and lower rating means firm strategy is lacking to support the factor.

IV. QSPM Matrix: Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management approach for evaluating possible strategies. Quantitative Strategic Planning Matrix or a QSPM provides an analytical method for comparing feasible alternative actions. The QSPM method falls within so-called stage 3 of the strategy formulation analytical framework.

When company executives think about what to do, and which way to go, they usually have a prioritized list of strategies. If they like one strategy over another one, they move it up on the list. This process is very much intuitive and subjective. The QSPM method introduces some numbers into this approach making it a little more "expert" technique.

What is a Quantitative Strategic Planning Matrix or a QSPM?

The Quantitative Strategic Planning Matrix or a QSPM approach attempts to objectively select the best strategy using input from other management techniques and some easy computations. In other words, the QSPM method uses inputs from stage 1 analyses, matches them with results from stage 2 analyses, and then decides objectively among alternative strategies.

Stage 1 strategic management tools...

The first step in the overall strategic management analysis is used to identify key strategic factors. This can be done using, for example, the EFE matrix and IFE matrix.

Stage 2 strategic management tools...

After we identify and analyze key strategic factors as inputs for QSPM, we can formulate the type of the strategy we would like to pursue. This can be done using the stage 2 strategic management tools, for example the SWOT analysis (or TOWS), SPACE matrix analysis, BCG matrix model, or the IE matrix model.

Stage 3 strategic management tools...

The stage 1 strategic management methods provided us with key strategic factors. Based on their analysis, we formulated possible strategies in stage 2. Now, the task is to compare in QSPM alternative strategies and decide which one is the most suitable for our goals.

The stage 2 strategic tools provide the needed information for setting up the Quantitative Strategic Planning Matrix - QSPM. The QSPM method allows us to evaluate alternative strategies objectively.

Conceptually, the QSPM in stage 3 determines the relative attractiveness of various strategies based on the extent to which key external and internal critical success factors are capitalized upon or improved. The relative attractiveness of each strategy is computed by determining the cumulative impact of each external and internal critical success factor.