Question

What is Lazada's External Factor Evaluation (EFE) Matrix?

Answer 1

Lazada's External Factor Evaluation (EFE) matrix method is a strategic- management tool which is mostly used for assessing the current business conditions. The EFE matrix is a better tool to visualize and prioritize the threats and opportunities which a business is facing.

This matrix is an analytical technique that is related to the Strength, Weakness, Opportunity, Threat analysis.

External factors are extracted after analyzing the external environment. Definitely there are some good and some bad for the company in its external environment.

The rating in EFE matrix shows the response of a firm, towards the opportunities and the threats. The higher the rating, the better the response of the firm to defend the threats and exploit the opportunities.

The weight in EFE matrix shows the importance of factor to being successful in a firm's industry.

There are several steps in developing the EFE matrix which are identification of a list of KEY external factors, assigning a weight to each factor from 0 to 1, assigning a 1 to 4 rating to each of the success factor to show how a firm's current strategies respond to a factor.Next is to multiply each factor's weight by its rating to get a weighted score and then finally sum the score.

Some examples of EFE matrix are Digital cellular and Walkie-Talkie services.