Kraft foods is an American company founded in1903 and operating in food processing industry. Its headquarter is located in Northfield, Illinois, United States. The company products are available in more than 170 countries almost serving worldwide.
External factor evaluation (EFE) matrix is a well known strategic tool has been used for the evaluation of external environment of a firm. External environment mainly consist of political,legal,economical,social and technological factors. A firm should determine the external factors and segregate them into opportunities and threats. The opportunities are the options available for a firm to further strengthen its position in a industry only if a firm exploit each offered opportunity. On the other hand, threats are considered as negative factors for a firm which may harm its position in a industry however, impact of threat could be minimized or eliminated if a firm respond to each threat in a timely manner.
Here is an example of EFE matrix made for Wal-Mart Stores.
Steps in Developing the EFE Matrix
1.Identify a list of KEY external factors (critical success factors).
2.Assign a weight to each factor, ranging from 0 (not important) to 1.0 (very important).
3.Assign a 1-4 rating to each critical success factor to indicate how effectively the firm’s current strategies respond to the factor. (1 = response is poor, 4 = response is extremely good)
4.Multiply each factor’s weight by its rating to determine a weighted score.
5.Sum the weighted scores.
EFE Matrix of Kraft Foods
|Operates in fast growing industry||0.08 (8%)||4||0.32|
|Increase in demand of healthy products||0.05 (5%)||3||0.15|
|Cost competition||0.10 (10%)||3||0.30|
|Merger and acquisition||0.08(10%)||3||0.24|
|Online existence on Internet for shopping||0.07 (7%)||3||0.21|
|Change in people lifestyle||0.07 (7%)||2||0.14|
|New product development||0.08 (8%)||3||0.24|
|Strong competition||0.10 (10%)||3||0.30|
|New entrants in retail industry||0.05 (5%)||3||0.15|
|Online sales increasing which will results in increasing competition||0.10 (10%)||3||0.30|
|Economics recession||0.05 (5%)||1||0.05|
|Political issues||0.05 (5%)||1||0.05|
|Increase in obesity rate||0.10 (10%)||2||0.20|
|Total Weighted Score||1.0(100%)||2.65|
The score of 2.65 is above average which means that the company is performing well but there is still enough of improvement.