McDonald’s is an American largest fast food chain founded 1940 and operating in fast food industry. Its headquarter is located in Oak Brook, Illinois,United States. Its is serving customers in more than 119 countries. MacDonald’s primary menu food items are hamburgers, cheeseburgers, chicken, French fries, breakfast items, soft drinks, milkshakes and desserts.

EFE Matrix

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 McDonald’s 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 McDonalds’s

OpportunitiesWeightRatingWeighted Score
Operates in fast growing industry0.05 (5%)40.20
Increase in demand of healthy products0.07 (7%)30.21
Cost competition0.06 (6%)30.18
Merger and acquisition0.03(3%)30.09
Going green0.04 (4%)30.12
Incorporate healthy food in its menu0.10 (10%)20.20
Globalization0.08 (8%)30.24
Expand coffee business0.09 (9%)30.27
    
Threats   
Strong competition especially from burger king.0.10 (10%)30.30
New entrants in fast food industry0.05 (5%)30.15
Online sales increasing which will results in increasing competition0.10 (10%)30.30
Economics recession0.05 (5%)10.05
Political issues0.05 (5%)20.05
Increase in obesity rate0.07 (7%)20.14
Relationship with franchisee and suppliers0.05 (5%)30.15
    
Total Weighted Score1.0(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.