External Factor Evaluation (EFE) –

• Note table in your text.

• Notice that there are three categories
(Weight, Rating, and Weighted Score)
and four categories if you count the
Opportunities and Threats.
 External Factor Evaluation (EFE)
Weights
• The Weight category represents the importance
of that factor to being successful in the
industry. The weight ranges from 0.00 (not-
important) to 1.0 (very important)
• Please note that when distributing weights, all
the weights combined MUST not exceed 1.00
External Factor Evaluation (EFE) –
Rating
• The Rating category represents the firm’s
current strategy response (rated from 1 – 4).
1 meaning the firm’s current strategy is poor
in responding to this opportunity or threat.
2 meaning the firm’s current strategy is
average in responding to this opportunity or
threat.
External Factor Evaluation (EFE)
Rating cont’d
3 meaning the firm’s current strategy is above
average in responding to this opportunity or
threat.
4 meaning the firm’s current strategy is
superior in responding to this opportunity or
threat.
External Factor Evaluation (EFE) –
Weighted Score
• The Weighted Score is simply multiplying
the Weight by the Rating.
• The provides a number that is the part of
a much larger total that is yet to come.
 External Factor Evaluation (EFE)

• Now, here is a re-cap, plus a little

more in-depth knowledge of the
procedure.
External Factor Evaluation (EFE) –
Step One
• Five easy steps in creating an EFE
• Step One – List all Opportunities in one
section, and list all the Threats in another
section as exhibited in the Table in your text.
• Opportunities go first, followed by the Threats
 External Factor Evaluation (EFE)
Step Two
• Step Two – You want to issue a weight to each
of the opportunities and threats that were
identified. The weight indicates how important
that opportunity is contributing to the success
of the organization in the industry.
• Opportunities normally receive higher weights
than threats, but threats can be high if that
particular threat is really severe or threatening.
 External Factor Evaluation (EFE)
Step Three
• Step Three – As mentioned earlier, Assign a
rating to each of the Opportunities and
Threats based on how the organization’s
current strategy is responding to this
opportunity or threat. For example, in just
using the extremes for this example; 1, the
organization is responding poorly and 4, the
organization’s current strategy is responding in
a superior fashion to this particular
Opportunity or Threat
 External Factor Evaluation (EFE)
Step Four and Five
• Step Four – Weight X Rating = Weighted
Score
• Step Five – Sum the Totals in the
Weighted Score category for a Total
Weighted Score
 External Factor Evaluation (EFE)
• Keep in mind, the highest possible score is a
4.0, and if this is the case, the organization is
doing a tremendously good job
• If the score is 1.0, the organization has some
“Major League” problems
• An average score is 2.5