Efas Analysis How-to

Synthesis of External Factors—EFAS After strategic managers have scanned the societal and task environments and identified a number of likely external factors for their particular corporation, they may want to refine their analysis of these factors using a form such as that given in Table 3. 4. The EFAS Table (External Factors Analysis Summary) is one way to organize the external factors into the generally accepted categories of opportunities and threats as well as to analyze how well a particular company’s management (rating) is responding to these specific factors in light of the perceived importance (weight) of these factors to the company. To generate an EFAS Table for the company being analyzed, complete the following steps: In Column 1 (External Factors), list the eight to ten most important opportunities and threats facing the company. In Column 2 (Weight), assign a weight to each factor from 1. 0 (Most Important) to 0. 0 (Not Important) based on that factor’s probable impact on a particular company’s current strategic position. The higher the weight, the more important is this factor to the current and future success of the company. (All weights must sum to 1. 0 regardless of the number of strategic factors. ) In Column 3 (Rating), assign a rating to each factor from 5 (Outstanding) to 1 (Poor) based on that particular company’s current response to that particular factor. Each rating is a judgment regarding how well the company is currently dealing with each external factor. 5 43 2 1 Â ¦_________________Â ¦_____________Â ¦_______________Â ¦_______________Â ¦ Out- Above Average BelowPoor standing Average Average In Column 4Â  (Weighted Score), multiply the weight in Column 2 for each factor times its rating in Column 3 to obtain that factor’s weighted score. This results in a weighted score for each factor ranging from 5. 0 (Outstanding) to 1. (Poor) with 3. 0 as average. In Column 5Â  (Comments), note why a particular factor was selected and how its weight and rating were estimated. Finally, add the weighted scores for all the external factors in Column 4 to determine the total weighted score for that particular company. The total weighted score indicates how well a particular company is responding to current and expected factors in its external environment. The score can be used to compare that firm to other firms in its industry. The total weighted score for an average firm in an industry is always 3. 0. As an example of this procedure, Table 3. 4 includes a number of external factors for Maytag Corporation with corresponding weights, ratings, and weighted scores provided. This table is appropriate for 1995 before Maytag sold its European and Australian operations. Note that Maytag’s total weight is 3. 15, meaning that the corporation is slightly above average in the major home appliance industry.