Question

Explain why it is so important to focus on a firm’s narrow industry rather than its broader industry in developing an IFE Matrix.Give applications examples.

Answer 1

Lets first understand the IFE matrix in brief:

IFE is Internal Factor Evaluation (IFE) Matrix.It is a strategic tool that is being used by a firm to evaluate it's internal environment.Now internal environment relates to the strength ,weakness ,opportunities an organization have .It's an organization evaluation tool or in an easy language it's the swot of the firm.

Since it is related to the internal environment of the organization IFE focuses more on narrow industry.Use of matrix ,ratios ,financial statements.comparative numbers to get the picture of a firms performance.having identified strength and weakness helps an organization to indicate the important factors that are needed to be kept in mind and need improvement.Having identified weakness helps a firm to plan in a better way to overcome it. IFE Matrix evaluates the internal position of the organization or its strategic intent hence it focuses more on narrow industry(internal environment).

For example a bakery business can use this tool to develop an strategy as in how to improve order to stay in competition or to know where is it lacking.It will help the bakery to analyze the factors that will lead to it's growth and development.Bakery main product is cakes and pastry but this analysis will help him to know other demand and business diversification. IFE is done through focus group discussion  or data collected through questionnaire, interview, observation and literature review.This all will help the bakery to evaluate it's internal environment and will also help in formulation of new internal strategy which will help to develop it's functioning.