| Key External Factors | Weight | Rating | Weighted Score |
|
Opportunities |
|||
| Economic growth in the US and an increase in disposable incomes. | 0.13 | 4 | 0.52 |
| Growth of E-Commerce and practice of people making their purchases online. | 0.10 | 2 | 0.2 |
| Increased acceptance of private label products which Target stocks. | 0.09 | 3 | 0.27 |
| Strong performance and growth potential showed by the urban market where Target has a foothold. | 0.17 | 2 | 0.34 |
| The rise of cost conscious consumers. | 0.20 | 4 | 0.8 |
|
Threats |
|||
| Rising labor costs in the US. | 0.09 | 1 | 0.09 |
| Intense competition from Wal-Mart and Kmart who have similar offers. | 0.12 | 3 | 0.36 |
| The growth of small box retailers such as Dollar General that offer low prices but are also conveniently located close to customers. | 0.10 | 2 | 0.20 |
| Total | 1.00 | 2.78 | |
The table above is external factor evaluation (EFE) matrix. It shows how Target has been performing with regard to managing its external environment. As can be seen, the weighted score of 2.40 is above average. The interpretation is that the company is doing quite a decent job in capitalizing on the available opportunities. However, there is still concern with its ability to fend off the threats that it faces. Therefore, there is a need to improve on the strategy as well as the focus of the company to ensure that the firm is able to take advantage of the opportunities that emerge in its environment.
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Pros, Cons, and Applications of EFE
An EFE matrix is a critical tool that every business should look to use. Its application is just like performing an external audit or a survey of the environment outside the organization. Using the EFE presents an organization with numerous advantages (David & David, 2014). The EFE is a pictorial representation of a summary of the external environment and provides a quick glance of the same. Therefore, it makes it possible to the management to have an idea of what is going on out there without getting into too much detail. For starters, it increases an organization’s perception of environmental shifts that may have an important impact on the business. The factors to be considered include the economy, government regulations, future trend, and competitive analysis. For example, surveying the external market can help an organization to know of technological advancements that its rival is using to stay ahead of the competition (David & David, 2014). Apart from that, the EFE matrix can enhance the decision-making in resource allocation. This is possible when the firm observed variations in the economy and then makes good decisions about how to manage the situation.
While the EFE is clearly useful, it also has the drawback that it is based on assumptions and cannot be completely relied on as an analytical tool. At the same time, it is too simplistic and cannot provide all the necessary information. Therefore, it would have to be used alongside other tools.
Internal Factor Evaluation (IFE)
Key Internal Factor |
Weight |
Rating |
Weighted score |
|
Strengths |
|||
| Target is a large retailer with presence all across the US. It has a large workforce of more than 300,000 and its size allows it economies of scale. |
0.2 |
4 |
0.8 |
| The company brand is well perceived and recognized by the customers. |
0.1 |
3 |
0.3 |
| Marketing experience gained over the years in areas such as fashion and household furnishings. |
0.08 |
2 |
0.16 |
| Liked by middle class shoppers for its focus on value unlike Wal-Mart that only focuses on low prices. |
0.1 |
4 |
0.4 |
| An online E-Commerce platform that allows customers to shop remotely. |
0.07 |
3 |
0.21 |
| Outstanding management that has continually made critical decisions that have helped the company grow to its current status. The leadership has made decisions such as focusing on and expanding into the urban market which has worked well for Target. |
0.06 |
3 |
0.18 |
| Target’s deliberate move to differentiate itself from other discount retailers has proven to be a winner with customers. The company focuses on selling affordable but stylish merchandise that is preferred by younger shoppers who are conscious about their image. |
0.09 |
3 |
0.27 |
|
Weaknesses |
|||
| The quest to sell differentiated products has seen Target becoming overly reliant on foreign suppliers which could end up hurting the company. |
0.05 |
4 |
0.2 |
| Target’s online platform is susceptible to data breaches such as what happened in 2013 when customer data including credit card details was compromised. Such an incident raises questions and damages the confidence that people have when using the company’s online shopping platform. |
0.05 |
1 |
0.05 |
| Little presence outside the US which could hurt the company in the future. |
0.07 |
3 |
0.21 |
| The business model of big box stores that is preferred by Target could be a problem considering that more shoppers are opting for stores located conveniently. Target refuses to adopt appropriately even as its main rival Wal-Mart adapts to the changes by opening smaller outlets. |
0.05 |
1 |
0.05 |
| Target is not as diversified as its rivals in spite of being one of the largest retailers in the US. Therefore, it is more vulnerable to changing economic conditions. |
0.03 |
3 |
0.09 |
| Target remains inflexible as reflected by its failure to venture into some segments in the retail market that have proven to be highly lucrative such as filling stations and financial services. |
0.05 |
2 |
0.1 |
| Total |
1.00 |
3.02 |
|
The table above gives Target’s internal factor evaluation (EFE) which tracks the company’s internal environment and how it impacts on the firm’s success. The weighted score of 3.02 is quite impressive and shows that the company has done a lot to capitalize on its strengths while eliminating its weaknesses. However, there is still a lot more that Target can and needs to do to ensure that the weaknesses observed do not hamper its ability to succeed going forward.
Application, Pros, and Cons of IFE
Having thorough knowledge of the internal factors and the environment is important for any business. Just like with the EFE, the IFE is a pictorial representation of the summary of the internal factors and considerations that are important to a business (David & David, 2014). It is particularly useful as it helps to break down the SWOT analysis and makes it easier to understand. Both the EFE and IFE are of use because they also include an aspect of data and empirical analysis.
Ultimately, the IFE has numerous advantages when used. As earlier mentioned, it is a good tool for summarizing the internal analysis of an organization in a simple and easy to understand manner. Looking at the IFE, a firm can pick on the areas for which it needs to make improvements without too much of a hassle (David & David, 2014). Apart from that, the IFE is also a tool that compliments the SWOT analysis and together with the EFE makes it easy to understand the analysis.
While the IFE is a great tool, it also has some disadvantages. Just like the EFE, the IFE suffers the drawback of being based on assumptions. In that case, the information thereof is subjective. It is also too simplistic given that it is based on implicit assumptions. Therefore, that reduces the reliability of the IFE as an analytical tool.
References
David, F., & David, F. (2014). Strategic management . Hoboken N.J: Pearson.
