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The number of macro-environmental factors is virtually unlimited. In practice, the firm must prioritize and monitor those factors that influence its industry. Even so, it may be difficult to forecast future trends with an acceptable level of accuracy. In this regard, the firm may turn to scenario planning techniques to deal with high levels of uncertainty in important macro-environmental variables.
The Internal Factor Evaluation (IFE) Matrix:
The IFE Matrix is a strategy-formulation tool that can be utilized to evaluate how the company is performing in regard to identified internal strengths and weaknesses of a company. The matrix can be created using the following five steps:1. Make a list of critical success factors: divided between strengths and weaknesses.
2. Assign a weight to each critical success factor. The value of these weights should be between 0 (not important at all) and to 1 (the most influential critical success factor). The total value of the weights should equal, but not exceed 1.
3. Assign a rating to each one of the critical success factors. The rating should be between 1 (minor) and 4 (major). Thus the scores are company-specific and the weights are industry-specific.
4. Multiply e A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the external macro-environment. Such external factors usually are beyond the firmЎ¦s control and sometimes present themselves as threats. For this reason, some say that Ў§pestЎРis an appropriate term for these factors. However, changes in the external environment also create new opportunities and the letters sometimes are arranged to construct the more optimistic term of STEP analysis.
Many macro-environmental factors are country-specific and a PEST analysis will need to be performed for all countries of interest. The following are examples of some of the factors that might be