Analytical Methods of Business Environment
Synthesis of External and Internal Factors of Business Environment
9. lecture
Ing. Šárka Zapletalová, Ph.D.
Department of Business Economics and Management
BUSINESS ENVIRONMENT

Introduction
•Must be made to systematize knowledge from internal and external environment analysis.
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•One approach is to create Industry matrix which is followed up forms in the form of
systematization IFAS, EFAS tables.
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•Thereafter we generate SFAS Matrix and find a Propitious Niche.
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•In conclusion, inecessary to generate alternative strategies by using a TOWS Matrix.
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EFAS Table
Synthesis of External Factors
1.Using key success factors to create an industry matrix - within any industry there are usually
certain variables - key success factors - that a company’s management must understand in order to
be successful.
•Key success factors are variables that can significantly affect the overall competitive positions
of companies within any particular industry.
•An industry matrix summarizes the key success factors within a particular industry. The matrix
gives a weight for each factor based on how important that factor is for success within the
industry.
•The matrix also specifies how well various competitors in the industry are responding to each
factor.
•To generate an industry matrix using two industry competitors (called A and B), complete the
following steps for the industry being analyzed:
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EFAS Table
Synthesis of External Factors
•To generate an industry matrix using two industry competitors (called A and B), complete the
following steps for the industry being analyzed:
1.In Column 1 (Key Success Factors), list the 8 to 10 factors that appear to determine success in
the industry.
2.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 the overall industry’s current and future
success. (All weights must sum to 1.0 regardless of the number of strategic factors.)
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EFAS Table
Synthesis of External Factors
•To generate an industry matrix using two industry competitors (called A and B), complete the
following steps for the industry being analyzed:
3.In Column 3 (Company A Rating), examine a particular company within the industry.
•for example, Company A. Assign a rating to each factor from 5 (Outstanding) to 1 (Poor) based on
Company A’s current response to that particular factor. Each rating is a judgment regarding how
well that company is specifically dealing with each key success factor.
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EFAS Table
Synthesis of External Factors
•To generate an industry matrix using two industry competitors (called A and B), complete the
following steps for the industry being analyzed:
4.In Column 4 (Company A Weighted Score), multiply the weight in Column 2 for each factor by its
rating in Column 3 to obtain that factor’s weighted score for Company A.
5.In Column 5 (Company B Rating), examine a second company within the industry – in this case,
Company B.
4.Assign a rating to each key success factor from 5.0 (Outstanding) to 1.0 (Poor), based on Company
B’s current response to each particular factor.
6.In Column 6 (Company B Weighted Score), multiply the weight in Column 2 for each factor times its
rating in Column 5.
7.The total weighted score indicates how well each company is responding to current and expected
key success factors in the industry’s environment.
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EFAS Table
Synthesis of External Factors – EFAS
•Using an EFAS (External Factors Analysis Summary) Table 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.
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IFAS Table
Synthesis of Internal Factors
•This IFAS (Internal Factor Analysis Summary) Table is one way to organize the internal factors
into the generally accepted categories of strengths and weaknesses as well as to analyze how well a
particular company’s management is responding to these specific factors in light of the perceived
importance of these factors to the company.
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•Use the VRIO framework (Value, Rareness, Imitability, & Organization) to assess the importance of
each of the factors that might be considered strengths.
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•Except for its internal orientation, this IFAS Table is built the same way as the EFAS Table.
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IFAS Table
Synthesis of Internal Factors
Example of Internal Factor Analysis Summary (IFAS Table)
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IE Matrix
•The IE Matrix is a strategic management tool which is used to analyze the current position of the
divisions and suggest the strategies for the future.
•The Internal-External (IE) Matrix is based on an analysis of internal and external business
factors which are combined into one suggestive model.

SFAS Matrix
Generating a Strategic Factors Analysis Summary SFAS Matrix
•The EFAS and IFAS Tables plus the SFAS Matrix have been developed to deal with the criticisms of
SWOT analysis.
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•When used together, they are a powerful analytical set of tools for strategic analysis.
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•The SFAS (Strategic Factors Analysis Summary) Matrix summarizes an organization’s strategic
factors by combining the external factors from the EFAS Table with the internal factors from the
IFAS Table.
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SFAS Matrix
Generating a Strategic Factors Analysis Summary SFAS Matrix
•The SFAS Matrix requires a strategic decision maker to condense these strengths, weaknesses,
opportunities, and threats into fewer than 10 strategic factors.
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•This is done by reviewing and revising the weight given each factor. The revised weights reflect
the priority of each factor as a determinant of the company’s future success.
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•The highest-weighted EFAS and IFAS factors should appear in the SFAS Matrix.
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SFAS Matrix
Generating a Strategic Factors Analysis Summary SFAS Matrix – can create following these steps:
1.In Column 1 (Strategic Factors), list the most important EFAS and IFAS items.
After each factor, indicate whether it is a Strength (S), Weakness (W), an Opportunity (O), or a
Threat (T).
2.In Column 2 (Weight), assign weights for all of the internal and external strategic factors. This
means that the weights calculated earlier for EFAS and IFAS will probably have to be adjusted.
3.In Column 3 (Rating), assign a rating of how the company’s management is responding to each of
the strategic factors.
These ratings will probably (but not always) be the same as those listed in the EFAS and IFAS
Tables.
4.In Column 4 (Weighted Score), multiply the weight in Column 2 for each factor by its rating in
Column 3 to obtain the factor’s rated score.
5.In Column 5 (Duration), indicate short-term (less than one year), intermediate-term (one to three
years), or long-term (three years and beyond).
6.In Column 6 (Comments), repeat or revise your comments for each strategic factor from the
previous EFAS and IFAS Tables. The total weighted score for the average firm in an industry is
always 3.0.
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SFAS Matrix – Summary SFAS Matrix
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SFAS Matrix – Generating SFAS matrix
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SWOT Analysis
•The primary objective of a SWOT analysis is to help organizations develop a full awareness of all
the factors involved in making a business decision.
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•This method was created in the 1960s by Albert Humphrey of the Stanford Research Institute, during
a study conducted to identify why corporate planning consistently failed. Since its creation, SWOT
has become one of the most useful tools for business owners to start and grow their companies.
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•A SWOT analysis is a compilation of company's strengths, weaknesses, opportunities and threats.
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•The primary objective of a SWOT analysis is to help organizations develop a full awareness of all
the factors involved in making a business decision.
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•A SWOT (strengths, weaknesses, opportunities and threats) analysis is a planning process that
helps company overcome challenges and determine what new leads to pursue.

SWOT Analysis
Strengths (S) and weaknesses (W) refer to internal factors, which are the resources and experience
readily available to you. These are some commonly considered internal factors:
•financial resources (funding, sources of income and investment opportunities);
•physical resources (location, facilities and equipment);
•human resources (employees, volunteers and target audiences);
•access to natural resources, trademarks, patents and copyrights;
•current processes (employee programs, department hierarchies and software systems).
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External forces influence and affect every company, organization and individual. Whether these
factors are connected directly or indirectly to an opportunity (O) or threat (T), it is important
to note and document each one. External factors are typically things you or your company do not
control, such as the following:
•market trends (new products, technology advancements and shifts in audience needs);
•economic trends (local, national and international financial trends);
•funding (donations, legislature and other sources);
•Demographics;
•relationships with suppliers and partners;
•political, environmental and economic regulations.
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TOWS Matrix
Generating Alternative Strategies by Using a TOWS Matrix
•The TOWS Matrix (TOWS is just another way of saying SWOT) illustrates how the external
opportunities and threats facing a particular corporation can be matched with that company’s
internal strengths and weaknesses to result in four sets of possible strategic alternatives.
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•This is a good way to use brainstorming to create alternative strategies that might not otherwise
be considered.
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•It forces strategic managers to create various kinds of growth as well as retrenchment strategies.
It can be used to generate corporate as well as business strategies.
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TOWS Matrix
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TOWS Matrix
Top build a TOWS Matrix, take the following steps:
Generate a series of possible strategies for the company or business unit under consideration based
on particular combinations of the four sets of factors:
•SO Strategies are generated by thinking of ways in which a company or business unit could use its
strengths to take advantage of opportunities.
•ST Strategies consider a company’s or unit’s strengths as a way to avoid threats.
•WO Strategies attempt to take advantage of opportunities by overcoming weaknesses.
•WT Strategies are basically defensive and primarily act to minimize weaknesses and avoid threats.
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TOWS Matrix
Some of the primary criticisms of SWOT analysis are:
•It generates lengthy lists.
•It uses no weights to reflect priorities.
•It uses ambiguous words and phrases.
•The same factor can be placed in two categories (e.g., a strength may also be a weakness).
•There is no obligation to verify opinions with data or analysis.
•It requires only a single level of analysis.
•There is no logical link to strategy implementation.
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TOWS Matrix
•Using the TOWS Matrix to identify a propitious niche is one way to develop a sustainable
competitive advantage using those strategic factors.
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•The goal is to find a propitious niche - an extremely favorable niche - that is so well suited to
the firm’s internal and external environment that other corporations are not likely to challenge or
dislodge it.
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•A niche is propitious to the extent that it currently is just large enough for one firm to satisfy
its demand. After a firm has found and filled that niche, it is not worth a potential competitor’s
time or money to also go after the same niche.
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•Such a niche may also be called a strategic sweet spot where a company is able to satisfy
customers’ needs in a way that rivals cannot, given the context in which it operates.
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TOWS Matrix
Finding a Propitious Niche - The strategic sweet spot
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SPACE Matrix
•The Strategic Position & ACtion Evaluation matrix or short a SPACE matrix is a strategic
management tool that focuses on strategy formulation especially as related to the competitive
position of an organization.
•The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis, BCG matrix
model, industry analysis, or assessing strategic alternatives (IE matrix).
•The SPACE Matrix analysis functions upon two internal and two external strategic dimensions in
order to determine the organization´s strategic posture in the industry.
•The SPACE matrix is based on four areas of analysis: internal strategic dimensions (financial
strength FS and competitive advantage CA), external strategic dimensions (environmental stability
ES and industry strength (IS).
•The SPACE matrix calculates the importance of each of these dimensions and places them on a
Cartesian graph with X and Y coordinates.
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SPACE Matrix
SPACE matrix average scores table


SPACE Matrix