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2nd bullet: Greater weights should be given to those internal factors which have greater influence on the organizational performance.
IFE, RBV, Porter's
What is the IFE Matrix?
• Internal Factor Evaluation Matrix
• A summary step in conducting internal
strategic management audit.
• Summarizes and evaluates the major
strengths and weaknesses in the
functional areas of a business.
• Internal Factors – list of all strengths and
• Weights – Scale of 0 to 1
• Rating – Scale of 1 to 4
– Strengths – 4-major strength; 3- minor
– Weaknesses – 1-major weakness; 2-minor
• Total Weighted Score
Construction of IFE Matrix
• Make a table. In the first column, list
down all the strengths and weaknesses.
• In the second column, assign weights to
each factor ranging from 0.0 (not
important) to 1 (most important).
• The sum of all weights must be equal to
Construction of IFE Matrix
• In the third column, rate each factor
ranging from 1 to 4 (where: 1 = major
weakness, 2 = minor weakness, 3 = minor
strength, 4 = major strength.)
Construction of IFE Matrix
• In the fourth column, calculate weighted
score by multiplying each factor’s score
by its rating.
• Find the total weighted score by adding
the weighted scores for each variable.
What is RBV?
• The resource-based view focuses on
internal resources, the firm's strengths
and weaknesses, in contrast to the
positional or environmental models of
competitive advantage which focuses on
opportunities and threats. (Barney, 1991)
The Language of Resources and
Inputs into a firm’s production process
capacity of an integrated set of resources
to integratively perform a task or activity
A surplus of revenue over cost.
Strategic Assets/Core Competencies
Resources and capabilities that can earn
Types of Resources
Tangible Resources – include all plant and
equipment, location, technology, raw
materials and machines
Intangible Resources - include all
employees, training, experience,
intelligence, knowledge, skills, abilities
Organizational Resources - include firm
structure, planning processes, information
systems, trademarks, copyrights, databases.
Resources and capabilities lead to Competitive
Advantage when they are:
Valuable allow the firm to exploit
opportunities or neutralize
threats in its external
Rare possessed by few, if any,
current and potential
Costly to imitate when other firms
obtain them at a
Non-substitutable the firm must be
obtain the full
benefits of the
order to realize a competitive
Criteria for Sustainable Competitive
Advantage and Strategic Implications
Who is Michael Porter?
• Described a category
scheme consisting of
three general types of
strategies that are
commonly used by
businesses to achieve
Three Generic Strategies
1. Cost Leadership
– a firm sets out to become the low cost
producer in its industry.
– Targets a broad market
• Competitive Advatages:
– by reducing production costs and therefore
increasing the amount of profit made on
each sale as the business believes that its
brand can command a premium price or
– by reducing production costs and passing on
the cost saving to customers in the hope that
it will increase sales and market share
• Southwest Airlines
– The airline industry has typically been an
industry where profits are hard to come by
without charging high ticket prices.
Southwest Airlines challenged this concept by
marketing itself as a cost leader.
• other firms may be able to lower their
costs as well. As technology improves,
the competition may be able to leapfrog
the production capabilities, thus
eliminating the competitive advantage.
– a firm seeks to be unique in its industry along
some dimensions that are widely valued by
– It selects one or more attributes that many
buyers in an industry perceive as important,
and uniquely positions itself to meet those
• For the health and wellness section...
• PROCTOR AND GAMBLE
- Differentiation of health and hygiene
products bet Johnson and Johnson with
variants in product and price sufficient
though not leader in this segment
• The risks associated with a
differentiation strategy include imitation
by competitors and changes in customer
– rests on the choice of a narrow competitive
scope within an industry. The focuser selects
a segment or group of segments in the
industry and tailors its strategy to serving
them to the exclusion of others.
FOCUSED COST LEADERSHIP
• In cost focus a firm seeks a cost
advantage in its target segment
• VENDING MACHINES
-This strategy allows the firm to offer large
demand at very low prices and still remain
• differentiation focus a firm seeks
differentiation in its target segment.
Both variants of the focus strategy rest
on differences between a focuser's target
segment and other segments in the
• One example is Breezes Resorts, a
company that caters to couples without
children. The firm operates seven
tropical resorts where vacationers are
guaranteed that they will not be annoyed
by loud and disruptive children.
• Focus (Niche) Strategy
– Under a focus strategy a business focuses its
effort on one particular segment of the
market and aims to become well known for
providing products/services for
• Cost leadership
– can benefit either by gaining market share
through lowering prices or by maintaining
average prices and therefore increasing
• DIFFERENTIATION STRATEGY
– win market strategy offering unique features
that are valued by their customers
• FOCUS STRATEGY
– involves achieving cist leadership of
differentiation within niche market in ways
that are not available to more focused
“STUCK IN THE MIDDLE”
(Best Cost Strategy)
– attempt to adopt all three strategies; cost
leadership, differentiation and niche (focus).
A business adopting all three strategies is
known as "stuck in the middle". They have no
clear business strategy and are attempting to
be everything to everyone.
STEPS IN CHOOSING THE RIGHT
1.) Carry out SWOT Analysis
2.) Use Five Forces Analysis
3.) Compare SWOT Analysis f the viable
strategic options with the results of your
five forces analysis