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Factors Affecting Nestle Sales Performance: IFE and EFE Matrix Analysis

This assignment aims to identify factors that affecting Nestle sales performance, to present the strategies that could be implemented based on those indicators, and to determine the priority strategy to execute the plan.

To analysis IFE and EFE in Nestle we used secondary data such as annual reports, news articles, and analysis on trusted websites to conduct this assignment.

IFE and EFE are part of the input stage of strategy-formulation. Making small decisions in the input matrices regarding the relative importance of external and internal factors allows strategists to more effectively generate and evaluate alternative strategies.

The internal and external factor evaluation matrices have been introduced by Fred R. David 1, (IFE) Matrix is a strategy tool used to evaluate Nestle’s internal environment and to reveal its strengths as well as weaknesses. And (EFE) Matrix is a strategy tool used to examine Nestle’s external environment and to identify the available opportunities and threats.

both tools are used to summarize the information gained from Nestle external and internal environment analyses.

a. Weight: Each key factor should be assigned a weight ranging from 0.0 (low importance) to 1.0 (high importance). The number indicates how important the factor is if a Nestle wants to succeed in an industry.

b. The sum of all the weights must equal 1.0. Separate factors should not be given too much emphasis (assigning a weight of 0.30 or more) because the success in an industry is rarely determined by one or few factors.

c. Rating: the meaning of ratings is different in each matrix, in IFE Matrix: The ratings in internal matrix refer to how strong or weak each factor is in a firm. The numbers range from 4 to 1, where 4 means a major strength, 3 – minor strength, 2 – minor weakness and 1 – major weakness.

d. Score: is the result of weight multiplied by rating. Each key factor must receive a score, in internal evaluation a low score indicates that the company is weak against its competitors.

To implement above tips on Nestle for IFE we evaluate strengths and weaknesses factors as follow:

 Strengths 1. Diversified income (5 different brands earning more than \$4 billion each) 0.10 4 0.40 2. Brand reputation valued at \$35 dollars 0.08 3 0.24 Loyalty and trust from customer worldwide Loyalty and trust from customer worldwide 3. Loyalty and trust from customer worldwide Loyalty and trust from customer worldwide 0.07 4 0.28 4. Excellent employee management 0.02 3 0.06 5. Competency in mergers and acquisitions 0.06 3 0.18 6. Extensive distribution channels 0.11 4 0.44 7. Strong product ecosystem 0.08 4 0.32 8. High debt level (\$2 dollars) 0.10 1 0.10 9. Over-dependence on sales from U.S. 0.13 2 0.26 10. Too low net profit margin 0.07 2 0.14 11. Competition based on prices 0.09 2 0.18 12. Rigid (bureaucratic) organizational culture impeding fast introduction of new products 0.04 1 0.04 13. Distribution cost is very high 0.05 2 0.10 1.00 – 2.74

Both matrices offer lots of advantages. For instance, they are easy to understand, and they don’t require extensive expertise, or investment in terms of time, money and employees.

When looking for the strengths, ask what do you do better or have more valuable than your competitors have? In case of the weaknesses, ask which areas of your company you could improve and at least catch up with your competitors?