Internal Factor Evaluation (IFE)
Internal factors are the outcome of the detailed internal audit by a firm. Every
company has some weaknesses and strong points; therefore the internal factors are
divided into two categories namely strengths and weaknesses. Weight attribute in IFE
matrix indicates the relative importance of factor to being successful in the firms
industry. Ratings, which is a major weakness, is represented by 1.0; minor weakness is
represented by 2.0; minor strength represented by 3.0; major strength represented by
4.0. Weights and ratings are assigned subjectively. The sum of all weighted score is
equal to the total weighted score; the final value of the total weighted score should be
between 1.0 (low) to 4.0 (high). The average weighted score for IFE matrix is 2.5. Any
company that has a total weighted score below 2.5 is considered as weak. The
company that has a total weighted score higher than 2.5 is considered as strong in
position.
Weighted
Strengths Weight Rating
Score
1 Strong brand name, image, and reputation 0.15 4.00 0.60
2 Large market share 0.12 4.00 0.48
3 Strong financial performance and position 0.13 4.00 0.52
4 Strong management team 0.15 4.00 0.60
5 Strong global company 0.10 4.00 0.40
Weaknesses
1 High employee turnover rate 0.05 2.00 0.10
2 Poor product differentiation 0.05 2.00 0.10
3 No healthy menu 0.09 1.00 0.09
4 Unhealthy food image- Negative publicity 0.09 1.00 0.09
5 Decrease in profit 0.07 1.00 0.07
TOTAL 1.00 3.05
Strengths
Strengths are the strongest areas or attribute of the company, which are used to
overcome weaknesses and to take advantage of the external opportunities available in
the industry. The strengths could be tangible or intangible.
Strong brand name, image, and reputation
With a rate of 4, McDonalds Corporation is one of the largest and most
globally recognizable brands. Everyone knows McDonalds, whether they are
from upper class, middle class or lower class. They have established strong
brand name and image that stands out in the marketplace and positions the
company as an irreplaceable lifelong partner to their clients.
This was given with the highest weight because we believe that it would
have the greatest effect on the companys success.
Large market share
With a rate of 4, McDonalds is considered as the largest player in size
and global reach. When Wendys or Burgers King was losing market share in
2006, McDonalds still increased its market share. In a global market, McDonalds
market share in the recent time is about 19% while Yum! Brands are 9% and
both Wendys and Burger King is 2%. In the Philippines, there is a fierce
competition between Jollibee and McDonalds. McDonalds still aiming to replace
Jollibee to the top place.
Having a weight that is third form the heaviest, we believe that this will
definitely have a great effect on the companys success.
Strong Financial Performance and Position
With a rate of 4, since the company is so large, with so many locations
around the world, its total sales and earnings in different regions tend to offset
one another. It has locations in nearly 120 countries, so if domestic sales are
collapsing, its possible that they could be strong in South America or Europe. As
a result, the company doesnt rely on one key source of income, unlike many of
its rivals.
This has a weight that is second to the highest because we believe that it
has a great effect on the company but not as great as the strong brand name and
the strong management team.
Strong management team
With a rate of 4, Strong management team is a McDonalds recipe
for success. McDonalds teamwork and strong leadership among managers
contribute to achieving their companys objectives. It helps them focus to a
common purpose and it eliminates any uncertainties or reservations. Also, they
develop a department to support the changing needs of business operations,
which ate being reported to the restaurants general manager. This new and
holistic management approach enables managers to consistently run great
restaurants.
This was given an equal weight with the highest of all because we believe
that its effect on the companys success is equal with its strong brand name,
image, and reputation.
Strong global company
With a rate of 4, McDonalds operates in more than 120 countries and they
are also the largest fast food chain in the world. They operate in many diverse
cultures. Although a multinational giant, McDonalds adapts its business and
menu to the different countries they operate in. They respect cultural differences
and every country has its own policy of developing menu items.
This has the lowest of all the weights in the strengths because
McDonalds, being a global company, has competitors that are also global
companies.
Weaknesses
Weaknesses are the risky areas that need to be addressed on priority to minimize its
impact. The competitors are always searching for the loopholes in the company and put
their best effort to capitalize on the identified weaknesses.
High employee turnover
With a rate of 2, Although McDonalds has many good managers as well
as skillful employees; the turnover rate is still high. Every year, many of their
employees quit their jobs, especially part time employees such as students
because of low salary as well as too high working pressure. Not every new
employee can work at the same pace and can handle the pressure as the one
who's working there for months; therefore it negatively affects the efficiency of
the restaurant. Also, high turnover rate comes with a cost. Each employee who
resigns costs your company money. All of the money invested into that employee
through training, education and licensing walks out the door with the employee.
This has the lowest weight amongst all the weaknesses because the
employees are important for the company but it is not as essential as the other
weaknesses with regard to the companys success.
Poor product differentiation
With a rate of 2, McDonalds are no longer able to substantially
differentiate itself from other fast food chains and chooses to compete with price
rather than by additional features. Although McDonalds has its own range of
unique products such as BigMac, McDouble, Flat-O-Fish and others, the extent
of McDonalds product differentiation is well below its full potential and this fact is
one of the major weaknesses associated with the brand.
This is tied to the lowest weight because, even though McDonalds has the
same menu with its competitors, it is still the factor that gives McDonalds its
identity.
No healthy menu
With a rate of 1, McDonalds use trans-fat and beef oil in their food,
although it is not illegal, it affects badly on customers health because trans-fat is
causes of any kind of cancer. Consequently, a number of customers who care
about their health stop eating at McDonalds restaurants. There are chemicals
and ingredients that are found in McDonalds food which are not healthy. Our
bodies are not designed to digest and consume chemicals that cause harm.
Greasy, artificial foods are not the foods healthy people will be consuming. Thus,
It makes the revenue of company decreases.
This has the highest weight of all the weaknesses because, as a food
company, having a menu that is healthy for the customers is necessary.
Unhealthy food image- Negative publicity
With a rate of 1, McDonalds has always maintained the perception that its
food is unhealthy, loaded with fat, carbs, salt, and sugar. Well, these perceptions
are generally on point, as most items on its standard menu are relatively
unhealthy. The chain has been widely criticized for promoting unhealthy eating
habits, leading many of its customers to put on pounds.
This has a weight that is the same with the highest of all the weaknesses
because the companys image is really important and publicity is what people
base their choices on.
Decrease in profit
With a rate of 1, McDonalds has to compete with many strong
brand names in the fast food industry such as Jollibee, Wendys, Burger
King, Mang Inasal and KFC. This fierce competition makes McDonalds lose a
large number of customers who prefer other brands. Such a decline is being
caused as a cumulative impact of other McDonalds weaknesses discussed
above.
This has a weight that is in between of the highest and the lowest because
the profit is one of the measures of how a company is doing.
Overall, McDonalds receives a total weighted score of 3.05, which indicates that
McDonalds has a strong internal position.
