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CS Professional · Strategic Management and Corporate Finance · Strategic Analysis and Planning

In an EFE (External Factor Evaluation) matrix, a firm assigns weights and ratings (1 to 4) to key external factors. Which statement about a correctly built EFE matrix is accurate?

In a correct EFE matrix the weights sum to 1.0, each factor is rated from 1 to 4 for the firm's response, and the weighted scores are added. A total above the average of 2.5 shows the firm is responding better than average to its external environment.

  1. AWeights across all factors sum to 1.0, and a total weighted score above 2.5 indicates the firm is responding above average to its environmentCorrect
  2. BRatings must sum to 1.0, and a total weighted score above 2.5 indicates the firm is weak
  3. CWeights are assigned only to threats, and the maximum total score is 5
  4. DThe total weighted score is always exactly 2.5 for an average firm because weights are equal

Explanation

In an EFE matrix, weights sum to 1.0, each factor is rated 1 to 4 for how effectively the firm responds, and the weighted scores are added. The average is 2.5, so a total above it shows an above-average response to opportunities and threats.

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