What is the purpose of an External Factor Evaluation EFE Mat

What is the purpose of an \"External Factor Evaluation (EFE) Matrix\"? Give at least 3 examples of the opportunities and 3 examples of the threats for The Bank of New York Mellon Corporation.

Solution

External Factor Evaluation (EFE) matrix is a strategic tool to evaluate an organization’s existing strategies in relation to the external or macro environment like socio, economic, political factors or even the competing forces. This tool is related to SWOT analysis however the EFE matrix concentrates only on the external factors affecting the company.

Three opportunities-

Three threats-

1. Pricing- The bank was involved in controversies that it provided high price to their clients and this yielded more returns for the bank. The bank also ended up paying settlement amount in relation to the lawsuits for such allegations.

2. Fluctuating share prices- The bank’s income come mainly from investment management and just a few percentage from foreign exchange. Due to the business sectors are less, there is a risk involved in investing in the bank.

3. Lower returns for shareholders- The bank’s dividend yield is less for shareholders. This would make the shareholders shift their point of investment to other banks or sectors.