Internal factor evaluation (IFE) matrix is a strategy formulation tool which is used to examine the strengths and weaknesses in the functional area of a business. In IFE Matrix it is more important to thoroughly understand the factors included rather than the actual numbers. Therefore intuitive judgments are required in developing IFE Matrix. Step by step construction of IFE Matrix is given for the WalMart (An American public corporation that runs a chain of large discount department stores and a chain of warehouse stores).
Steps in the Construction of IFE Matrix

In the first column, lists down all the strengths and weaknesses. IFE matrix should include 10 to 20 key internal factors.

In the second column, assign weights to each factor ranging from 0.0 (not important to 1 (most important). Greater weights should be given to those internal factors which have grater influence on the organizational performance. The sum of all weights must equal 1.

In the third column, rate each factor ranging from 1 to 4. Here, rating 1 represents major weakness, rating 2 shows minor weakness. Similarly, rating 3 indicates minor strength whereas rating 4 shows major strength. It means that weakness must receive 1 or 2 rating while strength must get 3 or 4 rating.

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.
The total weighted score ranges from 1 to 4 (where 1 is low, 4 is high and 2.5 is average) regardless of the total number of internal factors used in the analysis. If the total weighted score is less than 2.5 it indicates that the organization is weak internally. On the other hand, the scores above 2.5 show strong internal position. An internal factor could be included twice in the IFE Matrix if the factor is both strength and weakness. In case of WalMart the total weighted score is above than average, it means that the company is strong internally.