What is IE Matrix?
IE stands for Internal external as the name suggest that it’s based upon internal and external factors of the organization. The IE is an important strategic tool which comes under the portfolio management considered much similar to BCG Matrix. The IE matrix used to plot the organization divisions in nine cell diagram, each cell have some meaning associated which suggest strategies.
In summarize way it can be defined as the strategic management tool which is used to analyze the current position of the divisions and suggest the strategies for the future for the better results.
What are the terms commonly used in understanding the IE Matrix?
Before going into details it is important to understand the IE attributes or terms which are commonly used further in the discussion.
IE Matrix Cells
IE Matrix is composed of nine cells each one is numbered and associated with the some meaning.
IFE Total Weighted Score
The total weighted score which is derived from the IFE matrix based on division internal factors weight and rating.
IFE Total Weighted Score
The total weighted score which is derived from the EFE matrix based on division external factors weight and rating.
A division of a business entity is a portion of that business that operates under a different name.
How IE Matrix Looks?
As discussed earlier the IE matrix is composed of nine cells, each division plotted in one of the cell based on division IFE and EFE total weighted score.
The below diagram shows the structure of IE matrix.
The IE matrix have to important dimensions IFE total weighted score on x-axis and EFE total weighted score on y-axis. The number represent the cells and circle are the divisions plotted on the basis of IFE and EFE scores.
What are the classification on X and Y- Axis?
On x-axis of the IE matrix, the IFE total weighted score of 1.0 to 1.99 represent weak position, 2.0 to 2.99 considered as Average and 3.0 to 4.0 on high extremes is strong. On Y-axis score of 1.0 to 1.99 represent low, 2.0 to 2.99 considered as Average and 3.0 to 4.0 is strong.
How to decide strategies for Divisions on basis of IE Matrix Cells?
Well, I can’t say its a magic sure there is some way to formulate the strategy. The IE matrix is divided into three regions that have different strategy implications. The divisions that fall under cells 1,2 or 4 areconsidered in grow and build region which is the most appropriate region for the divisions. Following are the recommended strategies for the divisions which fall into grow and build region.
Intensive (market penetration, market development, product development)
Integrative (backward integration, forward integration, and horizontal integration) strategies
Grow & Build
Hold & Maintain
Harvest or Divest
Source: David, Fred R. (1999). Strategic Management: Concepts (7th ed.). Upper Saddle River, NJ: Prentice-Hall, Inc., p. 191.
Secondly, the divisions which comes under cells 3, 5 or 7 can be properly manages with hold and maintain strategies this position is average for the division market penetration and development strategies are most appropriate strategies. Last, the 6, 8, 9 cells represent harvest or divest which is the weak position for the divisions.
What are the information required to plot the Divisions in IE Matrix?
The below mentioned information is required to plot the division in the IE matrix cells.
What are the Circles in IE Matrix?
The circle represent the divisions, larger the revenue larger will be the size of the circle. The marked or sliced area of circle shows the profits of the division as shown below.
The circle represent the division with 50 percent of profits.
What is the difference between BCG and IE Matrix?
There are few difference in BCG and IE matrix, firstly the IE axis are different x- axis represent IFE weighted score and Y-axis represent total EFE weighted score. IE matrix require more information about the division than BCG matrix in which only relative market share and industry growth figures are required.
What are the next Steps after developing IE Matrix?
Grand strategy matrix and QSPM will further help in deciding the appropriate strategies for the Organization.