GE Matrix/Nine Cell Matrix

Jyothiraj B.G.
 INTRODUCTION
• GE/Nine Cell Matrix is a strategic and marketing management
tool used for portfolio analysis
• Developed by McKinsey & Company in 1970’s
• A tool for screening GE's large portfolio of strategic business
units (SBU)
• This business screen became known as the GE/McKinsey
Matrix
 GE MATRIX VS BCG MATRIX -
DIFFERENCES

• The GE matrix has nine cells vs. four cells in the BCG matrix
• The GE Matrix compares different businesses on "Business
Strength" and "Market Attractiveness" variables instead of
market growth rate and relative market share
 GE MATRIX VS BGC MATRIX -
SIMILARITIES
• Similar to the BCG growth-share matrix - it maps SBUs on a
grid of the industry and the SBU's position in the industry
• Attempts to improve upon the BCG matrix
– Generalizes the axes as "Industry Attractiveness" and "Business Unit
Strength”
– GE matrix uses the industry attractiveness as a proxy for market
growth rate and the strength of the business unit as a proxy for relative
market share
 INDUSTRY ATTRACTIVENESS
• The vertical axis of the GE/McKinsey matrix is industry
attractiveness, which is determined by
– Market growth rate
– Market size
– Demand variability
– Industry profitability
– Industry rivalry
– Global opportunities
– Macro-environmental factors
 BUSINESS UNIT STRENGTH
• The horizontal axis is the strength of the business unit, which
is determined by
– Market share
– Growth in market share
– Brand equity
– Distribution channel access
– Production capacity
– Profit margins relative to competitors
 GE MATRIX - ALTERNATIVE
POSITIONS & STRATEGIES
• The Matrix is divided into nine cells - nine alternatives for
positioning of any SBU
• The nine cells in the matrix can be grouped into three major
segments
 SEGMENT 1

Segment 1 - Grow
• The best segment
• Business is strong and the market is attractive
• The company should allocate resources in this business and
focus on growing the business and increase market share
 SEGMENT 2

Segment 2 - Hold
• The business is either strong but the market is not attractive or
the market is strong and the business is not strong enough to
pursue potential opportunities
• Decision makers should make judgment on how to further deal
with these SBUs
• Some of them may consume to much resources and are not
promising while others may need additional resources and
better strategy for growth
 SEGMENT 3

Segment 3 - Harvest
• The worst segment
• Businesses are weak and their market is not attractive
• Decision makers should consider either repositioning these
SBUs into a different market segment, develop better cost-
effective offering, or get rid of these SBUs and invest the
resources into more promising and attractive SBUs
GE MATRIX
 STRATEGIC IMPLICATIONS
• Resource allocation recommendations can be made to grow,
hold or harvest a SBU based on its position on the matrix
• Grow
– Strong business units in attractive industries, average business units in
attractive industries, and strong business units in average industries
 STRATEGIC IMPLICATIONS
• Hold
– Average businesses in average industries, strong businesses in weak
industries, and weak business in attractive industries
 STRATEGIC IMPLICATIONS
• Harvest
– Weak business units in unattractive industries, average business units
in unattractive industries, and weak business units in average industries
 LIMITATION OF GE MATRIX
• While the GE business screen represents an improvement over
the more simple BCG growth-share matrix, it still presents a
somewhat limited view by not considering interactions among
the business units and by neglecting to address the core
competencies leading to value creation.
• Rather than serving as the primary tool for resource allocation,
portfolio matrices are better suited to displaying a quick
synopsis of the strategic business units.
Thank You