Electric in the 1970's, McKinsey & Company developed a
as a tool for screening GE's large portfolio of strategic business units (SBU). This business screen became known as the |
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` The GE matrix has nine cells vs. four cells
in the BCG matrix. ` The GE / McKinsey matrix is similar to the BCG growth-share matrix in that it maps strategic business units on a grid of the industry and the SBU's position in the industry. |
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` The GE matrix however, attempts to improve upon
the BCG matrix in the following two ways: ` The GE matrix generalizes the axes as "Industry Attractiveness" and "Business Strength/ competitive position.´ ` whereas the BCG matrix uses the market growth rate as a proxy for industry attractiveness and relative market share as a proxy for the strength of the business unit/ competitive position. |
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` The vertical axis of the GE / McKinsey matrix is
industry attractiveness, which is determined by factors such as the following: * Market growth rate * Market size * Demand variability * Industry profitability * Industry rivalry * Global opportunities * Macro environmental factors (PEST)
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` The horizontal axis of the GE / McKinsey matrix is the strength
of the business unit. Some factors that can be used to determine business unit strength include: ` Market share ` Growth in market share ` Distribution channel access ` Profit margins relative to competitors ` R & D. ` Quality of products and services. ` Branding and promotions success. |
` The nine cell of the GE matrix are grouped
on the basis of low, medium, high industry attractiveness, and weak, average, strong business unit strength. ` Three zones of the three cells each are made, denoting different combination represented by green, yellow, and red colors. |
` Based on the green zone, the signal is µgo
ahead¶ to grow n build, indicating expansion strategies. ` Business in the green zone attract major investment. |
` ´or the yellow zone, the signal is µwait and
see¶ indicating hold and maintain type of strategies aimed at stability strategy. ` ´or red zone , the signals is µstop¶, indicating the retrenchment strategies of divestment and liquidation or for adopting turnaround strategies. |
` At this stage the marketing manager adapts the list
above to the needs of his strategy. The GE matrix has 5 steps: ` One - Identify your products, brands, experiences, solutions, or SBU's. ` Two - Answer the question, å
` Three - Decide on the factors that position the business on the GE matrix. |
` ´our - Determine the best ways to
attractiveness and business position. ` ´ive - ´inally each SBU as either low, medium or high for business strength, and low, medium and high in relation to market attractiveness. "
` 'es the GE matrix is superior to the Boston
Matrix since it uses several dimensions, as opposed to BCG's two. ` Compared to the BCG matrix ,it offers an intermediate classification of medium and average ratings.
` rowever, problems or limitations include:
` There is no research to prove that there is a relationship between market attractiveness and business position. ` The interrelationships between SBU's, products, brands, experiences or solutions is not taken into account.
` This approach does require extensive data
gathering. ` Scoring is personal and subjective. ` The GE matrix offers a broad strategy and does not indicate how best to implement it.