GE Nine-cell matrix

Industry Attractivenes s High Medium Low Business Unit Strength Strong Grow Grow Hold Average Grow Hold Harvest Weak Hold Harvest Harvest

This matrix was developed in 1970s by the General Electric Company with the assistance of the consulting firm, McKinsey & Co, USA. This is also called GE multifactor portfolio matrix. This matrix consists of nine cells (3X3) based on two key variables: i) Business Strength ii) Industry Attractiveness

The horizontal axis represents business strength and the vertical axis represents industry attractiveness. The business strength is measured by considering such factors as: • relative market share • ability to compete on price and quality • competitive strengths and weaknesses • caliber of management profit margins knowledge of customer and market technological capacity

Industry attractiveness is measured considering such factors as : • market size and growth rate industry profit margin • competitive intensity economies of scale • technology social, environmental, legal and human aspects The industry product-lines or business units are plotted as circles. The area of each circle is proportionate to industry sales. The pie within the circles represents the market share of the product line or business unit. The nine cells of the GE matrix represent various degrees of industry attractiveness (high, medium or low) and business strength (strong, average and weak). After plotting each product line or business unit on the nine cell matrix, strategic choices are made depending on their position in the matrix.

Spotlight Strategy:
GE matrix is also called “Stoplight” strategy matrix because the three zones are like green, yellow and red of traffic lights. 1) Green indicates invest/expand – if the product falls in green zone, the business strength is strong and industry is at least medium in attractiveness, the strategic decision should be to expand, to invest and to grow. 2) Yellow indicates select/earn – if the product falls in yellow zone, the business strength is low but industry attractiveness is high, it needs caution and managerial discretion for making the strategic choice. 3) Red indicates harvest/divest – if the product falls in the red zone, the business strength is average or weak and attractiveness is also low or medium, the appropriate strategy should be divestment.

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