GEs Directional Policy

Presented By
Kartik Sharma(95)
Harshvardan Yadav(102)

Introduction
In 1968, then-CEO of GE, Fred Borch, asked McKinsey and Co. for an
examination of GEs corporate structure. McKinseys examination
revealed that GEs structure was inadequate, and they argued that
the
firm should be organized on more strategic lines, with greater concern
for external conditions than internal controls. The company was
divided into strategic business units, or SBUs.
In 1971, GE asked McKinsey to evaluate strategic plans drawn up by
the SBUs. According to GE, the BCG Growth Matrix, with only two
performance measures, was insufficient for the companys needs.
From this request, the GE/McKinsey 9-block matrix, a system using a
dozen measures to screen for industry attractiveness and another
dozen to screen for competitive position, was developed

GEs Business Portfolio

Appliances
Aircraft Engines
Capital Services
Industrial Systems
Lighting
Medical Systems
NBC Television Network
Plastics
Power Systems
Transportation Systems

GE Matrix

It is a strategic and marketing management

tool used for portfolio analysis.

It is used for analyzing portfolio of products,

services, and strategic business units.

Also known as the GE/McKinsey 9-Block

Matrix.

A Two dimensional matrix

The GE matrix is plotted on two dimensional
grid. In most versions of the matrix:

The Y-Axis comprises Market Attractiveness measures.

The X-Axis comprises Business Strength measures.

9-Cell Grid

A nine cell grid emerges from dividing the

Vertical axis into three regions
( High, Medium , Low)
and
Horizontal axis into three regions
( Strong, Average, Weak)

Low

Medium

High

Market Attractiveness

Business Strength

Strong
Medium
Weak

Market Attractiveness

Annual market growth rate

Overall market size
Historical profit margin
Current size of market
Market structure
Market rivalry
Demand variability
Global opportunities

Business Strength

Current market share

Brand image
Brand equity
Production capacity
Corporate image
R & D performance
Managerial personal
Promotional effectiveness
Profit margins relative to competitors

GE Multifactor Portfolio Matrix

Business Strengths

Industry Attractiveness

High
High

Medium

Low

Protect
Position

Build
selectively

Protect &
refocus

Medium

Low

Invest to
Build

Build
selectively

Selectively
manage for
earnings

Limited
expansion
or harvest

Manage
for earnings

Divest

Invest/Grow
Selectivity
/earnings
Harvest
/Divest

Strategies-Segment 1
Protect Position
Invest to grow
Effort on maintaining strength
Invest to Build
Challenge for leadership
Build selectively on strength
Build Selectively
Invest in most attractive segment
Build up ability to counter competition
Emphasize profitability by raising productivity

Strategies-Segment 2
Protect & Refocus
Manage for current earning
Defend strength
Selectivity for Earning
Protect existing program
Investments in profitable segments

Build Selectively
Specialize around limited strength
Seek ways to overcome weaknesses
Withdraw if indication of sustainable
growth are lacking

Strategies-Segment 3
Limited Expansion for Harvest
Look for ways to expand
withoutfor
high
risk
Manage
Earnings
Protect position in profitable segment
Upgrade product line
Minimize investment
Harvest / Divest
Sell at time that will maximize cash value
Cut fixed costs and avoid investment
meanwhile

Case Study-LVMH
(Mot Hennessy - Louis Vuitton)
A world leader in luxury, LVMH possesses a unique portfolio of over
60 prestigious brands. The Group is active in five different sectors:
Wines & Spirits
Fashion & Leather Goods
Perfumes & Cosmetics
Watches & Jewelry
Selective retailing
Thanks to its brand development strategy, and the expansion of
its international retail network (more than 2,300 stores worldwide)
.LVMH has had a strong growth dynamic since its creation in 1987.
Today, LVMH has 77,000 employees.

References

Arthur A. Thompson & A.J. Strickland., Strategic Management.

John A. Pearce, II, and Richard B. Robinson, Jr., Strategic
Management: Strategy Formulation and Implementation
David J. Collis, Andrew Campbell, Michael Goold, Harvard,
Business Review on Corporate Strategy
Competition and Business Strategy in Historical Perspective,
Harvard Business School
Various websites

www.Mydashboard.com
www.ValueBasedManagement.com
www.wikipedia.org
www.QuickMBA.com
www.redpointcoaching.com
www.lvmh.com