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GE 9 Cell
GE 9 Cell
38%
The shading of the above circle indicates a 38% market share for the strategic
business unit.
The arrow in the upward left direction indicates that the business unit is projected
to gain strength relative to competitors, and that the business unit is in an industry
that is projected to become more attractive.
GE Matrix Positions and Strategy
The GE / McKinsey Matrix is actually divided into
nine cells. These 9 cells represent the nine alternatives
for positioning of any SBU or product / service
offering. Based on the strength of the business and its
market attractiveness each SBU will have a different
position in the matrix. Further, the market size and the
current sales will distinguish each SBU. Based on clear
understanding of all of these factors decision makers
are able to develop effective strategies.
The nine cells in the matrix can be grouped into three
major segments. Each zone is depicted by different
colours: green, yellow and red.:
Segment 1 ( Invest / Expand):
This is mostly the best segment. The business in this position is strong
and the market is attractive, the business has the opportunity to grow
further with investment and expansion. In the extreme left hand corner,
both the business strength and industry attractiveness are high which is
ideal situation for growth, however the business does not remain in this
situation for a long run.
Segment 2( Select / Earn)
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 hence it is a mixed situation. The opportunity for
selective earning exists because either one of the two dimensions
business strength and industry attractiveness is high or both stand in
the middle. Decision makers should make judgment on how to further
deal with these SBUs or products. Some of them may consume too
many resources and are not really promising any strong potential while
others may need additional resources and better strategy for growth.
Segment 3( Harvest / Divest)
This is the worst positioning segment. Businesses or products and
services in this segment are very weak and their market is not
attractive. Decision makers should consider either harvesting or
divesting strategy. Harvesting involves a decision to repositioning
these SBUs into a different market segment or getting rid of these
weak SBUs and invests the resources in more promising and
attractive SBUs
Strategic Position and Action Evaluation
(SPACE)
Strategic Position and Action Evaluation
(SPACE) is an extension of two dimensional
portfolio analyses which helps an organization
to hammer out an appropriate strategic posture.
SPACE involves a consideration of four
dimensions:
Organizations competitive advantage
Organizations financial strength
Industry strength
Environmental stability
Competitive advantage
Financial strength
Industry strength
Environmental StabilityCompetitive Advantage
Industry Strength Market share Profit Potential Product
qualityGroeth PotentialProduct Life Cycle Financial
StabilityProduct replacement CycleTechnical Know- Hoew
Customer LoyaltyResource utilizationCompetitions capacity
UtilizationCapital IntensityTechnical Know-How Ease of entry
into market Vertical IntegrationProductivity, capacity
utilizationFinancial StrengthEnvironmental
stabilityReturn Of InvestmentTechnological changes
Levarage Rate of inflationLiquidity Demand
variabilityCapital Required and available Price range of
competing products Cash Flow Competitive pressure Ease of
exit from marketPrice Elasticity of Demand Risk involved in
the businessEntry Barriers
Various SPACE factors are measured in terms of degrees ,
often quantified from 0 to 5 with 0 indicating the most
unfavorable and 5 indicating the most favorable . Based on
these degrees , SPACE diagram is prepared as shown in
figure :
Financial strength
Conservative Aggressive
Competitive Industry
Strength
Defensive Competitive
Advantage
Environmental Stability