GE 9 Cell Grid

▪ It is a strategy tool that offers a systematic approach for the multi-business

corporation to prioritize its investments among its business units.
▪ Adapted from BCG Matrix, introduced by Mc Kinsey Consultancy while working for
its client General Electric
▪ An attempt to overcome some limitations of BCG Matrix
▪ While the BCG Matrix uses market growth and market share as its dimensions, the
GE Matrix uses industry attractiveness and business unit strength as the criteria for
its measurements.
– Factors for Business Strength: Market share, profit margin, customer and market knowledge,
ability to compete, technology, competitive position and management caliber
– Factors for Industry Attractiveness: market growth, competition, seasonality, cyclical qualities,
environmental factors

▪ Then the position of business is determined by calculating subjective values of the

two dimensions of the grid
 Process…

1. Identify factors contributing to the industry attractiveness

2. Assign weights to each factor based on its perceived importance
3. Calculate weighted composite score for overall industry attractiveness
4. A similar procedure is followed in assessing the business strength as shown
Industry Weight Ratings score Business Weight Ratings score
attractiveness strength
factors factors
Market size 20 0.5 10.0 Relative 20 0.5 10.0
Projected 35 1.0 35.0 market share
market growth Product 20 1.0 35.0
capacity
Technological 15 0.5 7.5
High=1.0;
requirements Technological 15 0.5 7.5
Medium=0.5;
Low=0.0 capabilities
Concentration 30 0 0
(a few large Sales 30 0 0
competitors) organization
Political and Must be -- --
Marketing 25 -- --
regulatory nonrestrictive
promotion
factors
advantage
Total 100 52.5
Total 100 55
5. Once the comprehensive scores has been calculated, the scores are
classified into ratings such as high, medium or low
6. Then business units are classified into three categories
i. Invest/row
ii. Invest selectively and manage earnings
iii. Harvest or divest for resources

• Invest/grow = stars
• Units that land in this section of the grid generally have high market share and promise high
returns in the future so should be invested in.
• Harvest/divest = dogs
• Poor performing units in an unattractive industry end up in this section of the grid. This should
only be invested in if they can make more money than is put into them. Otherwise they should
be liquidated.
• Selectivity/earnings = cash cows or questions marks
• Units that land in this section of the grid can be ambiguous and should only be invested in if
there is money left over after investing in the profitable units.
Invest/Grow box.
▪ Companies that promise the highest returns in the future.
▪ These business units will require a lot of cash because they’ll be
operating in growing industries and will have to maintain or grow
their market share.
▪ It is essential to provide as much resources as possible for BUs so
there would be no constraints for them to grow.
▪ The investments should be provided for R&D, advertising,
acquisitions and to increase the production capacity to meet the
demand in the future.
Selectivity/Earnings box.
▪ Invest only if you have the money left and if you believe that BUs will
generate cash in the future.
▪ These business units are often considered last as there’s a lot of
uncertainty with them.
▪ The general rule should be to invest in business units which operate
in huge markets and there are not many dominant players in the
market
Harvest/Divest box.
▪ Two things companies can do with these companies
– First, just like for cash cows, if company generates surplus cash, invest only as
long as investments into it doesn’t exceed the cash generated from it.
– Second, if BUs only make losses such companies are to be divested. If that’s
impossible and there’s no way to turn the losses into profits, the company
should liquidate the business unit.