GE Matrix

7S Framework

Dr. Kiran Sharma

K J Somaiya Institute of Management, India 1

 How it came into being?
• In 1970’s, GE was unsatisfied with the returns on investments.
• It consulted with McKinsey & company and this resulted into a formation of a
nine-box matrix.
• That helped analyze portfolio of the strategic business unit (SBU) of the
corporation.
• Computation of this matrix allows business to take decision on whether to
invest or to divest or carry a further research on the product .
• The GE McKinsey matrix is a nine-box matrix which is used as a strategy tool.
It helps multi-business corporations evaluate business portfolios and prioritize
investments among different business units in a systematic manner.
Components of ge-matrix

 For the calculation process the company needs to

evaluate following :

• Industry attractiveness.

• Competitive strength.

K J Somaiya Institute of Management, India 3

 Industry Attractiveness
• Industry attractiveness indicates how hard or easy it will be for
a company to compete in the market and earn profits.
• More profitable = More attractive .
• Factors used to determine Industry Attractiveness.
Factors used to determine Industry Attractiveness.
Long run growth rate Trend of prices
Industry size Macro environment factors
Industry profitability Seasonality
Industry structure Availability of labor
Product life cycle changes Market segmentation
Changes in demand
 Competitive strength of a business unit
ora product
• The matrix measures how strong, in terms of competition, a
particular business unit is against its rivals.
• If the company has a sustainable competitive advantage,
the next question is: “For how long it will be sustained?”

Factors used to determine Competitive strength of a business unit .

Total market share. Customer loyalty.
Market share growth compared to Strength of a value chain.
rivals.
Brand strength. Level of product differentiation.
Profitability of the company. Production flexibility.
Construction of GE Matrix
• The G.E matrix is constructed in a 3x3 grid with Market Attractiveness plotted on the Y-axis
and Business Strength on the X-axis, both being measured on a high, medium, or low score.
Five steps must be considered in order to formulate the matrix
• The range of products produced by the SBU must be listed
• Factors which make the particular market attractive must be identified
• Evaluating where the SBU stands in this market
• Processes through which calculations about business strength and market attractiveness can
be made
• Determining which category an SBU lies in; high, medium, or low.

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K J Somaiya Institute of Management, India 7
 GE Matrix For TATA
High Business Strengths Low
High
IT

Market Attractiveness
Consumer
Durables

Low Textiles
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GE Matrix for Coca Cola

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 Advantages

• Helps to prioritize the limited resources in order to achieve

the best returns.

• Managers become more aware of how their products

or business units perform.

• Identifies the strategic steps the company needs to make

to improve the performance of its business portfolio.
 Disadvantages
• Requires a consultant or a highly experienced person to determine
industry’s attractiveness and business unit strength as accurately as
possible.

• It is costly to conduct.

• It doesn’t take into account the synergies that could exist

between two or more business units.
7S Framework

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 Strategy: the plan devised to maintain and build competitive advantage over the competition.
 Structure: the way the organisation is structured and who reports to whom.
 Systems: the daily activities and procedures that staff members engage in to get the job done.
 Shared Values: called "superordinate goals" when the model was first developed, these are the core
values of the company that are evidenced in the corporate culture and the general work ethic.
 Style: the style of leadership adopted.
 Staff: the employees and their general capabilities.
 Skills: the actual skills and competencies of the employees

working for the company.

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How to use the model
 The model is based on the theory that, for an organization to perform well, these seven elements need
to be aligned and mutually reinforcing. So, the model can be used to help identify what needs to be
realigned to improve performance.
 Whatever maybe the type of change – restructuring, new processes, organizational merger, new
systems, change of leadership, etc. - the model can be used to understand how the organisational
elements are interrelated, and thus ensure that the changes made in an area is taken into consideration.
 7S model may be used to help analyze the current situation, a proposed future situation and to identify
gaps and inconsistencies between them.
 Subsequently, adjustments may be made among the elements of the 7S model to ensure that the
organization works effectively and reaches the desired goal.

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Thank You
simsr.somaiya.edu

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