GE MATRIX

GE(General Electric) / McKinsey Multi-Factor

Matrix

Originally developed by GE’s planners drawing on

McKinsey’s approaches
GE MATRIX
GE Portfolio Analysis

Classification of SBUs / Products into nine cell

matrix based on;

(A) Market Attractiveness

Multiple Indicators

(B) Business Strength

Multiple Indicators
GE MATRIX
Industry Attractiveness
High Medium Low

Protect Invest to Build

High Position Build Selectively

Selectively Limited
Build
Manage for Expansion or
Invest/Grow
Medium Selectively
Earnings Harvest
Selectivity
/Earnings
Protect & Manage for Harvest
Low Refocus Earnings
Divest
/Divest
GE MATRIX
GE Portfolio Analysis
Sample Industry/Market Attractiveness

- Market Size
- Market growth
- Market profitability
- Pricing trends
- Competitive intensity / rivalry
- Overall risk of returns in the industry
- Opportunity to differentiate products and services
- Distribution structure (e.g. retail, direct, wholesale)
- Environmental impact
GE MATRIX
GE Portfolio Analysis
Sample Business Strength Indicators

- Strength of assets and competencies

- Relative brand strength
- Market share
- Customer loyalty
- Quality of products & services
- Management profile
- Relative cost position
- Branding & promotion success
- Distribution strength
- R&D
- Record of innovation
- Access to financial and other investment resources
GE MATRIX
Steps In Developing GE Matrix

1. Select Factors & Indicators

2. Assign each indicator a weight (total = 1) based on its

importance

3. Rate the industry on industry indicators and company on

business indicators on scale of 1(weak) – 5 (strong)

4. Multiply weight times rating and total for summary

measures
GE MATRIX
GE Portfolio Example

Market Factor Weight Rating (1- 5) Value

Size .33 5 1.65

Growth .33 3 .99

Profit Margins .34 2 .68

3.32
Business

Market Share .33 1 .33

Product Quality .33 5 1.65

Distribution Net .34 2 .68

2.66
GE MATRIX
Competitive Position
Strong
Maintain Leadership
Market Attractiveness
• Invest to Grow
High
•Concentrate on
Maintaining Strength
Challenge Leader/Build
Selectively
•In most attractive markets
Medium •Or counter competition
•Emphasize profitability by
raising productivity
Generate Cash
•Manage for current
Low earnings
•Concentrate on attractive
Segments
•Defend Strengths
Medium Weak
Challenge Leader Overcome Weakness,
•Invest to Build Find Niche or Quit
Selectively •Build Selectively
•Reinforce Strengths
Manage for Earnings Harvest (Gradual
•Protect existing Withdrawal) or Limited
programs Expansion
•Concentrate on •Look ways to expand
profitable, less risky without high risk
segments •Or Minimize
investment
Harvest Divest
•Minimize Investment •Sell at time that will
•Protect positions in maximize cash value
most profitable •Cut fixed costs and
segments avoid investment
GE MATRIX
Advantages of the GE Model

Allows for intermediate rankings between high & low

and between strong & weak
Incorporates a wider variety of strategically relevant
variables than the BCG matrix
Stresses the channeling of corporate resources to
SBUs with the greatest potential for competitive
advantage & superior performance
GE MATRIX
Some Limitations of the GE Model

Subjective measurements across SBUs

Process also highly subjective

From the selection and weighting of factors to the
subsequent development of both a firm’s position
and the market attractiveness

Businesses may have been evaluated with respect

to different criteria

Sensitive to how a product market is defined

GE MATRIX
Some Limitations of the GE Model

Provides no guidance on specifics of SBU strategy

Only suggests general strategic posture -- aggressive

expansion, fortify-&-defend, or harvest/divest

Doesn’t address the issue of strategic coordination

across related SBUs

Tends to obscure SBUs about to “take off” or “crash

& burn” -- static, not dynamic
Thank You