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    GE - McKinsey Matrix

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    GE - McKinsey Matrix

    Uploaded by

    mohit
    108 views4 pages
    mckinsey matrix

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    GE _ McKinsey Matrix

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    mckinsey matrix

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    108 views4 pages

    GE - McKinsey Matrix

    Uploaded by

    mohit
    mckinsey matrix

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    11/1/2015

    GE/McKinseyMatrix

    QuickMBA/Strategy/GEMcKinseyMatrix

    GE/McKinseyMatrix
    InconsultingengagementswithGeneralElectricinthe1970's,McKinsey&
    CompanydevelopedaninecellportfoliomatrixasatoolforscreeningGE'slarge
    portfolioofstrategicbusinessunits(SBU).Thisbusinessscreenbecameknownas
    theGE/McKinseyMatrixandisshownbelow:

    GE/McKinseyMatrix

    BusinessUnitStrength
    High Medium Low

    High

    Medium

    Low

    TheGE/McKinseymatrixissimilartotheBCGgrowthsharematrixinthatitmaps
    strategicbusinessunitsonagridoftheindustryandtheSBU'spositioninthe
    industry.TheGEmatrixhowever,attemptstoimproveupontheBCGmatrixinthe
    followingtwoways:
    TheGEmatrixgeneralizestheaxesas"IndustryAttractiveness"and
    "BusinessUnitStrength"whereastheBCGmatrixusesthemarketgrowthrate
    asaproxyforindustryattractivenessandrelativemarketshareasaproxyfor
    thestrengthofthebusinessunit.
    TheGEmatrixhasninecellsvs.fourcellsintheBCGmatrix.
    Industryattractivenessandbusinessunitstrengtharecalculatedbyfirstidentifying
    criteriaforeach,determiningthevalueofeachparameterinthecriteria,and
    multiplyingthatvaluebyaweightingfactor.Theresultisaquantitativemeasureof
    industryattractivenessandthebusinessunit'srelativeperformanceinthatindustry.
    http://www.quickmba.com/strategy/matrix/gemckinsey/

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    11/1/2015

    GE/McKinseyMatrix

    IndustryAttractiveness
    TheverticalaxisoftheGE/McKinseymatrixisindustryattractiveness,whichis
    determinedbyfactorssuchasthefollowing:
    Marketgrowthrate
    Marketsize
    Demandvariability
    Industryprofitability
    Industryrivalry
    Globalopportunities
    Macroenvironmentalfactors(PEST)
    Eachfactorisassignedaweightingthatisappropriatefortheindustry.Theindustry
    attractivenesstheniscalculatedasfollows:
    Industryattractiveness= factorvalue1xfactorweighting1
    + factorvalue2xfactorweighting2

    .
    .

    +factorvalueNxfactorweightingN

    BusinessUnitStrength
    ThehorizontalaxisoftheGE/McKinseymatrixisthestrengthofthebusinessunit.
    Somefactorsthatcanbeusedtodeterminebusinessunitstrengthinclude:
    Marketshare
    Growthinmarketshare
    Brandequity
    Distributionchannelaccess
    Productioncapacity
    Profitmarginsrelativetocompetitors
    Thebusinessunitstrengthindexcanbecalculatedbymultiplyingtheestimated
    valueofeachfactorbythefactor'sweighting,asdoneforindustryattractiveness.

    PlottingtheInformation
    Eachbusinessunitcanbeportrayedasacircleplottedonthematrix,withthe
    informationconveyedasfollows:
    http://www.quickmba.com/strategy/matrix/gemckinsey/

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    11/1/2015

    GE/McKinseyMatrix

    Marketsizeisrepresentedbythesizeofthecircle.
    Marketshareisshownbyusingthecircleasapiechart.
    Theexpectedfuturepositionofthecircleisportrayedbymeansofanarrow.
    Thefollowingisanexampleofsucharepresentation:

    Theshadingoftheabovecircleindicatesa38%marketshareforthestrategic
    businessunit.Thearrowintheupwardleftdirectionindicatesthatthebusinessunit
    isprojectedtogainstrengthrelativetocompetitors,andthatthebusinessunitisin
    anindustrythatisprojectedtobecomemoreattractive.Thetipofthearrow
    indicatesthefuturepositionofthecenterpointofthecircle.

    StrategicImplications
    Resourceallocationrecommendationscanbemadetogrow,hold,orharvesta
    strategicbusinessunitbasedonitspositiononthematrixasfollows:
    Growstrongbusinessunitsinattractiveindustries,averagebusinessunitsin
    attractiveindustries,andstrongbusinessunitsinaverageindustries.
    Holdaveragebusinessesinaverageindustries,strongbusinessesinweak
    industries,andweakbusinessinattractiveindusties.
    Harvestweakbusinessunitsinunattractiveindustries,averagebusinessunits
    inunattractiveindustries,andweakbusinessunitsinaverageindustries.
    Therearestrategyvariationswithinthesethreegroups.Forexample,withinthe
    harvestgroupthefirmwouldbeinclinedtoquicklydivestitselfofaweakbusinessin
    anunattractiveindustry,whereasitmightperformaphasedharvestofanaverage
    businessunitinthesameindustry.
    WhiletheGEbusinessscreenrepresentsanimprovementoverthemoresimple
    BCGgrowthsharematrix,itstillpresentsasomewhatlimitedviewbynot
    consideringinteractionsamongthebusinessunitsandbyneglectingtoaddressthe
    corecompetenciesleadingtovaluecreation.Ratherthanservingastheprimary
    toolforresourceallocation,portfoliomatricesarebettersuitedtodisplayingaquick
    synopsisofthestrategicbusinessunits.

    RecommendedReading
    DavidJ.Collis,AndrewCampbell,MichaelGoold,HarvardBusinessReviewonCorporateStrategy
    (HarvardBusinessReviewPaperbackSeries)
    QuickMBA/Strategy/GEMcKinseyMatrix
    http://www.quickmba.com/strategy/matrix/gemckinsey/

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    11/1/2015

    GE/McKinseyMatrix

    QuickMBA/Strategy/GEMcKinseyMatrix
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