GE / McKinsey Matrix

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GE / McKinsey Matrix

GE / McKinsey Matrix is strategic tool for portfolio analysis. It is similar to the BCG Matrix and actually the GE / McKinsey Matrix is an extension of the BCG Matrix - multifactor portfolio analysis tool. This tool compares different businesses on "Business Strength" and "Market Attractiveness" variables, plus the size of the bubbles represents the market size instead of business sales used in the BCG Matrix, and the share of the market or business sales vs. market size is represented as pie chart inside the bubbles. This allows the business user to compare business strength, market attractiveness, market size, and market share for different strategic business units (SBUs) or different product offerings. This strategic portfolio analysis tool has been initially developed by GE and McKinsey.


POSITIONS AND STRATEGIES

The GE / McKinsey Matrix is divided into nine cells - nine alternatives for positioning of any SBU or product 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:

Segment 1: This is the best segment. The business is strong and the market is attractive. The company should allocate resources in this business and focus on growing the business and increase market share.

Segment 2: 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. Decision makers should make judgment on how to further deal with these SBUs. Some of them may consume to much resources and are not promising while others may need additional resources and better strategy for growth.

Segment 3: This is the worst segment. Businesses in this segment are weak and their market is not attractive. Decision makers should consider either repositioning these SBUs into a different market segment, develop better cost-effective offering, or get rid of these SBUs and invest the resources into more promising and attractive SBUs.



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