Report on GE McKinsey Matrix Analysis
GE Matrix is also known as GE/McKinsey Matrix. It was developed by McKinsey & Company to view GE’s strategic business units in one table. For this purpose they developed a nine cell portfolio matrix as a tool for screening the units.
The concept is very much similar to BCG. BCG uses terms like star, question mark, cash cow and dog, here Industry attractiveness and Business unit strength are taken into consideration.
Industry attractiveness is put on the vertical side and Business unit strength is put on the horizontal side. They are divided into three points as low, medium and high.
Each business unit is given a point based on its market performance and that point is based on both industry attractiveness and business unit strength. Here both the industry attractiveness and business unit strength have to be considered. For example, if the industry is attractive and the business unit is not performing well, then it is a not a desirable position and on the other hand, if the industry is not so attractive and yet the business unit is making good profits and improving, then it is a noteworthy effort.
The factors that are important in both industry attractiveness and business unit strength are as follows:
For Industry attractiveness
- Market size and growth rate
- Industry profit margins
- Competitive intensity
- Seasonable nature
- Cyclical nature
- Economies of scale
- Technology and
- Social, environmental, legal and human impacts.
For Business unit strength
- Relative market share
- Profit margins
- Ability to compete on price and quality
- Knowledge of customer and market
- Competitive strength and weakness
- Technological capability and
- Calibre of the management.
Analyses like these are very much essential and crucial in the formulating the strategic corporate plans. It is performed by new companies, as well as by well-established and by companies which want to retrospect. The matrix shows which industry is highly productive and the strengths of the company that can take the company forward, etc. The matrix will help in formulating plans for the future which can work well and bring that can yield profits.
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