Enduring ideas: The GE-McKinsey nine-box matrix

Reading Summary

The reading describes the framework that offers a systematic approach for organisations to
prioritize their investments among their business units.
The rise of multi-business enterprises in the 20th century has seen companies struggling to
manage various business units profitably. In the early 1970s management thinkers developed
the GE-McKinsey nine-box matrix framework to overcome this complexity. This followed
Boston Consulting Groups well known growth share matrix.
The Nine-Box Matrix offers a systematic approach for decentralised corporations to help
determine best areas to invest their cash. A company can judge a business unit about its
performance on following factors
1. Attractiveness of the relevant industry and,
2. Units competitive strength within that industry.
The business units are placed within the matrix such as to provide an analytical map to manage
them. A company may pursue investment and growth strategies for units above the diagonal.
Those along the diagonal are candidates for selective investment. Those lying below the
diagonal might be sold, liquidated or run purely for cash.
Starting point for this is sorting the units for analysis where judgement is essential to measure
the trade-offs. E.g. A strong unit in a weak industry vs a weak unit in a strong industry. Over
the years, the criteria for assessing industry attractiveness and competitive strength have grown
more sophisticated. Most large companies refer to this matrix to model their businesses.
GE-McKinsey Nine-Box Matrix

High

Industry Medium
Attractiveness

Low

High Medium Low

Competitive strength of
business unit