GE Matrix:

The nine Cell Matrix or the GE matrix is a tool that facilitates multi business corporations to
make a investment decisions among its business units.it si a framework that that evaluate
business portfolio and provide strategic implications for each business unit.
In the year 1970, General electrics(GE) approached Mckinsey & company to develop a
portfolio analysis matrix for screening its business units. And this screening matrix became
GE/Mckinsey matrix and is shown below:

This matrix comprises two axis. The Industry attractiveness is mentioned on the Y axis and
competencies of business unit is plotted on the X-axis. Both axis is divided into 3 categories
(High, medium, low) thus creating nine cells.
In the business world the scarcity of sources are affecting the decision making a lot. With
limited resources, but many opportunities of using them, the businesses need to choose how
to use their them in a best possible manner. e.g, Multi business companies manage complex
business portfolios, often, with as much as 50, 60 or 100 products and services. The
products or business units differ in what they do, how well they perform or in their future
prospects. This makes it very hard to make a decision in which products the company
should invest. Hence, this tool solves the problem by comparing the business units and
assigning them to the groups that are worth investing in or the groups that should be
harvested or divested.
Industry Attractiveness: The vertical axis of GE/Mckinsey matrix is industry attractiveness
. It indicates how hard or easy it will be for a company to compete in the market and earn
profits. The more profitable the industry is the more attractive it becomes. There is no
definite list of factors that should be included in industry attractiveness but the following ar
the most common:

 Industry size
 Historical and expected market growth rate.
 Industry profitability.
 Global opportunities
 All macroeconomic factors(PEST)
 Threats and opportunities (components of SWOT analysis)
 Technological development
 Availability of subsitutes
 Degree of competitive advantage
 Market competion
Etc.

Competitive strength of a business unit or a product:

On the X-axis the matrix measures how strong, in terms of competition, a particular
business unit is against its competitors. And If the company has a sustainable
competitive advantage, the next question is: “For how long it will be sustained?”
The following factors determine the competitive strength of a business unit:

 Customer loyalty
 Brand equity
 Product differentiation
 Level of profit margin as compare to competitors
 Strength of value chain
 Growth in market share
 There are three different strategies that can be adopted using GE matrix:
1. Invest and grow: this is facilitated by making investment in the market or by
expanding it.
2. Hold: By making careful investments, the current market is consolidated.
3. Harvest or sell : Here companies make no extra investments but mainly focusing
on maximizing returns. By assigning a weight to each factor, the GE McKinsey
Matrix can be used more effectively. Based on these weights, the scores for
competitiveness and market attractiveness can be calculated more accurately for
each business unit.

Following is the visual representative example of GE matrix and how it is helping to

understand different products strength and attractiveness for decision making
purpose.

BUSINESS UNIT STRENGTH INDUSTRY ATTRACTIVENESS MARKET SIZE

21 10 10
46 24 45
87 27 75
34 26 42
46 37 62
95 94 41
69 54 75
74 48 35
53 42 46
29 65 55
26 75 97