11 .

GENERAL ELECTRIC MODEL ["STOP-LIGHT" STRATEGY MODEL]

1. I 11tr oduction

■ This model has been used by General Electric Company (d eveloped by GE with the
assistance of the consulting firm McKinsey & Company) .

■ This model is also known as Business Planning Matrix, GE Nine-Cell M atrix and GE
Electric Model.

■ The strategic planning approach in this model has been inspired from traffic control
lights.

■ The lights that are used at crossings to manage traffic are: green for go, amber or
yellow for c aution, and red for stop.
 decis ions: Busi ness Strength
This mode l uses two facto rs while takin g strat egic antt
• .
Mark et Attrn ct,vc ness .
h
and the horizontal axis sows
Tile vertic al axis indic ates mark et attra ctive ness tti
• e
busin ess stren gth in the indus try.

ber of fa4=.tors lrvt;

2 The mark et attrn ct,vc ness is mea sure d by a num

• Size of the market. General Electric {GE) BusinessSc,._

■ Mark et grow th rate.

~ Invest o,
~ Grow
• Indu stry prof itabi lity.
VI
Ill
111
Com petit ive inten sity.
• C:
41
.2
t; =::
Invest or
■ Prici ng trend s.
~
:i:=
<
i:-: Grow
il
Ove rall risk of returns in the industry.
...
J/1

• "'
:E
Ytibu>
Demand varia bility . . ...
• ~ ,t,K., ace,, .§

3. Busi ness stren gth is mea sure d by a kJ , HoU

cons ideri ng the typic al drive rs like: ~ Sl,ong ~

Competitive ?0$ition
r:: :t
• Mark et shar e .

■ Mark et shar e grow th rate.

61 ~- ~~
■ Profit marg in. ~llta .w-- f>t..-At,Vd;

■ Dist ribu tion effic ienc y Ru( - ~

■ Bran d imag e.
~d 'W U1 1, ~ -t:,JUuL
~ - f/d,(,41(1-
■ Abili ty to com pete on price and quality.
~ &olc,.6 -R. u/ .
■ Cus tomer loya lty.
J

■ Prod uctio n capa city.

■ Tech nolo gica l capa bility .

 ii
sr ~'F EG IC MA NA GE ME NT 3. ST RA TE GI C AN AL YS IS

_EXP LAN ATI ON OF IMA GE

4
reap the
th bus ines s is at adv ant age ous position . To
If a pro duc t falls in e gre en sec tion , the
exp and , to inv est and gro w.
benefits , the st rate gic dec isio n can be to

is in the am ber or yell ow zon e, it nee ds cau tion and ma nag erial disc reti on is
If a pro duc t
called for ma king the stra teg ic cho ices .

ntu ally lea d to tosses tha t wou ld ma

ke thin gs
If a pro duc t is in the red zon e, it will eve
hm ent ,
the app rop riat e stra teg y sho uld be retr enc
difficult for org ani sat ion s. In suc h cas es,
dive stm ent or liqu ida tion .

& GE
s. Wh at is the d iffe ren ce bet wee n BC G
irstly,
-sh are matrix. How eve r, the re are diff ere nce s.F
This mo del is sim ilar to the BC G gro wth
ess ,
act iven ess rep lace s ma rke t gro wth as the dim ens ion of indu stry attr acti ven
ma rke t attr
a bro ade r ran ge of fact ors oth er tha n just the ma rke t gro wth rate. Sec ond ly,
and inc lud es
com pet itive
t sha re as the dim ens ion by whi ch the
com pet itive stre ngt h rep lace s ma rke

pos itio n of eac h SB U is ass ess ed.

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GROW GROW - ra Difi ~~ili
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~ INVEST r.t □ U D HARVEST
~ GROW ~ ~Difi~lfi DIVEST
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3: t; D llD HARVEST HARVEST

9
- rae:o ~rt DIVEST DIVEST

MEDIUM HIGH

COMPETITIVE STRENGTH