GE 9 Cell Matrix
Introduction
- The GE/McKinsey Matrix is a nine-cell (3 by 3) matrix used to perform business portfolio analysis as a step in the strategic planning process.
- The GE/McKinsey Matrix identifies the optimum business portfolio as one that fits perfectly to the company’s strengths and helps to explore the most attractive industry sectors or markets.
- The objective of the analysis is to position each SBU on the chart depending on the SBU’s Strength and the Attractiveness of the Industry Sector or Market on which it is
- Each axis is divided into Low, Medium and High, giving the nine-cell matrix as depicted below.
GE Nine Cell Matrix figure
Industry Attractiveness and Business Unit Strength
- Different factors can be used to define Industry Attractiveness. Like:-
Market Size, Market Growth Rate, Demand variability, Industry Profitability, Competitive Rivalry, Global Opportunities, Entry and exit barriers, Capital requirement, Macro environmental Factors (PEST)
- Different factors can also be used to define SBU Strength. Like:-
Market Share, Distribution Channel Access, Financial Resources, R&D Capability, Brand equity, Production Capacity, Knowledge of customer and market, Caliber of management. Relative cost position
- The factors and their relative weightings are selected. The rating values for each factor are entered for each SBU and Industry.
GROW, HOLD, HARVEST
- Grow – Business units that fall under grow attract high investment. Firms may go for product differentiation or Cost leadership. Huge cash is generated in this phase. Market leaders exist in this phase.
- Hold – Business units that fall under hold phase attract moderate investment. Market segmentation, Market penetration, imitation strategies are adopted in this phase. Followers exist in this phase.
- Harvest – Business units that fall under this phase are unattractive. Low priority is given in these business units. Strategies like divestment, Diversification, mergers are adopted in this phase.
