GE matrix

GE MATRIX

GE MATRIX? USES OF GE MATRIX.

HOW ATTRACTIVE IN THE INDUSTRY. FACTORS UNDERLYING THE PARAMETERS.

DIAGRAM OF GE MATRIX. BCG AND GE MODEL.

Bhuvanesh.K-Ist MBA

The multi factor portfolio planning matrix propagated by General Electric (GE) holds that a company can appropriately rate its different businesses for the purpose of strategic planning, on the basis of two main parameters. Industry attractiveness. Company’s business strength.

GE Matrix?

USES OF GE MATRIXAlternative technique used in brand

marketing and product management.

Help a company decide to what product to add and which market opportunities are worthy of continued investment.

Also known as the 'Directional Policy Matrix,' the GE multi-factor model was first developed by Mckinsey for General Electric in the 1970s.

Every firm desires to stay in the most attractive industries and excel through its distinctive strengths and if not the business is rated as the least important one.

The other businesses will occupy a position somewhere between the two extremes this is the basic approach of the GE model.

HOW ATTRACTIVE IN THE INDUSTRY

Industry attractiveness is the product of several factors such as industry potential, the current size of the industry, the rate of growth of the industry, the industry structure and the profitability of the industry.

Company’s business strength is the product of several factors such as company’s current market share, growth rate, differentiation strength, brand image, corporate image, etc.

FACTORS UNDERLYING THE PARAMETERS

Each firm will have to identify the factors specific to its industry and its competitive position.

It has to also assign due weightages to each of the factors and find out the weighted measures in respect of the two parameters, viz., market attractiveness and firms business strength.

FACTORS UNDERLYING THE PARAMETERS(cont)

STRENGTHS AND WEAKNESSES

The GE/McKinsey Matrix, as an extension of the BCG framework, shares the fore mentioned advantages of the BCG model.

Though the GE/McKinsey Matrix is more sophisticated than the BCG matrix and can provide higher value information for the executive management, it has several flaws and limitations.

No proven relationship between market attractiveness and business position.

The approach requires extensive data gathering.

The relationships between different units are not taken into account.

The core-competencies that lead to value creation are not taken into consideration.

Scoring is personal and subjective (risk of bias)

There is no hard and fast rule on how to weight elements.

The GE/McKinsey Matrix offers a broad strategy and does not indicate how best to implement it.

STRENGTHS AND WEAKNESSES(cont)

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BCG model goes by industry growth and company’s business strength.

BCG is a growth share matrix

GE model goes by industry attractiveness and company’s business strength.

GE model is an enlarged version of the BCG model.

DIFFERENCE BETWEEN BCG AND GE MODEL

DIAGRAM OF GE MATRIX