7/22/2019 23_GE Nine Cell Matrix
1/24
GE Nine Cell Matr ix
7/22/2019 23_GE Nine Cell Matrix
2/24
GE Nine Cell Matr ixThe GE/McKinsey Matrix is a nine-cell (3 by 3) matrix
used to perform business portfolio analysis as a step inthe strategic planning process.
The GE/McKinsey Matrix identifies the optimum
business portfolio as one that fits perfectly to thecompany's strengths and helps to explore the mostattractive industry sectors or markets.
The objectiveof the analysis is to position each SBU onthe chart depending on the SBU's Strength and the
Attractiveness of the Industry Sector or Market on which itis focused. Each axis is divided into Low, Medium andHigh, giving the nine-cell matrix as depicted below.
7/22/2019 23_GE Nine Cell Matrix
3/24
7/22/2019 23_GE Nine Cell Matrix
4/24
GE Nine Cell Matr ix
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 exitbarriers, Capital requirement, Macro
environmental Factors (PEST)
7/22/2019 23_GE Nine Cell Matrix
5/24
GE Nine Cell Matr ix
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 andmarket, Caliber of management.
Relative cost position
7/22/2019 23_GE Nine Cell Matrix
6/24
GE Nine Cell Matr ix
The factors and theirrelative weightings are
selected. The rating valuesfor each factor are entered
for each SBU and Industry.
7/22/2019 23_GE Nine Cell Matrix
7/24
Market Attractiveness
Annual market growth rate
Overall market size
Historical profit margin
Current size of market
Market structure
Market rivalry
Demand variability
Global opportunities
7/22/2019 23_GE Nine Cell Matrix
8/24
Current market share
Brand image
Production capacityCorporate image
Profit margins relative tocompetitors
R & D performance
Promotional effectiveness
Business Strength
7/22/2019 23_GE Nine Cell Matrix
9/24
GE Nine Cell Matr ix
Industry attractiveness and business unit strength arecalculated by first identifying criteria for each,determining the value of each parameter in thecriteria, and multiplying that value by a weightingfactor. The result is a quantitative measure of industryattractiveness and the business unit's relative
performance in that industry
Industry attractiveness =factor value1 x factor weighting1
+ factor value2 x factor weighting2 +
7/22/2019 23_GE Nine Cell Matrix
10/24
Each business unit can be portrayed as a circleplotted on the matrix, with the information conveyedas follows:
Market size is represented by the size of the circle.
Market share is shown by using the circle as a piechart.
The expected future position of the circle is portrayedby means of an arrow.
GE Nine Cell Matr ix
7/22/2019 23_GE Nine Cell Matrix
11/24
7/22/2019 23_GE Nine Cell Matrix
12/24
GE nine-cell Planning Grid
Zone Strategic Signal
Green
Yellow
Red
Invest/Expand
Select/Earn
Harvest/Divest
7/22/2019 23_GE Nine Cell Matrix
13/24
GE Nine-cel l Plann ing Grid Invest/ Expand: In this Zone there is opportunity to Grow
through further Investment & Expansion. This zone is
characterized by high business strength & high industry
attractiveness which is a Ideal situation for growth. How ever
this situation does not remain for a long time.
Example: Initially IT industry was most attractive but later on
it was facing competition from all sorts of places. Select/Earn : This zone presents a mixed situation in which
growth possibility is low. However, it presents opportunities for
selective earning.
Harvest/Divest: In the case of red-cell, organization has tostop. In this case Harvesting or Divesting strategies are suitable.
Harvesting means withdraw from a business but withdrawal is
not immediate. Initially focus is on cost-cutting i.e., in R&D and
advertising; the objective is to earn short term profit.
7/22/2019 23_GE Nine Cell Matrix
14/24
Strategies based on GE Nine Cell Matrix
Industry
Attractiveness
Business Unit Strength
Strong Average Weak
High Grow Grow Hold
Medium Grow Hold Harvest
Low Hold Harvest Harvest
7/22/2019 23_GE Nine Cell Matrix
15/24
GE Nine Cell Matrix
GrowBusiness units that fall
under grow phase, attract high
investment. Firms may go for
product differentiation or Cost
leadership. Huge cash is
generated in this phase. Marketleaders exist in this phase.
7/22/2019 23_GE Nine Cell Matrix
16/24
GE Nine Cell Matrix
HoldBusiness 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.
7/22/2019 23_GE Nine Cell Matrix
17/24
GE Nine Cell Matrix
Harvest- Business units that
fall under this phase are
unattractive. Low priority is
given to these business units.
Strategies like divestment,
diversification, mergers areadopted in this phase.
7/22/2019 23_GE Nine Cell Matrix
18/24
GE Nine Cell Matrix
Strength
a) It allows intermediate ratings between high
and low and between strong and week.
b) It helps in channeling the corporateresources to business and achieving
competitive advantage and superior
performance.c) It helps in better strategic decision making
and better understanding of business scope.
7/22/2019 23_GE Nine Cell Matrix
19/24
GE Nine Cell Matrix
Weakness
a)It tends to obscure business that are become
to winners because their industries areentering at exit stage.
b)Assessment of business in terms of two
factors is not fair.
7/22/2019 23_GE Nine Cell Matrix
20/24
EXAMPLE OF GE NINE CELL MATRIX
7/22/2019 23_GE Nine Cell Matrix
21/24
Founded in 1981
Products are Maruti 800, Omni, Alto,SX4, SwiftDezire, Swift, A-star, Gypsy, Wagon R, Ritz,others.
VisionThe Leader in the Indian AutomobileIndustry, Creating Customer Delight andShareholders Wealth; a Pride of India
Core Values: Maruti claims to be driven by some CoreValues in every endeavour-
Customer Obsession,
fast, Flexible, and first mover,
Innovation and creativity
Networking and Partnership
Openness and Learning
About Maruti Udyog
7/22/2019 23_GE Nine Cell Matrix
22/24
800
7/22/2019 23_GE Nine Cell Matrix
23/24
GE Matrix For TATA
Business Strengths
M
arket
Attra
ctiveness
Low
High
WeakStrong
IT Consumer
Durables
Textiles
7/22/2019 23_GE Nine Cell Matrix
24/24
THANK
YOU !!
Top Related