3. What is ge-matrix?
• It is a strategy tool that offers
• systematic approach for multi business corporations
• to identify market position and profitability
• and further prioritize its investments among its
business units.
4. How it came into being?
• In 1970’s , GE was unsatisfied with the returns on investments.
• It consulted with McKinsey & company and this resulted into a
formation of a nine-box matrix.
• That helped analyze portfolio of the strategic business unit (SBU) of the
corporation.
• Computation of this matrix allows business to take decision on whether
to invest or to divest or carry a further research on the product .
5. Components of ge-matrix
For the calculation process the company needs to
evaluate following :
• Industry attractiveness.
• Competitive strength.
6. Industry Attractiveness
• Industry attractiveness indicates how hard or easy it will be for a
company to compete in the market and earn profits.
• More profitable = More attractive .
• Factors used to determine Industry Attractiveness.
Factors used to determine Industry Attractiveness.
Long run growth rate Trend of prices
Industry size Macro environment factors
Industry profitability Seasonality
Industry structure Availability of labor
Product life cycle changes Market segmentation
Changes in demand
7. Competitive strength of a business unit
or a product
• The matrix measures how strong, in terms of competition, a
particular business unit is against its rivals.
• If the company has a sustainable competitive advantage, the
next question is: “For how long it will be sustained?”
Factors used to determine Competitive strength of a business unit .
Total market share. Customer loyalty.
Market share growth compared to
rivals.
Strength of a value chain.
Brand strength. Level of product differentiation.
Profitability of the company. Production flexibility.
10. Advantages
• Helps to prioritize the limited resources in order to achieve the
best returns.
• Managers become more aware of how their products or
business units perform.
• Identifies the strategic steps the company needs to make to
improve the performance of its business portfolio.
11. • Requires a consultant or a highly experienced person to
determine industry’s attractiveness and business unit strength
as accurately as possible.
• It is costly to conduct.
• It doesn’t take into account the synergies that could exist
between two or more business units.
Disadvantages
