How can you use the GE McKinsey Matrix to analyze your business?

1 What is the GE McKinsey Matrix?

The GE McKinsey Matrix, developed by the consulting firm McKinsey & Company for the General Electric Company in the 1970s, is an extension of the Boston Consulting Group Matrix. It classifies business units or products into nine cells instead of four, and considers more factors than just market size and position. The two dimensions of the matrix are industry attractiveness and competitive strength. Industry attractiveness measures how attractive the industry is for your business unit or product, based on factors such as market size, growth rate, profitability, competition, customer needs, technology, regulation, and environmental impact. You can assign a score from 1 (low) to 10 (high) to each factor and calculate the weighted average to get the overall industry attractiveness score. Competitive strength measures how strong your business unit or product is compared to your competitors, based on factors such as market share, brand image, quality, innovation, customer loyalty, cost structure, distribution, and capabilities. You can also assign a score from 1 (low) to 10 (high) to each factor and calculate the weighted average to get the overall competitive strength score. The GE McKinsey Matrix is a useful tool for evaluating market attractiveness and competitive strength in order to make better decisions about investments and resources.

2 How to plot the GE McKinsey Matrix?

Once you have the scores for industry attractiveness and competitive strength for each of your business units or products, you can plot them on the GE McKinsey Matrix. The matrix has three zones: green, yellow, and red. The green zone represents the best opportunities for growth and investment, the yellow zone represents the moderate opportunities that require careful analysis, and the red zone represents the weak opportunities that should be restructured or divested. The matrix looks like this:

|-----------------|-----------------|-----------------|
| Green           | Green           | Yellow          |
| High Attract.   | High Attract.   | High Attract.   |
| High Strength   | Medium Strength | Low Strength    |
|-----------------|-----------------|-----------------|
| Green           | Yellow          | Yellow          |
| Medium Attract. | Medium Attract. | Medium Attract. |
| High Strength   | Medium Strength | Low Strength    |
|-----------------|-----------------|-----------------|
| Yellow          | Yellow          | Red             |
| Low Attract.    | Low Attract.    | Low Attract.    |
| High Strength   | Medium Strength | Low Strength    |
|-----------------|-----------------|-----------------|        

3 How to interpret the GE McKinsey Matrix?

The GE McKinsey Matrix assists in understanding the relative position and performance of business units or products, and provides guidance for strategic actions. Depending on which zone the business unit or product falls into, you can follow some general recommendations. Business units in the green zone are stars with high industry attractiveness and competitive strength. These should be invested in to maintain or increase market share and profitability, and to exploit growth opportunities. The yellow zone includes question marks with either high industry attractiveness and low competitive strength, or medium industry attractiveness and medium competitive strength. Analyze these carefully to determine potential and feasibility, and decide whether to invest, harvest, or divest. Red zone business units are dogs with low industry attractiveness and competitive strength; they should be restructured or divested as they are likely to generate low or negative returns and drain resources.

4 How to use the GE McKinsey Matrix for decision making?

The GE McKinsey Matrix is a useful tool for strategic decision making, but it should be used as a starting point for further analysis and evaluation. You should also take into account factors such as your vision, mission, goals, resources, capabilities, and risks. Moreover, the matrix should be updated regularly as the industry attractiveness and competitive strength of your business units or products may change over time. To use the GE McKinsey Matrix for decision making, you should first define the scope and purpose of your analysis. Then, you need to collect and analyze relevant data about the industry attractiveness and competitive strength factors for each business unit or product. After that, you can plot the scores on the matrix and interpret the results. Next, generate possible strategic alternatives for each business unit or product based on the matrix results. Finally, choose the best option for each business unit or product and develop an action plan to implement it. Monitor and measure the outcomes and impacts of your decision, and adjust your strategy as needed.

5 What are the benefits and limitations of the GE McKinsey Matrix?

The GE McKinsey Matrix is a powerful tool that can help you analyze your business portfolio and make strategic decisions. It can assess the attractiveness and competitiveness of your business units or products using multiple criteria and factors, as well as visualize and compare their relative positions and performances. Additionally, the matrix can help you allocate resources and capabilities more effectively, and align your business strategy with your corporate strategy. However, the matrix also has some limitations, such as relying on subjective judgments and assumptions, needing a lot of data to work properly, oversimplifying the complexity of the industry and market, and not reflecting changes or uncertainties in the industry.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?