23_GE Nine Cell Matrix

7/22/2019 23_GE Nine Cell Matrix

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GE Nine Cell Matr ix


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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.


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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)


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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


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The factors and theirrelative weightings are

selected. The rating valuesfor each factor are entered

for each SBU and Industry.


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Market Attractiveness

Annual market growth rate

Overall market size

Historical profit margin

Current size of market

Market structure

Market rivalry

Demand variability

Global opportunities


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Current market share

Brand image

Production capacityCorporate image

Profit margins relative tocompetitors

R & D performance

Promotional effectiveness

Business Strength


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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 +


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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.



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GE nine-cell Planning Grid

Zone Strategic Signal

Green

Yellow

Red

Invest/Expand

Select/Earn

Harvest/Divest


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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.


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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


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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.


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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.


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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.


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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.


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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.


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EXAMPLE OF GE NINE CELL MATRIX


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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


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800


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GE Matrix For TATA

Business Strengths

M

arket

Attra

ctiveness

Low

High

WeakStrong

IT Consumer

Durables

Textiles


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THANK

YOU !!

23_GE Nine Cell Matrix

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