- In consulting engagements with general cleelric in the 1970s Mckinsey and company developed a nine cell portfolio matrix as a tool for screening GE’s large portfolio of strategic business units.
- The GE [Mckinsey matrix] is similar to BCG growth share matrix in that it maps strategic units on a grid of the industry and SBU’s position in the industry.
- The GE matrix however, attempts to improve upon the BCG matrix in the following two ways.
- The GE matrix generalizes the ones as industry attractiveness and business unit strength whereas BCG matrix uses the market growth rate as a proxy for industry attractiveness and relative market share as a proxy for the strength of the business unit.
- The GE matrix has nine cells v/s four cells in the BCG matrix.
- Industry attractiveness and business unit strength are calculated y first indentifying criteria for each, determining the value of each parameter in the criteria and multiplying that value by a weighting factor.
- The result is a quantitative measure of industry attractiveness and the business unit’s relative performance in that industry.
Steps in developing GE matrix
- Select factor and indicators
- Assign each indicator a weight (total =1) based on its importance.
- Rate the industry indicator and company on business indicators on scale of 1(weak) – 5 (strong)
- Multiply weight time rating and total for summary measure.
GE Portfolio Example