GE/ McKinsey Matrix

The GE/McKinsey Matrix, commonly known as the GE-McKinsey Nine-box Matrix, is a strategic business analysis tool used to examine a company’s business portfolio and identify the appropriate resource allocation among its many business units or product lines. It was created in the 1970s by McKinsey & Company in partnership with General Electric.
The matrix serves as a framework for assessing the attractiveness and competitiveness of various business units or product lines. Based on the relative positioning of these units, it assists managers in making educated decisions about resource allocation, investment, and strategic planning. Components of GE/McKinsey Matrix

1. Industry Attractiveness: This metric assesses the overall attractiveness of the industry or market in which a company operates. The attractiveness of an industry is determined by factors such as market growth rate, market size, competitive intensity, profitability, and regulatory environment.
2. Business Unit Strength: This dimension evaluates a business unit’s competitive power within its industry. The strength of the business unit is determined by factors such as market share, brand strength, technological skills, financial resources, and management expertise.
3. Nine box grid: The GE/McKinsey Matrix is a three-by-three grid in which the vertical axis represents industry attractiveness (from low to high) and the horizontal axis represents business unit strength (from weak to strong). The grid is divided into nine cells, each of which represents a distinct strategic recommendation.
4. Strategic Recommendations: The matrix’s strategic recommendations are determined by the position of a business unit inside the nine-box grid. Among these suggestions are invest/grow, selectively invest/hold, harvest/divest, and selectivity.
• Invest/grow: Business units falling into this category have both high market attractiveness and strong competitive strength. These units are considered prime opportunities for investment and resource allocation to drive growth and capitalize on their competitive advantages.
• Selectively invest/hold: Business units in this category may have moderate industry attractiveness and competitive strength. They are advised to be monitored closely and selectively invested in to improve their position or exploit specific opportunities.
• Harvest/divest: Business units in this category have low market attractiveness or weak competitive strength. They may be candidates for divestment or resource reduction to minimize losses or reallocate resources to more promising areas.
• Selectivity: This category represents business units that fall in the middle of the grid. They may have average industry attractiveness and competitive strength. Strategic decisions for these units are more nuanced and require careful evaluation.
  The GE/McKinsey Matrix is a very useful tool for portfolio analysis and resource allocation. It assists organizations in making educated decisions regarding investment, divestment, and strategic emphasis by arranging business units or product lines in the proper cells of the matrix.