# GE/McKinsey Matrix

The GE/McKinsey Matrix or GE-McKinsey nine-box matrix is a business portfolio analysis that provides a structured way to evaluate business units on two key dimensions: the attractiveness of the market involved and the strength of the firm’s position in that market. The result is graphical portrayal of the various business units on these key dimensions and gives insight to a resource allocation decision.[1] Business Assessment Array is another name for McKinsey’s GE matrix used to assess business portfolio analysis for Strategic Business Units (SBU’s) of a corporation. It is a 3*3 matrix having “Market attractiveness” and “Competitive strength” as its axis.[2]

Industry Attractiveness The vertical axis of the GE / McKinsey matrix is industry attractiveness, which is determined by factors such as the following:

• Market growth rate
• Market size
• Demand variability
• Industry profitability
• Industry rivalry
• Global opportunities
• Macroenvironmental factors (PEST)

Each factor is assigned a weighting that is appropriate for the industry. The industry attractiveness then is calculated as follows:

```                      Industry attractiveness    =  	factor value1   x   factor weighting1
+ factor value2   x   factor weighting2
.
.
.
+ factor valueN   x   factor weightingN
```

The horizontal axis of the GE / McKinsey matrix is the strength of the business unit. Some factors that can be used to determine business unit strength include:

• Market share
• Growth in market share
• Brand equity
• Distribution channel access
• Production capacity
• Profit margins relative to competitors

The business unit strength index can be calculated by multiplying the estimated value of each factor by the factor's weighting, as done for industry attractiveness.[3]

source: Marketing91

GE McKinsey Matrix Strategies.[4]
There are 3 main strategies in the GE McKinsey matrix which are grow, hold and harvest.

• Grow – If the business unit is strong against a strong attractiveness, you grow the business. This means, that you are ready to invest a higher percentage of your resources in these businesses. These business units have high market attractiveness and high business unit strength. They are most likely to be successful if backed up with more resources. The quadrants marked in green are the places where you can grow your business.
• Hold – If the business unit strength or attractiveness is average, than you hold the business as it is. It might be that the market is dropping in value, or that there is much high competition which the business unit will be hard put to catch up. In both the cases, the business unit might not give optimum returns even if resources are invested. Thus, in this case, you wait and hold the business unit to see if the market environment changes or if the business unit gains importance in the market as compared to other players.
• Harvest – If the business unit or market has become unattractive, than you either sell or liquidate the business or you can hold it for any residual value that it has. This strategy is used in the GE McKinsey matrix when the business unit strength is weak and the market has lost its attractiveness. The best measure in this case is to harvest the weak businesses and reinvest the money earned into business units which are in growth

• 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.
• It’s more sophisticated business portfolio framework than the BCG matrix.
• Identifies the strategic steps the company needs to make to improve the performance of its business portfolio.

• 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.

GE McKinsey Matrix vs. BCG Matrix

source: BMS

### References

1. What is The GE McKinsey Matrix Niklas Blanke
2. Definition - What is Business Assessment Array? MBA Skool
3. The GE McKinsey Matrix Strategic Management QuickMBA
4. GE McKinsey matrix strategies Marketing91