 G.E. MATRIX OR MCKINSEY MATRIXThe business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities. The company must: 1. Analyse its current business portfolio and decide which businesses should receive more or less investment, and 2. Develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained. The two best-known portfolio-planning methods are the Boston Consulting Group Portfolio Matrix and the McKinsey / General Electric Matrix (discussed in this revision note). In both methods, the first step is to identify the various Strategic Business Units ("SBU's") in a company portfolio. An SBU is a unit of the company that has a separate mission and objectives and that can be planned independently from the other businesses. An SBU can be a company division, a product line or even individual brands - it all depends on how the company is organised. The McKinsey / General Electric Matrix The McKinsey/GE Matrix overcomes a number of the disadvantages of the BCG Box. Firstly, market attractiveness replaces market growth as the dimension of industry attractiveness, and includes a broader range of factors other than just the market growth rate. Secondly, competitive strength replaces market share as the dimension by which the competitive position of each SBU is assessed. The diagram below illustrates some of the possible elements that determine market attractiveness and competitive strength by applying the McKinsey/GE Matrix to the UK retailing market: Factors that Affect Market Attractiveness Whilst any assessment of market attractiveness is necessarily subjective, there are several factors, which can help determine attractiveness. These are listed below:
Factors that Affect Competitive Strength Factors to consider include:
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