Introduction
The GE McKinsey Matrix, developed by McKinsey for General Electric in the 1970s, is a more sophisticated alternative to the BCG Matrix. It uses multiple factors to assess industry attractiveness and competitive strength.
The Two Dimensions
Industry Attractiveness (Y-axis)
- Market size and growth rate
- Industry profitability
- Competitive intensity
- Technology requirements
- Entry barriers
Competitive Strength (X-axis)
- Market share
- Brand strength
- Production capacity
- Profit margins vs competitors
- Technological capability
The Nine Cells
| Strong | Medium | Weak | |
|---|---|---|---|
| High Attractiveness | Invest/Grow | Invest/Grow | Selectivity |
| Medium | Invest/Grow | Selectivity | Harvest/Divest |
| Low Attractiveness | Selectivity | Harvest/Divest | Harvest/Divest |
- Green (Invest/Grow): Priority for investment
- Yellow (Selectivity): Selective investment
- Red (Harvest/Divest): Minimize investment or exit
Constructing the Matrix
- Define factors for each dimension
- Assign weights (must sum to 1.0)
- Rate each SBU on factors (1-5)
- Calculate weighted scores
- Plot on matrix (circle size = revenue)
GE vs BCG Matrix
| Feature | BCG | GE McKinsey |
|---|---|---|
| Dimensions | 2 single factors | 2 composite measures |
| Cells | 4 | 9 |
| Flexibility | Limited | Customizable |
| Complexity | Simple | More complex |
Conclusion
Key Takeaways
- GE Matrix: Industry attractiveness × Competitive strength
- Nine cells provide nuanced strategic guidance
- Multiple weighted factors per dimension
- More comprehensive but more subjective than BCG