• General Electric Matrix (GE Matrix)

    The general electric Matrix was developed by GE with the assistance of the consulting firm McKinsey & Company. The model identifies the market position and profitability of different business units based on their market attractiveness and business unit strength. This is more advanced form of Growth matrix model compared to BCG Matrix.

    The main aims for GE Model

    • Analyze the current portfolio of business units and their position compared to others
    • Develop growth strategies for each individual business units by adding new products and businesses to the portfolio
    • Decide the business units to be sold or invested more to exploit future opportunities

    Here the two dimensions used are Market Attractiveness and Business Unit Strength. The market attractiveness refers to the attractiveness of the market or the industry in which the business units operate.

    Factors affecting the Market Attractiveness

    • Market Size
    • Market growth and growth potential
    • Market profitability
    • Competition
    • Market Predictability
    • New Opportunities
    • Macro environmental and economic factors

    Business Unit Strength refers to the competitive position of each of the business units. It specifies the strength, market share, market position of the Business units.

    Factors affecting the Business Unit Strength

    • Assets and market under the Business Unit
    • Relative brand strength compared to others
    • Market share and growth in market share
    • Brand Loyalty
    • Distribution network and population reach
    • R&D, Patents and Innovations
    • More investment and access to capital

    Based on these two dimensions, one 3×3 matrix is formed to be used as a GE Model. The matrix is shown below with the respective strategic decisions.

    GE Model

    It leads to four strategic decisions based on the outcome of this model.

    • Invest
    • Protect
    • Harvest
    • Divest

    Investment is made in the market on the basis of the existing market attractiveness in terms of growth. Also it is affected by the respective market share of an organization.

    Protect condition refers to the situation where a business doesn’t want fresh investment rather it is willing to have the security of the given investment. So that it does not result in losses.

    Harvest refers to the situation where the business wants to generate cash out of the given investment (i.e. it does not want stock accumulation).

    Divest refers to the condition where a business organization has finally decided to sale an undertaking or a part of its undertaking. Divestment is the last option which a business organization can undertake.

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