PRESENTATION ON GE MCKINSEY MATRIX Submitted to: Mrs. Rutvi Umrigar Presented by: Ragini Patel Roll.no.-34 Sub.:- BPSM

Portfolio Analysis Analyze its current business portfolio and decide which SBU's should receive more or less investment Develop growth strategies for adding new products and businesses to the portfolio Decide which businesses or products should no longer be retained.

Analysis models Boston consultancy Group. GE matrix. Shell’s directional policy matrix

GE McKinsey Matrix  The GE matrix / McKinsey matrix is a model to perform a business portfolio analysis on the Strategic Business Units of a corporation.  In consulting engagements with General Electric in the 1970's, McKinsey & Company developed a nine-cell portfolio matrix as a tool for screening GE's large portfolio of strategic business units (SBU).  This business screen became known as the GE/McKinsey Matrix  The GE / McKinsey matrix is similar to the BCG growth-share matrix in that it maps strategic business units on a grid of the industry and the SBU's position in the industry.

GE Multifactor Portfolio Matrix Industry Attractiveness Business Strengths High Medium Low Invest/Grow Selectivity /earnings Harvest /Divest Protect Position Invest to Build Build selectively Selectively manage for earnings Limited expansion or harvest Protect & refocus Divest Manage for earnings

 The GE matrix however, attempts to improve upon the BCG matrix in the following two ways:  The GE matrix generalizes the axes as "Industry Attractiveness" and "Business Unit Strength“.  The BCG matrix uses the market growth rate as a proxy for industry attractiveness and relative market share as a proxy for the strength of the business unit.market share

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 Macro-environmental factors (PEST)PEST

Business Unit Strength 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.

Strategic Implications Resource allocation recommendations can be made to grow, hold, or harvest a strategic business unit based on its position on the matrix as follows: Grow strong business units in attractive industries, average business units in attractive industries, and strong business units in average industries. Hold average businesses in average industries, strong businesses in weak industries, and weak business in attractive industries.

Harvest weak business units in unattractive industries, average business units in unattractive industries, and weak business units in average industries. There are strategy variations within these three groups. For example, within the harvest group the firm would be inclined to quickly divest itself of a weak business in an unattractive industry, whereas it might perform a phased harvest of an average business unit in the same industry.

Some Limitations of the GE Model  Subjective measurements across SBUs  Process also highly subjective  From the selection and weighting of factors to the subsequent development of both a firm’s position and the market attractiveness  Businesses may have been evaluated with respect to different criteria  Sensitive to how a product market is defined  Aggregation of the indicators is difficult