23 June 2007

GE/McKinsey Matrix

Business Unit Strength




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.

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

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

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.

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