GE NINE CELL MATRIX

Another popular Corporate Portfolio Analysis technique is the result of

pioneering effort of General Electric Company along with McKinsey
Consultants which is known as the GE NINE CELL MATRIX.

GE nine-box matrix is a strategy tool that offers a systematic approach for the
multi business enterprises to prioritize their investments among the various
business units. It is a framework that evaluates business portfolio and
provides further strategic implications.

Each business is appraised in terms of two major dimensions

Market Attractiveness and Business Strength. If one of these
factors is missing, then the business will not produce desired
results. Neither a strong company operating in an unattractive
market, nor a weak company operating in an attractive market
will do very well.2

The vertical axis denotes industry attractiveness, which is a

weighted composite rating based on eight different factors. They
are:

1. Market size and growth rate

2. Industry profit margins

3. Intensity of Competition

4. Seasonality

5. Product Life Cycle Changes

6. Economies of scale

7. Technology

8. Social, Environmental, Legal and Human Impacts

What does the horizontal axis represent?

It indicates business strength or in other words competitive
position, which is again a weighted composite rating based on
seven factors as listed below:

1. Relative market share

2. Profit margins

3. Ability to compete on price and quality

4. Knowledge of customer and market

5. Competitive strength and weakness

6. Technological capability

7. Caliber of management

The two composite values for industry attractiveness and

competitive position are plotted for each strategic business unit
(SBU) in a COMPANYS PORTFOLIO. The PIE chart (circles) denotes
the proportional size of the industry and the dark segments
denote the companys respective market share.

The nine cells of the GE matrix are grouped on the basis of low to
high industry attractiveness, and weak to strong business
strength. Three zones of three cells each are made, indicating
different combinations represented by green, yellow and red
colors. So it is also called Stoplight Strategy Matrix, similar to the
traffic signal.

The green zone suggests you to go ahead, to grow and build,

pushing you through expansion strategies. Businesses in the
green zone attract major investment.

Yellow cautions you to wait and see indicating hold and maintain
type of strategies aimed at stability.

Red indicates that you have to adopt turnover strategies of

divestment and liquidation or rebuilding approach.
This matrix offers some advantages over BCG matrix in that, it
offers intermediate classification of medium and average ratings.
It also integrates a larger variety of strategic variables like the
market share and industry size.

Advantages

Helps to prioritize the limited resources in order to achieve

the best returns.

The performance of products or business units becomes

evident.

Its more sophisticated business portfolio framework than

the BCG matrix.

Determines the strategic steps the company needs to adopt

to improve the performance of its business portfolio.
Disadvantages

Needs a consultant or an expert to determine industrys

attractiveness and business unit strength as accurately as
possible.

It is expensive to conduct.

It doesnt take into account the harmony that could exist

between two or more business units.