What is: This was an array created by Mckinsey Consulting over a project at General Eletric in the 70 decade. Like the BCG Matrix (Boston Consulting Group), the Ge / McKinsey matrix, aims to analyze a portfolio of products or business units with the goal of defining future investments.
Matrix GE / McKinsey vs. Matrix BCG
Unlike the BCG Matrix that aims to cross 4 quadrants with the "Market Participation" and "Market Growth" axes, the GE / McKinsey Matrix evaluates the "Competitive Strength" and "Market Attractiveness" axes generating the cross of 9 quadrants according to 3 intensities for each axis: Low, Medium or High.
How to Use the GE / McKinsey Matrix
This tool is very popular and useful mainly for its practicality and simplicity in use. Below, I will demonstrate the steps that you must take to develop and apply the matrix in your company, based on our GE / McKinsey matrix ready worksheet.
1) List of Business Units / Portfolio with its Classification
The first step is to list all the business units or products in your portfolio that you want to analyze and rank them according to your Competitive Strength and Attractiveness. At that point, it helps a lot to define the extremes, that is, what is your most competitive unit and what it represents for your company, as well as the least competitive and which market is the most attractive of all and the least attractive.
2) Check and Interpret 5 GE / McKinsey Matrix Classifications
The GE Matrix generates 9 different classification blocks for its business / portfolio units that will generally indicate the strategy that must be followed. In case of using our spreadsheet, the units will already be positioned automatically. Let's see below how to interpret each block
a) High Competitive Strength + High Market Attractiveness = Priority Investment
That means the units in this area should receive the most investment and attention as they are the engine of business growth.
b) Competitive Strength Average + Attractiveness High Market or Vice Versa = Investment Insurance and Growth
In these units, you must continue to invest a portion of your capital, in order to correct the competitiveness or attractiveness to make them a priority investment.
c) High Competitive Strength and Low or Vice Versa or Medium Both Attractiveness = Selective / Cautious Investment
In such cases, one should only invest if there is capital surplus of the priority and insurance investments, since the risk of these units increases considerably.
d) Average Competitive Strength and Low or Vice Versa Versatility = Limit / Harvest Expansion
If the unit is minimally profitable, it is worth maintaining a standard investment to continue operating. Otherwise, you should plan your departure.
e) Low Competitive Strength and Low Attractiveness = Area of Danger / Disinvestment
In these units, the best way to dispose of the investment and reduce losses should be sought, as future prospects are negative.
3) Create a Plan of Action
It is no use analyzing and analyzing, without acting on the information obtained. Although this is not an obligatory part of creating a GE matrix, we suggest and include in our worksheet an area for the definition of actions for each business unit, with responsible and deadline.
4) See the Major Scenario
Finally, in our GE / McKinsey matrix worksheet, we also recommend that you stop to look at the overall landscape of your business, that is, see how your business unit distribution has been, to reflect whether this is making sense the reality and also monitor the macro progress of their action plans.
If you want to start developing your matrix today, we have a GE / McKinsey matrix worksheet already ready for use and can be tested free of charge prior to purchase.