GE 9 cell matrix strategic management subject

GE 9 cell matrix

1. BUSINESS POLICY & STRATEGIC MANAGEMENT

2. How BCG became obsolete Cash flow became less of an issue with more efficient capital markets and lower interest rates Process could be manipulated by defining the market narrowly or broadly Multiple companies could not jointly pursue a strategy to be #1, but they tried…with disastrous consequences

3. Evolution of this analysis The GE Nine(9) Cell Matrix is  a strategy tool developed by McKinsey and Company consultancy group in the 1970s . It is a variant of the Boston Consulting Group (BCG) portfolio analysis and measures business unit strength against industry attractiveness.

4. The General Electric Model: Typically used to analyze a company's various business units or product lines. MARKET ATTRACTIVENESS BUSINESS STRENGTH 5 5 High Medium Low 1.67 3.33 1.67 3.33 Strong Medium Weak

5. two key dimensions Market Attractiveness: This dimension assesses the overall appeal of the market in which a business unit or product operates. Market attractiveness is typically determined by factors such as market size, growth rate, profitability, customer demand, competitive dynamics, and regulatory environment. The scale often ranges from low to high. Competitive Strength of Business: This dimension evaluates the relative competitive strength of the business unit or product within its specific market. Competitive strength is influenced by factors such as market share, brand reputation, technological capabilities, cost efficiency, and the quality of the product or service, etc. It is also usually rated on a low to high scale.

6. Evaluating Market Attractiveness and Business Strength

7. Management Strategies Protect Position Invest to Build Divest Limited Expansion or Harvest Manage for Earnings Build Selectively Protect and Refocus Build Selectively Selectivity/ Manage for Earnings MARKET ATTRACTIVENESS BUSINESS STRENGTH 5 High Medium Low 1.67 3.33 5 1.67 3.33 Strong Medium Weak

8. Problems with portfolio models 1. Subjective Inputs Lead to Self-Confirming Strategies: Assessment of business units or products within a portfolio relies heavily on subjective judgment rather than objective data and analysis. There's a risk of reinforcing existing beliefs and strategies, leading to self-confirming biases. 2. Lack of Independence of SBU (Strategic Business Units): In portfolio analysis, SBU independence refers to the degree to which each business unit operates autonomously and has its own distinct strategy. Too interdependent or similar in their operations. This can lead to a lack of diversification and risk management within the portfolio, making it vulnerable to external market shocks that affect multiple units simultaneously.

9. 3. Cannibalization: Cannibalization occurs when a new product or business unit within a company's portfolio competes with and erodes the market share and revenue of existing products. 4. Synergy: Synergy is a concept that refers to the potential for two or more business units or products within a portfolio to create greater value or achieve better results when they work together than they would independently. The problem arises when portfolio analysis fails to identify and capitalize on opportunities for synergy. This can result in missed cost-saving or revenue-enhancing potential. 5. Works Best with Companies at the Edges: Portfolio analysis is often considered most effective when applied to companies at the extreme ends of the business spectrum, such as those with very mature or very diverse portfolios. Companies at the "edges" of business complexity or size may benefit more from portfolio analysis because the trade-offs between business units or products are more apparent.

10. Conclusion Q&A

11. THANK YOU Learnings