GE McKinsey Matrix

Definition

GE-McKinsey nine-box matrix

 

is a strategy tool that offers a systematic approach for the multi business corporation to prioritize its investments among its business units.

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GE-McKinsey

 

is a framework that evaluates business portfolio, provides further strategic implications and helps to prioritize the investment needed for each business unit (BU).

[2]

Difference between GE McKinsey and BCG matrices

GE McKinsey matrix is a very similar portfolio evaluation framework to BCG matrix. Both matrices are used to analyze company’s product or business unit portfolio and facilitate the investment decisions.

The main differences:

• Visual difference. BCG is only a four cell matrix, while GE McKinsey is a nine cell matrix. Nine cells provide better visual portrait of where business units stand in the matrix. It also separates the invest/grow cells from harvest/divest cells that are much closer to each other in the BCG matrix and may confuse others of what investment decisions to make.
• Comprehensiveness. The reason why the GE McKinsey framework was developed is that BCG portfolio tool wasn’t sophisticated enough for the guys from General Electric. In BCG matrix, competitive strength of a business unit is equal to relative market share, which assumes that the larger the market share a business has the better it is positioned to compete in the market. This is true, but it’s too simplistic to assume that it’s the only factor affecting the competition in the market. The same is with industry attractiveness that is measured only as the market growth rate in BCG. It comes to no surprise that GE with its complex business portfolio needed something more comprehensive than that.

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