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    GE Nine Cell

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    Vandana Sharma
    The GE nine-cell matrix is a strategy tool developed by General Electric and McKinsey consultants to evaluate business portfolios. It assesses each business unit based on two dimensions: market attractiveness and business strength. Market attractiveness is determined by factors like market size, profit margins, and competition. Business strength considers factors such as relative market share, profit margins, and management caliber. Plotting these ratings divides businesses into nine cells that indicate whether to grow, hold, or divest/restructure each unit.

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    GE Nine Cell

    Uploaded by

    Vandana Sharma
    1K views3 pages
    The GE nine-cell matrix is a strategy tool developed by General Electric and McKinsey consultants to evaluate business portfolios. It assesses each business unit based on two dimensions: market attractiveness and business strength. Market attractiveness is determined by factors like market size, profit margins, and competition. Business strength considers factors such as relative market share, profit margins, and management caliber. Plotting these ratings divides businesses into nine cells that indicate whether to grow, hold, or divest/restructure each unit.

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    Strategic management

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    The GE nine-cell matrix is a strategy tool developed by General Electric and McKinsey consultants to evaluate business portfolios. It assesses each business unit based on two dimensions: market attractiveness and business strength. Market attractiveness is determined by factors like market size, profit margins, and competition. Business strength considers factors such as relative market share, profit margins, and management caliber. Plotting these ratings divides businesses into nine cells that indicate whether to grow, hold, or divest/restructure each unit.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    1K views3 pages

    GE Nine Cell

    Uploaded by

    Vandana Sharma
    The GE nine-cell matrix is a strategy tool developed by General Electric and McKinsey consultants to evaluate business portfolios. It assesses each business unit based on two dimensions: market attractiveness and business strength. Market attractiveness is determined by factors like market size, profit margins, and competition. Business strength considers factors such as relative market share, profit margins, and management caliber. Plotting these ratings divides businesses into nine cells that indicate whether to grow, hold, or divest/restructure each unit.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    The GE nine-cell matrix is a strategic tool used by multi-business enterprises to evaluate and prioritize investments across business units based on industry attractiveness and competitive position.

    The horizontal axis indicates business strength or competitive position, which is a weighted composite rating based on factors like market share, profit margins, price and quality competitiveness, customer knowledge, and management caliber.

    The three zones are called the green, yellow, and red zones, also known as the 'stoplight strategy matrix'. The green zone indicates businesses to grow and build, yellow to hold and maintain, and red to divest or rebuild.

    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.

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