Ge Matrix

Topics: Strategic management, Marketing, Strategic business unit Pages: 5 (1180 words) Published: September 15, 2011
The GE matrix is an alternative technique used in brand marketing and product management to help a company decide what product(s) to add to its product portfolio, and which market opportunities are worthy of continued investment. Also known as the 'Directional Policy Matrix,' the GE multi-factor model was first developed by General Electric in the 1970s. Conceptually, the GE Matrix is similar to the Boston Box as it is plotted on a two-dimensional grid. In most versions of the matrix: * the Y-Axis comprises industry attractiveness measures, such as Market Profitability, Fit with Core Skills etc. and * the X-Axis comprises business strength measures, such as Price, Service Levels etc. Each product, brand, service, or potential product is mapped as a piechart onto this industry attractiveness/business strength space. The diameter of each piechart is proportional to the Volume or Revenue accruing to each opportunity, and the solid slice of each pie represents the share of the market enjoyed by the planning company. The planning company should invest in opportunities that appear to the top left of the matrix. The rationale is that the planning company should invest in segments that are both attractive and in which it has established some measure of competitive advantage. Opportunities appearing in the bottom right of the matrix are both unattractive to the planning company and in which it is competitively weak. At best, these are candidates for cash management; at worst candidates for divestment. Opportunities appearing 'in between' these extremes pose more of a problem, and the planning company has to make a strategic decision whether to 'redouble its efforts' in the hopes of achieving market leadership, manage them for cash, or cut its losses and divest The General Business Screen was originally developed to help marketing managers overcome the problems that are commonly associated with the Boston Matrix (BCG), such as the problems with the lack of credible business information, the fact that BCG deals primarily with commodities not brands or Strategic Business Units (SBU's), and that cashflow is often a more reliable indicator of position as opposed to market growth/share. The GE Business Screen introduces a three by three matrix, which now includes a medium category. It utilizes industry attractiveness as a more inclusive measure than BCG's market growth and substitutes competitive position for the original's market share.

So in come Strategic Business Units (SBU's). A large corporation may have many SBU's, which essentially operate under the same strategic umbrella, but are distinctive and individual. A loose example would refer to Microsoft, with SBU's for operating systems, business software, consumer software and mobile and Internet technologies. Growth/share are replaced by competitive position and market attractiveness. The point is that successful SBU's will go and do well in attractive markets because they add value that customers will pay for. So weak companies do badly for the opposite reasons. To help break down decision-making further, you then consider a number of sub-criteria: For market attractiveness:

* Size of market.
* Market rate of growth.
* The nature of competition and its diversity.
* Profit margin.
* Impact of technology, the law, and energy efficiency.
* Environmental impact.
. . . and for competitive position:
* Market share.
* Management profile.
* R & D.
* Quality of products and services.
* Branding and promotions success.
* Place (or distribution).
* Efficiency.
* Cost reduction.
At this stage the marketing manager adapts the list above to the needs of his strategy. The GE matrix has 5 steps:...
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