G. e.

matrix
and b.c.g. matrix

PRESENTED BY ASHWINI KUMAR (2018MBA007)

CONTENTS OF G.E. MATRIX AND B.C.G. MATRIX

G.E. MATRIX B.C.G. MATRIX

1. Definition and Concept 1. Definition and Understanding
2. Market Attractiveness Factors 2. Example
3. What Does That Means 3. Comparison Chart between G.E.
Matrix and B.C.G. Matrix
4. Strengths and Weakness
5. Structure of the Matrix
6. Example
DEFINITION AND CONCEPT OF G.E. MATRIX

DEFINITION OF G.E. MATRIX = 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.
 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).
CONCEPT OF G.E. MATRIX = The General Electric Matrix was developed by GE with
the assistance of the consulting firm Mckinsey and company. The model identifies the
market position and profitability of different business units based on their market and
business unit strength.
MARKET ATTRACTIVENESS FACTORS

1. Annual Market Growth Rate

2. Overall Market Size
3. Historic Profit Margin
4. Current Size of Market
5. Market Structure
6. Market Rivalry
7. Demand Variability
8. Global Opportunities
WHAT DOES THAT MEANS ?

 Invest => This is the phase which signals to invest more when business is strong and the
industry it is operates is also providing exponential growth.

 Hold => In this phase business should focus on improving it’s strength so that it can shift
to the invest phase.

 Divest => The divest phase suggest that business should cease it’s operations.
STRENGTH’S AND WEAKNESS OF G.E. MATRIX

STRENGTH’S OF G.E. MATRIX WEAKNESS OF G.E. MATRIX

1. It used 9 cells instead of 4 cells of BCG 1. It can get quite complicated and cumbersome
matrix. with the increase in businesses.
2. It considers many variables and does not 2. Though industry attractiveness and business
lead to simplistic conclusions. strength appear to be objective, they are in
reality subjective that may vary from one
3. High/medium/low and
person to another.
strong/average/low classification enables
a finer distinction among business 3. It cannot effectively depict the position of
portfolio. new business units in developing industry.
4. It uses multiple factors to assess
industry attractiveness and business
strength, which allow users to select
criteria appropriate to their situation.
STRATEGIC BUSINESS UNIT’S (SBU) STRENGTH FACTORS

1. Current Market Share

2. Brand Image
3. Production Capacity
4. Corporate Image
5. Profit Margins Related to Competitors
6. Research & Development Performance
7. Promotional Effectiveness
STRUCTURE OF G.E. MATRIX

 On X-axis, Strategic Business Unit (SBU) strengths are shown by strong, average and
weak degrees.

 On Y-axis, industry attractiveness is shown by low, medium and high degrees.

STRUCTURE OF G.E. MATRIX (CONT.)
DEFINITION OF B.C.G. MATRIX

• B.C.G. matrix is a corporate planning tool, which is used to

portray firm’s brand portfolio or SBU’s on a quadrant along
relative market share axis(horizontal axis) and speed of
market growth axis(vertical axis).
• Growth-Share matrix is a business tool, which uses relative
market share and industry growth rate factors to evaluate the
potential of business brand portfolio and suggest further
investment strategies.
 UNDERSTANDING THE B.C.G. MATRIX

• BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the business brand
portfolio and its potential. It classifies business portfolio into four categories based on industry attractiveness (growth rate of
that industry) and competitive position (relative market share). These two dimensions reveal likely profitability of the business
portfolio in terms of cash needed to support that unit and cash generated by it. The general purpose of the analysis is to help
understand, which brands the firm should invest in and which ones should be divested.
• Relative market share = One of the dimensions used to evaluate business portfolio is relative market share. Higher
corporate’s market share results in higher cash returns. This is because a firm that produces more, benefits from higher
economies of scale and experience curve, which results in higher profits. Nonetheless, it is worth to note that some firms may
experience the same benefits with lower production outputs and lower market share.
• Market growth rate = High market growth rate means higher earnings and sometimes profits but it also consumes lots of
cash, which is used as investment to stimulate further growth. Therefore, business units that operate in rapid growth industries
are cash users and are worth investing in only when they are expected to grow or maintain market share in the future.
UNDERSTANDING THE B.C.G. MATRIX (CONT.)

• There are four quadrants into which firms brands are classified:
• Dogs = Dogs hold low market share compared to competitors and operate in a slowly
growing market. In general, they are not worth investing in because they generate low or
negative cash returns. But this is not always the truth. Some dogs may be profitable for
long period of time, they may provide synergies for other brands or SBUs or simple act
as a defence to counter competitors moves. Therefore, it is always important to perform
deeper analysis of each brand or SBU to make sure they are not worth investing in or
have to be divested. Strategic choices: Retrenchment, divestiture, liquidation.
• Cash cows = Cash cows are the most profitable brands and should be “milked” to
provide as much cash as possible. The cash gained from “cows” should be invested into
stars to support their further growth. According to growth-share matrix, corporates
should not invest into cash cows to induce growth but only to support them so they can
maintain their current market share. Again, this is not always the truth. Cash cows are
usually large corporations or SBUs that are capable of innovating new products or
processes, which may become new stars. If there would be no support for cash cows,
they would not be capable of such innovations. Strategic choices: Product development,
diversification, divestiture, retrenchment.
 UNDERSTANDING THE B.C.G. MATRIX (CONT.)

• Stars= Stars operate in high growth industries and maintain high market share. Stars are both cash generators and
cash users. They are the primary units in which the company should invest its money, because stars are expected to
become cash cows and generate positive cash flows.Yet, not all stars become cash flows. This is especially true in
rapidly changing industries, where new innovative products can soon be outcompeted by new technological
advancements, so a star instead of becoming a cash cow, becomes a dog. Strategic choices: Vertical integration,
horizontal integration, market penetration, market development, product development.
• Question marks = Question marks are the brands that require much closer consideration. They hold low market
share in fast growing markets consuming large amount of cash and incurring losses. It has potential to gain market
share and become a star, which would later become cash cow. Question marks do not always succeed and even after
large amount of investments they struggle to gain market share and eventually become dogs. Therefore, they require
very close consideration to decide if they are worth investing in or not. Strategic choices: Market penetration, market
development, product development, divestiture.
EXAMPLE OF G.E. MATRIX ON GOOGLE

• Founded on : 04th September 1998 (04-09-1998)

• Founded by : Larry Page(C.E.O.) and Sergey Brin(President)
• Parent company : Alphabet Inc.
• Products :
1. Search Engine; 2.YouTube; 3. Chrome; 4. Maps, Earth and Street view; 5. AdWords and
AdSense; 6.G1 And Pixel Mobiles; 7. Images; 8. Translator; 9. Docs; 10. Picasa; 11. Gmail;
12. Books; 13. Desktop; 14. Scholar; and 15. Toolbar.
EXAMPLE OF G.E. MATRIX ON GOOGLE (CONT.)
EXAMPLE OF B.C.G. MATRIX ON GOOGLE

• List of Products of Google :-

1. You Tube ; 7. Google Docs ; 13. Google Reader .
2. Android ; 8. Google Drive ;
3. Gmail ; 9. Google Glass ;
4. Google+ ; 10. Orkut ;
5. Search Engine ; 11. Google News ;
6. Advertising ; 12. Google Group ;
EXAMPLE OF B.C.G. MATRIX ON GOOGLE (CONT.)
 COMPARISON CHART BETWEEN
B.C.G. MATRIX AND G.E. MATRIX
BASIS FOR COMPARISON B.C.G. MATRIX G.E. MATRIX

Meaning BCG Matrix is a growth share model
representing growth of business and the
market share enjoyed by the firm.
Number of Cells Four
G.E. Matrix implies multifactor portfolio
matrix that assist firm in making strategic
choices for product lines based on their
position in the grid.
Nine

Factors Market Share and Market Growth Industry attractiveness and Business strengths

Objectives To help companies deploy their To prioritize investment among various

resources among various business units. business units.
Measures Used Single measure used Multiple measures are used

Classification Classified into two degrees Classified into three categories