Mastering the GE Business Planning Matrix: A Comprehensive Guide
If you’re looking to grow your business or revamp your corporate strategy, it’s essential to have a clear understanding of the GE Business Planning Matrix. This matrix, also called the GE/McKinsey Matrix, is a tool developed by General Electric that helps businesses analyze their product portfolio and make strategic decisions based on market attractiveness and competitive position.
In this article, we’ll provide you with a comprehensive guide to mastering the GE Business Planning Matrix. We’ll delve into the matrix’s history and how it works, provide tips on using it effectively, and offer real-life examples of companies that have benefited from this tool.
Understanding the GE Business Planning Matrix
The GE Business Planning Matrix is divided into two axes. The vertical axis represents Market Attractiveness, while the horizontal axis represents the Business Unit’s Competitive Position. Each axis is divided into three categories, resulting in a 3×3 matrix graph with nine boxes in total.
Market Attractiveness is based on factors such as market size, potential growth, profitability, competition, regulatory environment, and technological advancements. Competitive Position considers the Business Unit’s brand strength, market share, pricing strategy, distribution channels, and product quality.
The Nine Boxes represent the potential of a Business Unit’s product(s). The upper-right box represents the most attractive product(s) to invest in, while the lower-left box represents the least attractive to invest in. The central box represents products with average attractiveness and positioning, requiring more attention to maintain than grow.
Using the GE Business Planning Matrix effectively
The GE Business Planning Matrix is an effective tool for decision-making, provided it’s utilized correctly. Here are some tips on how to use the matrix effectively:
1. Invest in products that fall in the upper-right box. These products have a high market attractiveness and a strong competitive position, meaning they have the potential to provide the most significant return on investment.
2. If you have a product in the lower-left box, it may be wise to divest. As these products have low market attractiveness and weak competitive positions, they’re unlikely to provide a substantial return on investment and may require more resources than they’re worth.
3. Use the matrix to uncover new opportunities. Analyzing your product portfolio may reveal gaps in the market where there is untapped potential for growth.
4. Continuously revisit the matrix. Market conditions are constantly changing, and it’s essential to keep your product portfolio up-to-date continually.
Real-life examples of companies benefiting from the GE Business Planning Matrix
One company that benefited from the GE Business Planning Matrix is Philips, a Dutch multinational conglomerate. In 2013, Philips used the matrix to analyze its product portfolio and identified its lighting and healthcare segments as high-potential growth areas. As a result, the company divested its under-performing TV and audio divisions and invested in healthcare technology and LED lighting.
Another example is Apple. In the early 2000s, Apple used the GE Business Planning Matrix to analyze its potential entry into the smartphone market. The matrix showed that smartphones had high market attractiveness and that Apple had the competitive positioning to succeed. This analysis helped Apple make the critical decision to enter the smartphone market, leading to the creation of the iPhone.
Conclusion
The GE Business Planning Matrix is a powerful tool for analyzing a product portfolio and making strategic decisions. By understanding the matrix’s key components and using it effectively, businesses can identify growth opportunities, divest under-performing products, and ensure their product portfolio stays competitive. By using real-life examples, we’ve highlighted the usefulness of the matrix in today’s marketplace. Start mastering the GE Business Planning Matrix today!
