GE McKinsey Matrix

Introduction to the GE McKinsey Matrix

The GE McKinsey Matrix is a strategic tool that helps companies assess the potential of various business directions, products, and services. This model is useful for both existing and new projects, allowing consideration of not only financial indicators but also other important aspects such as competitiveness and market attractiveness.

Overview of the GE McKinsey Model

Developed in the 1970s by the consulting firm McKinsey & Company in collaboration with General Electric, the GE McKinsey Matrix was a response to the BCG matrix created in the late 1960s. Unlike the latter, which primarily evaluates businesses based on sales volume, the GE McKinsey model is more comprehensive and considers two key aspects:

• Competitiveness of the business or product.
• Attractiveness of the market in which it operates or plans to operate.

These two parameters intersect in nine cells of the matrix, where the upper right corner indicates the most promising directions, and the lower left indicates the least promising. Cells shaded in yellow suggest potential opportunities but also come with high risks.

Application of the GE McKinsey Matrix

The main purpose of using the GE McKinsey Matrix is to assist in making informed resource allocation decisions. This model allows for answers to a number of questions, including:

• Which business direction is the most promising?
• Which products should be developed and which should be excluded from the range?
• How competitive is the company in its market?
• Should the company enter new markets?

Collecting and analyzing data about the company, its competitors, and the market environment helps to form a clear understanding of the strengths and weaknesses of the business, which in turn allows for adjustments to financial and marketing strategies.

Assessment of Competitiveness

To assess competitiveness, it is necessary to analyze a number of factors, such as:

• Brand recognition.
• Uniqueness of the value proposition.
• Product quality.
• Professionalism of the team.
• Financial resources.
• Marketing capabilities.
• Speed of response to market changes.

Each of these factors is rated on a scale from 0 to 10, allowing for a more precise determination of the competitiveness of a product or service.

Assessment of Market Attractiveness

To assess market attractiveness, the following aspects are considered:

• Market size and the share occupied by the company.
• Number and activity of competitors.
• Barriers to entry for new players.
• Market audience and consumer loyalty levels.
• Trends and potential risks in the market.

After identifying all factors, they are assigned scores, which are also summed to obtain an overall measure of market attractiveness.

Construction of the GE McKinsey Matrix

Once the data on competitiveness and attractiveness is collected and evaluated, the construction of the matrix can begin. Each of these parameters is divided into three categories:

• Low (0-3 points).
• Medium (4-7 points).
• High (8-10 points).

Based on the obtained results, it is possible to determine which cell of the GE McKinsey Matrix the business or product falls into, providing a clear understanding of the chances for success and potential for further development.