Both are strategic frameworks developed to device a product development strategy. Through a model where companies look to prioritize products that can turn into high market shares and high margins businesses, the BCG does that. The GE Matrix focuses on prioritizing products with a high industry attractiveness and a high competitive strength of the business unit.
|Aspect||BCG Matrix (Boston Consulting Group Matrix)||GE Matrix (General Electric Matrix)|
|Purpose||The BCG Matrix is a strategic planning tool that helps companies analyze their product portfolio in terms of market growth rate and relative market share. This analysis helps identify where to allocate resources for maximum profitability.||The GE Matrix, also known as the McKinsey Matrix, is a strategic tool used to evaluate business units or products based on two dimensions: industry attractiveness and business unit strength. Its purpose is to prioritize investment decisions.|
|Components||The BCG Matrix categorizes products or business units into four categories: Stars, Cash Cows, Question Marks (or Problem Children), and Dogs. Each category represents a different stage in a product’s lifecycle and requires a specific strategy.||The GE Matrix uses a 9-cell grid, with three levels of industry attractiveness (high, medium, and low) and three levels of business unit strength (strong, medium, and weak). Business units are positioned within this grid, resulting in nine possible cells.|
|Focus||The BCG Matrix primarily focuses on a company’s products and their position in the market. It emphasizes market share and market growth as the key factors for analysis.||The GE Matrix takes a broader approach. In addition to assessing business unit strength, it considers industry attractiveness as a critical factor. This broader perspective allows for a more comprehensive evaluation.|
|Market Growth Rate||In the BCG Matrix, market growth rate measures the industry’s potential for growth. High growth rates indicate opportunities, while low rates suggest maturity or decline.||The GE Matrix assesses industry attractiveness to identify growth opportunities. Factors such as market size, market growth rate, and competitive intensity are considered.|
|Relative Market Share||The BCG Matrix analyzes a product’s or business unit’s market share relative to its competitors. A high market share indicates a strong competitive position.||The GE Matrix evaluates business unit strength, considering various factors like market share, profitability, technological capabilities, and competitive advantage.|
|Strategy Implications||The BCG Matrix offers specific strategic recommendations for each category: – Stars: Invest heavily to maintain growth. – Cash Cows: Harvest profits and reinvest selectively. – Question Marks: Decide whether to invest for growth or divest. – Dogs: Consider divestiture or harvesting.||The GE Matrix recommends different strategies for business units in various cells: – Invest: Allocate resources to business units in strong industry positions. – Build: Strengthen business units with the potential for future growth. – Hold: Maintain current positions with moderate investment. – Harvest: Maximize short-term cash flow from mature businesses. – Divest: Sell or liquidate business units with low potential.|
|Limitations||The BCG Matrix has some limitations: – It may oversimplify complex business situations. – It focuses solely on market share and growth and neglects other critical factors. – It doesn’t provide guidance on how to assess industry attractiveness.||The GE Matrix also has limitations: – It requires subjective assessments of industry attractiveness and business unit strength. – It can be resource-intensive to implement and maintain, especially for large organizations.|
|Origins||The BCG Matrix was developed by the Boston Consulting Group in the early 1970s as a tool for managing a diversified portfolio of businesses.||The GE Matrix, also known as the McKinsey Matrix, was developed by General Electric in the 1980s as part of its strategic planning process.|
Key Similarities between BCG Matrix and GE McKinsey Matrix:
- Portfolio Analysis: Both BCG Matrix and GE McKinsey Matrix are portfolio analysis tools used to assess a company’s product portfolio or business units. They provide a structured approach for evaluating and prioritizing different elements within the portfolio.
- Strategic Decision Making: Both frameworks aim to guide strategic decision making by helping companies allocate resources, identify growth opportunities, and determine the appropriate strategy for each product or business unit.
- Growth Focus: Both matrices consider growth as a critical factor in assessing the potential of products or business units. They identify high-growth areas that may require more investment and low-growth areas that might need to be managed differently.
- Market Share Consideration: Both models take market share into account when evaluating products or business units. Market share is an essential aspect of determining their current position and potential future performance.
Key Differences between BCG Matrix and GE McKinsey Matrix:
- Origin and Creator: The BCG Matrix was developed by Bruce D. Henderson of the Boston Consulting Group, while the GE McKinsey Matrix was developed by McKinsey & Company for General Electric.
- Factors for Assessment: The BCG Matrix assesses products based on their potential growth (market growth rate) and current market share, categorizing them into stars, cash cows, question marks, and dogs. In contrast, the GE McKinsey Matrix evaluates business units based on two factors: industry attractiveness (market growth rate, market size, profitability) and competitive strength (market share, brand strength, technological capabilities).
- Application: The BCG Matrix is mainly used for product portfolio analysis, while the GE McKinsey Matrix is used for business unit portfolio analysis. The BCG Matrix focuses on individual products, while the GE McKinsey Matrix looks at business units as a whole.
- Categories and Recommendations: The BCG Matrix categorizes products into four distinct categories (stars, cash cows, question marks, and dogs) with specific strategic recommendations for each category. The GE McKinsey Matrix categorizes business units into three scenarios (invest, protect, harvest/divest) with corresponding strategies for resource allocation and management.
- Degree of Detail: The BCG Matrix provides a simpler, high-level view of the product portfolio, making it easier to understand and apply. The GE McKinsey Matrix offers a more comprehensive and nuanced analysis of business units, considering multiple factors that contribute to their attractiveness and competitive strength.
BCG Matrix Examples:
- Apple Inc.
- Coca-Cola Company:
- Stars: Coca-Cola Zero Sugar
- Cash Cows: Classic Coca-Cola
- Question Marks: New flavored beverages or experimental products
- Dogs: Tab (which they discontinued)
- Stars: Azure (Cloud Computing Services)
- Cash Cows: Microsoft Office Suite
- Question Marks: Newer software or experimental products
- Dogs: Windows Phone
GE McKinsey Matrix Examples:
- General Motors (Automobiles):
- Invest: Electric vehicles (High industry attractiveness due to increasing demand, strong competitive strength due to technology and brand)
- Protect: SUVs (Moderate industry attractiveness, strong competitive strength)
- Harvest/Divest: Traditional Sedans (Low industry attractiveness due to declining market, weaker competitive strength)
- Sony Corporation:
- Invest: PlayStation gaming consoles (High industry attractiveness in the gaming market, strong competitive strength due to brand loyalty and technology)
- Protect: Sony Pictures (Moderate industry attractiveness in the entertainment industry, moderate competitive strength)
- Harvest/Divest: Older electronic gadgets or those with declining demand
- Unilever (Consumer Goods):
- Invest: Sustainable and organic personal care products (High industry attractiveness due to growing demand for green products, strong competitive strength because of R&D and branding)
- Protect: Established brands like Dove and Axe (Moderate industry attractiveness, strong competitive strength due to brand recognition)
- Harvest/Divest: Outdated product lines or those with declining consumer interest
- Strategic Frameworks:
- Both BCG and GE McKinsey Matrix are strategic frameworks to guide product development strategy.
- BCG prioritizes products with potential for high market shares and margins.
- GE McKinsey focuses on products with high industry attractiveness and business unit competitive strength.
- BCG Matrix:
- Developed in the 1970s by Bruce D. Henderson of the Boston Consulting Group.
- Evaluates products based on potential growth and market shares.
- Categories: cash cows, pets (dogs), question marks, and stars.
- GE McKinsey Matrix:
- Developed in the 1970s by McKinsey & Company for General Electric.
- A strategy tool guiding corporations on business unit investment priorities.
- Scenarios: invest, protect, harvest, and divest.
- Portfolio Analysis: Both are tools for assessing a company’s portfolio (products or business units).
- Strategic Decision Making: They guide companies in resource allocation, identifying growth opportunities, and strategizing.
- Growth Focus: Both matrices consider growth essential in evaluating products/business units.
- Market Share: Both models incorporate market share in their assessments.
- Origin and Creator: BCG Matrix was by Boston Consulting Group, while GE McKinsey was by McKinsey & Company for GE.
- Factors for Assessment:
- BCG: Potential growth and market share.
- GE McKinsey: Industry attractiveness and business unit competitive strength.
- Categories and Recommendations:
- BCG: Four categories (stars, cash cows, question marks, dogs).
- GE McKinsey: Three scenarios (invest, protect, harvest/divest).
- Degree of Detail:
- BCG: Simpler, high-level view.
- GE McKinsey: More detailed, considering multiple factors.
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