The GE McKinsey Matrix was developed in the 1970s after General Electric asked its consultant McKinsey to develop a portfolio management model. This matrix is a strategy tool that provides guidance on how a corporation should prioritize its investments among its business units, leading to three possible scenarios: invest, protect, harvest, and divest.
Understanding the GE McKinsey Matrix
The GE McKinsey Matrix is fundamentally a portfolio analysis.
That is, it compares groups of products with their competitive power and market attractiveness.
The portfolios themselves are comprised of the full suite of products or services that a business offers to the market.
In the context of General Electric, the matrix was created so that the company could analyze the composition of each of its 150 portfolios – otherwise known as strategic business units (SBUs).
The GE McKinsey Matrix allows a large, decentralized company to determine where best to invest its cash.
It does this by allowing the company to judge each SBU according to whether it will do well in the future.
That is, the attractiveness of the industry and the SBU’s competitive strength in that industry.
Drivers of the GE McKinsey Matrix
Before any business can plot their products on the matrix, they must first define both competitive advantage and industry attractiveness.
Competitive advantage may include:
Actual market share and market share growth potential.
Profit margins, cash flow, and manufacturing costs.
The potential for new entrants (competition) or substitution with another product.
Industry profitability.
Entry and exit barriers.
Structure of the GE McKinsey Matrix
The matrix comprises two axes.
The competitive strength of the individual SBUs is represented on the x-axis while market attractiveness is represented on the y-axis.
Both competitive strength and market attractiveness are determined by a weighted score calculated from the relevant factors that apply to each.
Each parameter is further divided into three categories – low, medium, and high.
This creates a matrix with a total of nine cells.
To calculate a weighted score for each SBU, follow these steps:
Make a list of factors
What are the competitive strength and market attractiveness features that are most relevant to the organization?
Refer to the previous section for examples.
Attribute weights
These define the relative importance of each factor.
The scale that is used is up to the discretion of the business.
For example, one may use a value of 1 to denote extreme unimportance with a value of 100 denoting extreme importance.
In this case, the individual weights that are assigned to each factor should add up to 100.
Rate the factors
Then, rate the factors according to how well each SBU satisfies them.
Most businesses use a scale of 1 to 10.
For example, one SBU may score a 6 for industry size while a smaller industry may score a 3.
Calculate total scores
To arrive at a total score for each SBU, multiply the weight assigned in step two with the rating assigned in step three.
Market segmentation for one SBU that is weighted at 17 and rated at 5, for example, receives a score of 85.
Repeat the process for each factor and sum each score to arrive at a total score.
Plot the scores on the matrix
With the total scores identified for industry attractiveness and competitive strength, the x and y-values of each SBU can be plotted on the matrix using a circle.
The size of each circle should correspond to how much revenue the small business unit generates.
That is, an SBU that generates 40% of company revenue should be twice the size of an SBU that generates 20% of revenue.
Note also that the nine cells are divided by a diagonal line running from the bottom left to the top right of the matrix.
When a product is placed on the matrix, its position relative to the diagonal line determines the strategy that should be used.
Products that fall above the diagonal line tend to be better performers with high growth or cash flow potential.
Conversely, products that fall below the line tend to have little potential for growth and are costing the company money to sell.
Strategic implications of the matrix
With each SBU plotted on the matrix, the business can choose one of three strategies according to whether it has low, medium, or high competitive strength and industry attractiveness.
Let’s take a look at these below.
Grow/invest strategy
A growthstrategy is prudent when a product has a competitive advantage in an attractive market.
Investment in growth and a focus on maintaining strengths is a priority. Profitability can also be increased with an emphasis on productivity.
This is a position every business aspires to and is characterized by moderate to high industry attractiveness and moderate to high competitive strength.
The biggest challenge for businesses in this area of the matrix is a lack of assets or capital that prevents growth or hinders it from maintaining a dominant market position.
For those who can afford to do so, growth strategies may involve increasing production capacity, targeting new consumer demographics, or mergers and acquisitions.
Hold strategy
A hold strategy occurs when a product has both average competitive advantage and market attractiveness.
The way forward, in this case, is a little more difficult to define than in the previous example.
Depending on the outlook of the company, it could either shift to a more attractive industry or strive to improve its competitive position in the current industry.
If the business decides to improve the current competitive position of one of its SBUs, it should only do so if there is capital leftover from investments in the grow/invest strategy.
Harvest strategy
If the product is at a competitive disadvantage and resides in an unattractive industry, a harvest strategy should be employed.
This means investing just enough capital to keep the SBU afloat and continuing to invest as long as the investment made does not exceed the cash that is generated.
Business units that are making a loss, on the other hand, should be sold as soon as possible or when the cash value is at its peak.
These strategies ensure that low viability products do not negatively impact other, more profitable SBUs.
Advantages of using the GE Matrix
The GE Matrix is a great tool that introduces a more scientific method to business strategy.
Indeed, the GE Matrix helps clarify the business landscape and, based on a set of weights, identify the best strategy to execute.
Thus, its strengths definitely lie in the fact that the GE Matrix is a simple yet more scientific tool to assess the business world beyond gut or instinct.
Disadvantages of using the GE Matrix
The main issue with the GE Matrix is the fact that the way to attribute weights can become very subjective.
Indeed, based on how we attribute weights in analyzing the business landscape, that might also result in a complete misrepresentation of what the business world looks like.
In addition, the GE Matrix, while it introduces a “scientific” element, it also has significant drawbacks, given the fact that it looks at the business world in a linear fashion.
This simplification works to simplify the execution of a strategy, yet it can also represent a significant limitation.
That is why the GE Matrix needs to be balanced with other heuristic-based tools and also on the intuition of the business person or team of people who is in charge of the strategy and execution.
In short, the GE Matrix is a great tool to avoid getting stuck, prioritize a strategy and enable execution.
Yet, to be effective, it needs to be balanced with heuristics and intuition about the business landscape.
GE McKinsey matrix vs. BCG matrix
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
The matrix was developed by Bruce D. Henderson in 1968 and served as the template for the GE McKinsey matrix in the following decade.
As a result, the two matrices are similar but with a few key differences which are outlined below.
Purpose
The GE matrix is a multifactor portfolio matrix that tells a firm which strategy to follow based on the position a product occupies in the grid.
The matrix has nine cells that account for varying degrees of industry attractiveness and competitive advantage.
The earlier BCG matrix, on the other hand, is more primitive.
It features only four cells and categorizes products according to their relative market share and growth rate. Each cell, or quadrant, is described as follows:
The GE McKinsey matrix provides concrete instruction on how a business can calculate industry attractiveness and competitive advantage or business unit strength.
As noted earlier, the organization lists important factors and then assigns a weighting to each.
The resultant calculation then yields x and y values that can be plotted on the matrix to determine the best course of action moving forward.
The BCG matrix does not clarify how market share and market strength should be calculated.
In fact, one of the main criticisms of the matrix is that it is too simplistic.
Smaller businesses with market shares that are too small to quantify may also find that the BCG matrix is unsuitable for their needs.
Strategy
The nine-box GE matrix features three different strategies that in some interpretations are color-coded in the following way:
Grow/invest (green) – any product that falls in a green box is representative of a business in a good position.
Hold (amber) – with the way forward more difficult to define, these boxes require the skilled decision-making of experienced personnel.
Harvest (red) – these products require close attention because they have the potential to negatively impact the company’s bottom line.
Strategies here are based on strong, average, and weak competitive advantage and high, medium, and low industry attractiveness.
Conversely, the less versatile BCG matrix is mostly concerned with identifying the business units where investment should be prioritized.
Market share and market growth are only measured in terms of high or low, which makes the resultant strategy far more general and imprecise:
Dogs – in most cases, these products should be removed from the portfolio because they are a drain on resources.
Question marks – as the name suggests, these are products that may or may not respond to increased investment. Some may turn into stars, while others will turn into dogs or fall somewhere in between.
Stars – or products that require ongoing investment to sustain market dominance.
Cash cows – these are mature, well-established products that should be “milked” as long as possible.
GE matrix vs. Ansoff matrix
You can use the Ansoff Matrix as a strategic framework to understand what growthstrategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growthstrategy can be derived by whether the market is new or existing and whether the product is new or existing.
Where the GE matrix is a useful tool to prioritize specific business units, the Ansoff Matrix helps to make sense of whether to prioritize four kinds of strategies (market penetration, market development, product development, or diversification) to grow the business and create competitive moats.
Indeed, the Ansoff matrix will help to assess whether it’ll make sense to leverage new or existing products while looking into new or existing markets, and based on that, it devises four different types of strategies:
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
With the GE Matrix, we can build a prioritization pipeline to understand what initiatives and products the company can push forward.
On the other hand, by coupling the GE Matrix with the SWOT analysis, you can assess and prioritize initiatives by looking at the internal context (strengths and weaknesses) and external context (opportunities and threats).
This might give you a further qualitative assessment of the business landscape in which you can prioritize your business initiatives.
GE Matrix and Porter’s Five Forces
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.
The GE Matrix can also be coupled with another tool, like Porter’s Five Forces, to assess the competitive landscape through five main elements:
With this further quantitative assessment, you can define what the competition looks like in the current market’s landscape and what initiatives make more sense based on this external environment!
GE matrix of Apple
Grow/invest strategy
Apple is in the enviable position of operating in several highly attractive industries with a strong competitive position.
The company’s services category is experiencing the most growth and investment.
The category, which includes Apple TV+, AppleCare, Apple Pay, and the App Store (among others) earned $19 billion in Q3 2022 with the company reporting over 900 million paying subscribers.
These numbers represent an increase of $1 billion compared to Q3 2021 or an extra 155 million paying customers.
Hold strategy
Apple has been the leading tablet seller between 2011 and 2022 with the iPad enjoying 37.5% of the global market.
However, market analyst firm Canalys reported recently that the market itself has experienced an 11% year-over-year decline and has shrunk for the past four years.
The reasons for this decline are likely to be multifaceted. One explanation is that the increasing size and functionality of smartphones have made them a more attractive alternative.
Another reason is that the popularity of the market is not sustainable.
Adoption of the tablet exploded initially, but with many holding onto their iPads for several years before considering another purchase, growth in the market has stalled and reversed.
The future of the iMac and associated peripherals were also unclear for a time.
But almost inexplicably, the iMac is one of the few success stories in a rapidly shrinking PC market.
However, the company only enjoys moderate competitive strength and is placed fourth for sales behind powerhouses Lenovo, HP, and Dell.
Harvest strategy
In some respects, the iPod and its many derivations made Apple what it is today.
In the modern era, however, the market is almost non-existent and the iPod touch remains the only product the company still sells.
Considering the rise of Spotify and other streaming services, Apple also announced in mid-2019 that iTunes would be discontinued after 18 years.
The product would be harvested with the release of macOS Catalina and replaced by three apps with different purposes: Apple TV, Apple Podcasts, and Apple Music.
While iTunes would be no more on Apple devices, the company noted that its revolutionary iTunes Store would live on and exist on the sidebar in the new Music app.
Downloaded movies and TV shows, on the other hand, would intuitively be found in the Apple TV app.
iTunes itself would also still be available for Windows users.
GE matrix of The Coca-Cola Company
Grow/invest strategy
The original and iconic Coca-Cola beverage is still the company’s top seller around the world.
Coca-Cola’s dominant position in this market has never been in doubt, but it has been forced to develop new products that appeal to more health-conscious consumers.
Coca-Cola has also made several acquisitions as it seeks to take advantage of this trend.
The company prefers to acquire smaller, ready-made start-ups such as Honest Tea, Fairlife Dairy, and Suja Life LLC – a manufacturer of processed juices and kombucha.
Hold strategy
While many of Coca-Cola’s carbonated beverages enjoy a competitive advantage in attractive markets, the long-term viability of these brands is uncertain.
From a peak of 50 gallons per person in 1999, per capita soft drink consumption in the United States has been on a slow but steady decline to now sit at 39.3 gallons per person.
This trend, as we noted above, is the result of more health-conscious consumers. But it is also important to note that the input prices for carbonated soft drinks have also increased recently.
Higher oil prices, for example, have seen demand for alternative fuels such as ethanol increase. Since ethanol is made using corn and sugar products, the price for these products has also increased.
One product in particular – high-fructose corn syrup – is used in both ethanol and soft drink production.
It is unlikely the carbonated soft drink market will ever decline to a point where it becomes unprofitable.
Nevertheless, the extent to which the market declines (and whether growth in the healthy drink market can compensate) remains to be seen.
Harvest strategy
The Coca-Cola Company has been in continuous operation for over 130 years and has had its fair share of failed or questionable products.
In Japan in 2020, the company debuted its Go: Good line of canned soup available in vending machines and served hot.
The product is billed as a healthier, low-salt alternative, but it nevertheless occupies the low market share, low market attractiveness area of the GE matrix.
Coca-Cola was also forced to harvest its Dasani line of bottled water in the United Kingdom.
Whilst Dasani has been relatively successful in the United States, English consumers reacted unfavorably when they realized that water was sourced from a tap in London and not from the virgin forest on the bottle’s label.
GE McKinsey matrix of Volkswagen
Volkswagen is a German automotive manufacturer that was founded in 1937 by the German Labour Front with a mission to make vehicles more affordable for working-class citizens.
The company is best known for its iconic Beetle, with its 80-year production run finally ending in Mexico in July 2019.
Some 453,000 of these sales were electric vehicles, representing an increase of 95% over the previous year.
Like most of its competitors, Volkswagen is investing heavily in electric vehicles.
In releasing its Q1 2022 results, the company announced a growth strategy to achieve a 10% market share of battery-electric vehicles (BEVs) in the United States.
This investment forms part of the company’s New Auto – Mobility for Generations to Come strategy which also encompasses fully networked autonomous transportation.
Hold strategy
Seat is a brand that may be classified as average market attractiveness and competitive advantage.
The brand was the fourth most popular for Volkswagen in 2021 with 494,000 vehicles sold, with the vehicle more popular in Germany and the United Kingdom than in its home country of Spain.
Elsewhere, Seat has had mixed success. In a similar way that Skoda gained a foothold in India, Seat has been a strong representative of VW in North Africa.
However, a move to enter the Chinese market with a small, low-cost EV was ultimately thwarted by a looming recession, reduced governmental incentives, and continued COVID-19 lockdowns.
The measure was also seen as a reversal of the company’s previous global dominance strategy, where it flooded the unprofitable North and South American markets with new models amidst heavy financial losses.
This quasi-harvest strategy will allow Volkswagen to remove the less profitable models of some brands and keep the products with higher margins and higher potential.
The so-called “survivors” will then receive more attention, more investment, and more focus and become integral parts of the company’s sustainable EV growth strategy moving forward.
GE matrix of Nestle
Nestle is a multinational food and drink conglomerate corporation headquartered in Vevey, Switzerland.
Nestlé is a powerhouse of consumer brands spanning baby foods, bottled waters, powdered drinks, cereals, coffee, drinks, pet care, and more. The company made almost $92 billion in 2018, with high margins on its powdered and liquid beverages (coffee, cocoa, malt beverages, and tea categories).
The company, which owns 29 brands with sales of at least $1 billion and more than 2,000 brands in total, sells products such as baby food, bottled water, breakfast cereals, pet food, snacks, coffee, healthcare nutrition, and confectionery.
With thousands of brands in multiple industries and markets, we consider Nestle to be an ideal candidate for a GE-McKinsey matrix analysis.
The results of this analysis posit that a brand has three potential courses of action according to where each is positioned in the matrix itself.
These alternatives are the grow/invest, hold, and harvest strategies.
Let’s take a look at each of these with respect to some of Nestle’s brands.
Grow/invest strategy
Growth or investment strategies are suited to products that have a competitive advantage in an attractive industry that may be characterized by size, growth potential, profitability, and the presence of entry barriers.
As the largest food company in the world, it is perhaps no surprise that Nestle has many product brands in this section of the matrix.
Nescafe has dominated the instant coffee market since it was introduced in the Second World War to U.S. soldiers, using its previous expertise in milk processing to offer a product now available in more than 180 countries.
Hold strategy
Hold strategies are reserved for products characterized by average competitive advantage and market attractiveness.
As a result, a specific course of action is a little harder to identify and depends on the specific ideals of the company in question.
Nestle Milo is a chocolate-flavored malt drink that is normally mixed with milk or hot water.
The drink was invented in Australia in 1934 where it remains the most popular drink in a relatively small market.
However, Milo is also a staple in Malaysia and popular in other parts of South Asia such as Singapore and Japan.
Milo has been released in other countries such as Portugal, Brazil, and the United Kingdom to limited success and is not available at all in the lucrative United States market.
In other areas, it competes directly with fellow Nestle drink brand Nesquik.
As of February 2022, Nestle is looking to expand its presence in the popular South Asia region with a new soy-based version of Milo.
Since over 40% of Thai consumers consume plant-based diets, this may be a way for the brand to increase its market share and industry attractiveness in the country and indeed the broader region.
Harvest strategy
When a product resides in an unattractive industry at a competitive disadvantage, a harvest strategy should be employed.
Products that break even should be dedicated just enough capital to remain afloat, while loss-making products should be discontinued.
Nestle has a long list of products that have been discontinued for whatever reason.
A low sugar version of its popular white chocolate Milkybar was pulled from sale in 2020 just two years after it was launched because of a disagreeable taste.
The company also phased out a line of smoothies after four months in a joint-venture with juice company Boost.
Other products to have suffered the same fate include hot cocoa mixes, power bars, and flavored mineral waters.
Nestle has several brands in this area of the GE matrix for a couple of reasons.
Like any sizeable company, its failed innovations are more numerous than other companies with smaller budgets.
But there is a far more significant reason: Nestle is a multinational food company in a market that now demands healthy and nutritious food.
Since much of Nestle‘s success has been built on confectionery and other unhealthy foods, the company has found it difficult to shift its brand perception among consumers.
The company even went as far as acknowledging that over 60% of its food and drink options did not meet a “recognized definition of health”.
Nestle is a multinational food and drink conglomerate corporation headquartered in Vevey, Switzerland. The company owns 29 brands with sales of at least $1 billion and over 2,000 brands in total.
Nestle’s instant coffee brand Nescafe is a dominant brand in over 180 countries around the world. Flavored malt drink Milo is a brand that has average market attractiveness and competitiveness since most sales are confined to Asia and Oceania.
As a company built on the back of unhealthy food item sales, Nestle has several brands in the harvest strategy of the GE matrix. These include power bars, cocoa mixes, confectionary, and smoothies.
Nestlé is a large multinational food and beverage manufacturer with more than 2000 brands spread across 197 countries. Some of Nestlé’s well-known brands include Nescafe, Kit-Kat, Purina, Aero, Butterfinger, Maggi, and Haagen-Dazs. Originally a producer of infant food in 1867, it is now considered to be the world’s largest food manufacturer.
GE matrix of P&G
P&G has a portfolio of brands that resonate with consumers spanning five main units and it focuses on their growth, while also innovating by the creation of new products. P&G generated over $80 billion across these brands. Its strength stands by implementing a growth strategy focused on five pillars: portfolio, superiority, productivity, constructive disruption and organizational design.
In this case study, we’ll analyze the consumer-packaged-goods multinational Procter & Gamble.
Beauty – Head & Shoulders, Herbal Essences, SK-II, Olay, and Pantene.
Grooming – Braun and Gillette.
Health Care – Crest, Oral B, and Vicks.
Fabric & Home Care – Ariel, Downy, Gain, Tide, Cascade, Dawn, Fairy, and Febreze.
Baby, Feminine & Family Care – Luvs, Pampers, Always, Bounty, Charmin.
Procter & Gamble has looked to capitalize on its dominant position in numerous markets with innovations that solve everyday problems. In 2021, nine of the company’s products were featured in the top 25 of market research firm IRI’s New Product Pacesetters list.
The list details the most successful non-food product launches and featured new P&G products that were variations of billion-dollar brands. Examples included Dawn Platinum Powerwash, Febreze LIGHT, Febreze Auto, Crest Whitening Emulsions, Tide Hygienic Clean, and Olay Regenerist Collage Peptide 24.
Hold strategy
While Braun and Gillette are both billion-dollar brands, they only possess a moderate competitive advantage in the United States and, together with women’s brand Venus, contributed just 8% of the company’s 2022 net sales.
In the aforementioned razor market, Gillette and Venus rank #3 and #6 for sales with Braun not featuring in the top 10. These brands face stiff competition from the likes of Panasonic ($62.1 billion in sales in 2021) and Philip Morris International ($31.4 billion) whose diverse product ranges compete for sales.
Whether the company should hold these brands to maintain market share or invest in their growth is not clear. Research firm Prescient & Strategic Intelligence predicts the industry will experience a modest CAGR of 0.96% until 2030 and the industry has seen many new entrants as consumer tastes have evolved.
Nevertheless, with two brands in the top 10 in North America and billion-dollar brands in other segments, P&G may be content to hold Braun, Gillette, and Venus for now.
Harvest strategy
The harvest strategy has been effective for P&G in consumer goods where the lifecycle of a product can be relatively short. Perhaps counterintuitively, some of the company’s most successful products are those that have been harvested.
For example, Pampers diapers has been a staple brand for years and the company has maintained its market dominance via constant innovation. Tide, as we mentioned earlier, is another brand that is refined periodically to maintain its competitive advantage.
Nevertheless, Procter & Gamble has sold several brands over its history to focus on core products and improve performance. Here are some examples:
The GE McKinsey Matrix is a nine-cell portfolio matrix, originally developed for GE as a means of screening their large portfolio of strategic business units.
The drivers of the GE McKinsey Matrix for a product portfolio are competitive strength and market attractiveness.
The position of a product on the matrix ultimately decides whether the business should focus on growth or on minimizing investment and selling.
What is GE Matrix used for?
The GE Matrix is a strategic tool that is useful for assessing and prioritizing the development of a portfolio of products for specific business units. The matrix helps corporations prioritize their investments among their business units, leading to three possible scenarios: invest, protect, harvest, and divest.
Is GE matrix better than BCG?
The strength of the BCG Matrix is its simplicity. Both tools help prioritize the investment activities of corporations toward products that can lead to business growth. Whereas the GE Matrix is a bit more complex, the BCG Matrix is a more straightforward tool. Both can be extremely useful for corporations to identify business opportunities and products worth pursuing.
What are the components of GE matrix?
The main components of the GE Matrix comprise:
Competitive advantage, which may include:
Actual market share and market share growth potential.
Profit margins, cash flow, and manufacturing costs.
The ADKAR model is a management tool designed to assist employees and businesses in transitioning through organizational change. To maximize the chances of employees embracing change, the ADKAR model was developed by author and engineer Jeff Hiatt in 2003. The model seeks to guide people through the change process and importantly, ensure that people do not revert to habitual ways of operating after some time has passed.
You can use the Ansoff Matrix as a strategic framework to understand what growthstrategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growthstrategy can be derived from whether the market is new or existing, and whether the product is new or existing.
The business model canvas is a framework proposed by Alexander Osterwalder and Yves Pigneur in Busines Model Generation enabling the design of business models through nine building blocks comprising: key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.
The lean startup canvas is an adaptation by Ash Maurya of the business model canvas by Alexander Osterwalder, which adds a layer that focuses on problems, solutions, key metrics, unfair advantage based, and a unique value proposition. Thus, starting from mastering the problem rather than the solution.
The Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
A gap analysis helps an organization assess its alignment with strategic objectives to determine whether the current execution is in line with the company’s mission and long-term vision. Gap analyses then help reach a target performance by assisting organizations to use their resources better. A good gap analysis is a powerful tool to improve execution.
The GE McKinsey Matrix was developed in the 1970s after General Electric asked its consultant McKinsey to develop a portfolio management model. This matrix is a strategy tool that provides guidance on how a corporation should prioritize its investments among its business units, leading to three possible scenarios: invest, protect, harvest, and divest.
The McKinsey 7-S Model was developed in the late 1970s by Robert Waterman and Thomas Peters, who were consultants at McKinsey & Company. Waterman and Peters created seven key internal elements that inform a business of how well positioned it is to achieve its goals, based on three hard elements and four soft elements.
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.
The McKinsey Horizon Model helps a business focus on innovation and growth. The model is a strategy framework divided into three broad categories, otherwise known as horizons. Thus, the framework is sometimes referred to as McKinsey’s Three Horizons of Growth.
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.
According to Michael Porter, a competitive advantage, in a given industry could be pursued in two key ways: low cost (cost leadership), or differentiation. A third generic strategy is focus. According to Porter a failure to do so would end up stuck in the middle scenario, where the company will not retain a long-term competitive advantage.
In his 1985 book Competitive Advantage, Porter explains that a value chain is a collection of processes that a company performs to create value for its consumers. As a result, he asserts that value chain analysis is directly linked to competitive advantage. Porter’s Value Chain Model is a strategic management tool developed by Harvard Business School professor Michael Porter. The tool analyses a company’s value chain – defined as the combination of processes that the company uses to make money.
Porter’s Diamond Model is a diamond-shaped framework that explains why specific industries in a nation become internationally competitive while those in other nations do not. The model was first published in Michael Porter’s 1990 book The Competitive Advantage of Nations. This framework looks at the firm strategy, structure/rivalry, factor conditions, demand conditions, related and supporting industries.
A SWOT Analysis is a framework used for evaluating the business‘s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision making by avoiding two pitfalls: underprediction, and overprediction.
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
