Repeat the process for each factor and sum each score to arrive at a total score.
Market segmentation for one SBU that is weighted at 17 and rated at 5, for example, receives a score of 85. To arrive at a total score for each SBU, multiply the weight assigned in step two with the rating assigned in step three. Then, rate the factors according to how well each SBU satisfies them.įor example, one SBU may score a 6 for industry size while a smaller industry may score a 3. In this case, the individual weights that are assigned to each factor should add up to 100. The scale that is used is up to the discretion of the business.įor example, one may use a value of 1 to denote extreme unimportance with a value of 100 denoting extreme importance. These define the relative importance of each factor. Refer to the previous section for examples. What are the competitive strength and market attractiveness features that are most relevant to the organization? To calculate a weighted score for each SBU, follow these steps: Make a list of factors This creates a matrix with a total of nine cells. The competitive strength of the individual SBUs is represented on the x-axis while market attractiveness is represented on the y-axis.īoth competitive strength and market attractiveness are determined by a weighted score calculated from the relevant factors that apply to each.Įach parameter is further divided into three categories – low, medium, and high. The potential for new entrants (competition) or substitution with another product.Market size and the potential for growth.Profit margins, cash flow, and manufacturing costs.Actual market share and market share growth potential.Drivers of the GE McKinsey Matrixīefore any business can plot their products on the matrix, they must first define both competitive advantage and industry attractiveness. That is, the attractiveness of the industry and the SBU’s competitive strength in that industry.
It does this by allowing the company to judge each SBU according to whether it will do well in the future. The GE McKinsey Matrix allows a large, decentralized company to determine where best to invest its cash. 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 portfolios themselves are comprised of the full suite of products or services that a business offers to the market. That is, it compares groups of products with their competitive power and market attractiveness.
The GE McKinsey Matrix is fundamentally a portfolio analysis. Digital Business Models Podcast by FourWeekMBA.Business Strategy Book Bundle By FourWeekMBA.An Entire MBA In Four Weeks By FourWeekMBA.100+ Business Models Book By FourWeekMBA.
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