GE matrix was developed by McKinsey & Company for General Electric in the 1970s. GE metrics are the tool or strategic framework to evaluate the product portfolio and strength of the strategic business unit. GE Matrix provides direction to multi-business corporations regarding which products to launch and what strategy the organization needs to continue with. Through GE Matrix multibusiness corporations can make the right decisions regarding investments for the organization’s growth.
Hence the GE matrix is an effective technique for identifying the right portfolio of products to continue in the market. It provides the right direction regarding product and brand management. Many organizations must know the growth opportunities and suitable strategies when helping to get a competitive advantage. GE matrix made on market attractiveness and strength of business unit.
Market attractiveness
Market attractiveness is the dimension of the GE Matrix which indicates the favorable environment for the business to adopt the strategy for growth. The market attractiveness of the GE matrix indicates the Success of the growth strategy for the organization which can be possible by implementing the strategy.
Market attractiveness is the dimension of the GE Matrix that evaluates the number of factors based on which favorable situations in the market can be determined. These factors are not standardized but many factors can influence the strategy of the organization and hence the growth or profitability. Based on the profitability of the organization the market attractiveness can be determined. Following are a few of the factors that can be considered while determining the market attractiveness.
Market size
Market size indicates the market potential and future score to expand the market
Profitability
It indicates how much profit the company can earn and how much cost the company can maintain in the market to sell the product with affordability. It considers price trends, cost, etc.
Industry trends
Industry trends indicate how much capital will be required in the long or short term. How much technological advancement is there in the market and business sustainability?
Distribution channels
It indicates how well the company may have access to the distribution channels. It plays an important role in accessing all the customers efficiently.
Business Unit Strength
The business unit strength of G Matrix is one of the dimensions versus market attractiveness. Business unit strength indicates how well the business has captured the market. Following out the key factors that indicate the business in its strength. Play
Market share
This factor of business unit strength assesses the portion of the market the business organization has captured. A significant portion of the market is essential to capture to stand in the market with strength. If the business organization has a significant number of customers’ preference for a product or service indicates the strength of the organization.
For example
FMCG business organizations may capture a significant portion of the market by selling their product to that portion consistently. If customers are satisfied and refer to buying the products again and again from the organization indicates the business unit’s strength by the factor of market share.
Profit margin
It indicates how much profit the business organization can earn by selling the product to the significant captured market. It also indicates the business unit’s profitability by selling the product at a specific price without losing the customers and with the affordability of the customers.
Strength of Brand
It indicates how well well-known a product or service is in the market with specific perceptions or perspectives. The brand is a bundle or set of any product or service characteristics or features that satisfy the customers.
Customer loyalty
It indicates how frequently the customers prefer to buy the product or services.
Technological advantage
It indicates the capability of the organization to make product innovations that make them unique or differentiated.
Market positioning
Positioning is the strategy of a business organization that indicates how well the product or services are shown in the market or the minds of customers.
Invest and Grow Strategy
This dimension of the GE Matrix indicates the favorable situation in the market where the organization can successfully implement the strategies and invest. This stage of the GE matrix indicates the situation of the market in which the business organization can adopt the strategy effectively. The organization can invest more to get more benefits. The profitability of the company will be more by implementing the strategy in this situation.
Examples
Launching a new mobile phone in the Asian market can be more profitable but the competitive position of the organization is as good as the competitors have. So from the perspective of demand and growth of the market, it is very favorable to implement the growth strategy and invest more. The organization can invest more
Hold
This dimension of the GE matrix indicates the situation in which a company should avoid investing and hold the situation until a favorable environment comes. In this stage of the business, it is very essential to be alert and conduct research or study to evaluate the business strategies required to survive and grow. And explain
Harvest and divest
This sale of Ge Matrix indicates the situation of the business where investment must be avoided and the organization needs to devastate to generate the cash. This is a critical situation for any organization when the organization may be required to shut down the business. Sometimes it is essential to devastate another business entity