GE/McKinsey Matrix Tutorial - Overview

Overview

The GE/McKinsey matrix approach evaluates a business based on two composite dimensions: industry attractiveness and business strength. These dimensions, in turn, consist of a series of weighted factors. Both the factor weights and the factors themselves may vary from one application to another; for example, industry attractiveness includes measures of market size, growth rate, competitive intensity, and the like, whereas business strength normally includes such measures as market share, share growth, and product quality. Analysts assign each business a rating for each factor and a weight to each factor. Multiplying the factor ratings by the weights produces a position for each business on the strength/attractiveness matrix.

Although designed to mimic the GE approach to portfolio management, this model can also be used for any situation in which a certain number of entities (e.g., companies, products, sales territories) can be ranked on one or more sets of weighted factors. 

The GE Portfolio approach helps firms answer such questions as: 

• On which products, offerings, or divisions should we focus our efforts?
• What method can we use to assess and understand the weights that various members of the management team assign to different dimensions?
• How can we reconcile different points of view regarding weights and evaluations given to various factors by different groups within an organization?