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The GE/McKinsey Matrix is a model to perform a business portfolio analysis on the Strategic Business Units of a company. It uses a nine-cell portfolio matrix.
The GE/McKinsey Matrix uses Industry Attractiveness and Business Unit Strength as its axes.
Industry attractiveness and Business Unit Strength are calculated by identifying criteria for each, determining the value of each parameter in the criteria, and multiplying that value by a weighting factor. The result is a quantitative measure of industry attractiveness and the business unit's relative performance in the industry.
Industry Attractiveness
The vertical axis represents the Industry Attractiveness of the GE/McKinsey Matrix which is determined by factors such as the following:
- Market size
- Market growth rate
- Market profitability
- Pricing trends
- Competitive intensity/rivalry
- Overall risk of returns in the industry
- Entry barriers
- Opportunity to differentiate products and services
- Demand variability
- Segmentation
- Distribution structure
- Technology development
The horizontal axis represents the Business Unit Strength and is defined by factors such as the following:
- Strength of assets and competencies
- Relative brand strength
- Market share
- Market share growth
- Customer loyalty
- Relative cost position
- Relative profit margins
- Distribution strength and production capacity
- Record of technological or other innovation
- Quality
- Access to financial and other investment sources
- Management strength
