Technique # 2.

GE Nine-Cell Planning Grid:

The General Electric (GE) McKinsey Matrix template is a nine-cell (3 by 3) matrix used
to perform business portfolio analysis as one of the steps in the strategic planning
process.
It can be used in conjunction with, or as an alternative to other tools such as SWOT
Analysis and the Boston Consulting Group (BCG) Growth Share Matrix in basic
strategic planning and analysis.

Business Unit Strength

High Medium Low

Attractiveness

Invest (1)
High Invest (1) Protect (2)
Market

Medium Invest (1) Protect (2) Harvest (3)

Low Protect (2) Harvest (3) Divest (3)

Example :
(1) Patanjali Dantkanti, Honey & Ghee
(2) Patanjali Candy, Fruit Juice & Medicine
(3) Patanjali Home Care : Agarbati & Dish wash bar

The GE/McKinsey Matrix differs from the other tools. Unlike a BCG Matrix template, it
uses multiple factors to define Industry Attractiveness and Business Unit Strength and
therefore overcomes one of the main BCG Matrix limitations.
The GE/McKinsey Matrix identifies the optimum business portfolio as one that matches
the company's strengths to the most attractive industry sectors or markets.
Thus the objective of the analysis is to position each Strategic Business Unit (SBU) on
the chart depending on the SBU's Strength and the Attractiveness of the Industry Sector
or Market on which it is focused. Each axis is divided into Low, Medium and High, giving
the 3 by 3 nine-cell matrix.
Industry Attractiveness indicates how hard or easy it will be for a company to
complete in the market and earn profit.
  Long run growth rate
 Industry size
 Industry profitability
 Industry structure
 Product life cycle changes
 Change in demand
 Trend in price
 Availability of labour
 Market segmentation
Business Unit Strength
 Total market share
 Market share growth
 Brand strength
 Profitability
 Customer loyalty
 Business unit strength
 Strength of value chain
 Level of product differentiation
 Production flexibility
 

GE Nine(9) Cell Matrix

GE nine-box matrix is a strategy tool that offers a systematic approach for the
multi business enterprises to prioritize their investments among the various
business units. It is a framework that evaluates business portfolio and provides
further strategic implications.
Each business is appraised in terms of two major dimensions – Market
Attractiveness and Business Strength. If one of these factors is missing, then the
business will not produce desired results. Neither a strong company operating in
an unattractive market, nor a weak company operating in an attractive market will
do very well
The vertical axis denotes:
Industry attractiveness indicates how hard or easy it will be for a company to
compete in the market and earn profits. The more profitable the industry is the
more attractive it becomes. When evaluating the industry attractiveness, analysts
should look how an industry will change in the long run rather than in the near
future, because the investments needed for the product usually require long
lasting commitment.
 Long run growth rate
 Industry size
 Industry profitability: entry barriers, exit barriers, supplier power, buyer power,
threat of substitutes and available complements (use Porter’s Five Forces analysis to
determine this)
 Industry structure (use Structure-Conduct-Performance framework to determine
this)
 Product life cycle changes
 Changes in demand
 Trend of prices
 Macro environment factors (use PEST or PESTEL for this)
 Seasonality
 Availability of labor
 Market segmentation
Horizontal axis represent:
Along the X axis, the matrix measures how strong, in terms of competition, a
particular business unit is against its rivals. In other words, managers try to
determine whether a business unit has a sustainable competitive advantage (or at
least temporary competitive advantage) or not.
 Total market share
 Market share growth compared to rivals
 Brand strength (use brand value for this)
 Profitability of the company
 Customer loyalty
 VRIO resources or capabilities (use VRIO framework to determine this)
 Your business unit strength in meeting industry’s critical success factors
(use Competitive Profile Matrix to determine this)
 Strength of a value chain (use Value Chain Analysis and Benchmarking to
determine this)
 Level of product differentiation
 Production flexibility
Green zone
Suggests you to ‘go ahead’, to grow and build, pushing you through expansion
strategies. Businesses in the green zone attract major investment.
Yellow zone
Cautions you to ‘wait and see’ indicating hold and maintain type of strategies aimed at
stability.
Red zone
Indicates that you have to adopt turnover strategies of divestment and liquidation or
rebuilding approach.
Advantages
· Helps to prioritize the limited resources in order to achieve the best returns.
· The performance of products or business units becomes evident.
· It’s more sophisticated business portfolio framework than the BCG matrix.
· Determines the strategic steps the company needs to adopt to improve the
performance of its business portfolio.
Disadvantages
· Needs a consultant or an expert to determine industry’s attractiveness and
business unit strength as accurately as possible.
· It is expensive to conduct.
· It doesn’t take into account the harmony that could exist between two or
more business units.
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GE nine cell planning grid tries to overcome some of the limitations of BCG
matrix in two ways:
1. It uses multiple factors to assess industry attractiveness and business strength in
place of the single measure employed in the BCG matrix.
2. It expanded the matrix from four cells to nine cells. It replaced the high/low axes with
high/medium/low making a finer distinction between business portfolio positions.
The grid then does rating of each of the company’s business units on multiple sets of
strategic factor within each axis of the grid.
In order to assess the industry attractiveness factors such as market growth, size of
market, industry profitability, competition, seasonality and cyclical qualities, economies
of scale, technology, and social/environmental/ legal/human factors are included.
For assessing business strength factors such as market share, profit margin, ability to
compete, customer and market knowledge, competitive position, technology, and
management caliber are identified.
The strategists then calculate “subjectively” a business’s position within the planning
grid by quantifying the two dimensions of the grid.
The strategist first selects industry attractiveness factors to measure industry
attractiveness and then assign each industry attractiveness factor a weight that reflects
its perceived importance as compared to other attractiveness factors. Favorable to
unfavorable future conditions for those factors are forecast and rated based on some
scale (0 to 1 scale is illustrative).
Then a weighted composite scope is obtained for a business’s overall industry
attractiveness. In order to assess business, a similar procedure is followed in selecting
factors, assigning weights to them, and then rating the business on these dimensions.
Thus the GE planning grid might prove to be a useful tool for assessing a business
within a corporate portfolio. Usually several managers are involved during the planning
process. The inclusion and exclusion of factors and their rating and weighting are
primarily matters of managerial judgment. This classifies businesses in terms of both
the projected strength of the business and the projected attractiveness of the industry.
The decisions concerning the resource allocation remain quite similar to those in the
BCG approach. Business classified as invest to grow would be treated like the stars in
the BCG matrix. These businesses would be provided resources to pursue growth-
oriented strategies.
Businesses classified in the harvest/divest category would be managed like the dogs in
the BCG matrix. Businesses classified, as selectivity/ earnings would either be
managed as cash cows or as question marks.
While the strategic recommendations generated by the GE planning grid are similar to
those from the BCG matrix, the GE nine-cell grid improves on the BCG matrix in three
fundamental ways.
i. The terminology associated with GE grid is preferable because it is less offensive and
more universally understood.
ii. The multiple measures associated with each dimension of the GE grid include more
factors relevant to business strength and market attractiveness than simply market
share and market growth.
iii. The nine-cell format allows finer distinction between portfolio positions than does the
four-cell BCG format.
Technique # 3. Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix:
Technique # 4. Hofer’s Matrix:
Technique # 5. Shell Directional Policy Matrix:
Technique # 6. Strategic Position and Action Evaluation (SPACE) Matrix:
GE-McKinsey nine-box matrix
Is a strategy tool that offers a systematic approach for the multi business corporation to
prioritize its investments among its business units.
GE-McKinsey is a framework that evaluates business portfolio, provides further
strategic implications and helps to prioritize the investment needed for each business
unit
Difference between GE McKinsey and BCG matrices
GE McKinsey matrix is a very similar portfolio evaluation framework to BCG matrix.
Both matrices are used to analyze company’s product or business unit portfolio and
facilitate the investment decisions.
The main differences:
Visual difference. BCG is only a four cell matrix, while GE McKinsey is a nine cell
matrix. Nine cells provide better visual portrait of where business units stand in the
matrix. It also separates the invest/grow cells from harvest/divest cells that are much
closer to each other in the BCG matrix and may confuse others of what investment
decisions to make. GE-McKinsey matrix compared to BCG matrix visually
Comprehensiveness. The reason why the GE McKinsey framework was developed is
that BCG portfolio tool wasn’t sophisticated enough for the guys from General Electric.
In BCG matrix, competitive strength of a business unit is equal to relative market share,
which assumes that the larger the market share a business has the better it is
positioned to compete in the market. This is true, but it’s too simplistic to assume that
it’s the only factor affecting the competition in the market. The same is with industry
attractiveness that is measured only as the market growth rate in BCG. It comes to no
surprise that GE with its complex business portfolio needed something more
comprehensive than that.
SWOT analysis is a strategic planning technique used to help a person or organization
identify strengths, weaknesses, opportunities, and threats related to business
competition or project planning. The TOWS Matrix is derived from the SWOT Analysis
model, which stands for the internal Strengths and Weaknesses of an organisation and
the external Opportunities and Threats that the business is confronted with.
The acronym TOWS is a variant of this and was developed by the American
international business professor Heinz Weirich.
The TOWS Matrix is aimed at developing strategic options from an external-internal
analysis and is a practical tool, particularly in the fields of business administration and
marketing.
The other way around
Whereas SWOT Analysis starts with an internal analysis, the TOWS Matrix starts the
other way around, with an external environment analysis; the threats and opportunities
are examined first.
From that standpoint, an organization gets a clear picture of its environment and the
opportunity to think about strategy and what direction the company will go in. Next the
company’s strengths and weaknesses are considered; what it’s good at internally and
what it’s not so good at.
The external analysis is linked to the analysis and the resulting TOWS Matrix can help
an organization to make decisions better, seize opportunities and protect itself better
against threats.
Strategic options
The TOWS Matrix helps businesses to identify their strategic options. An organisation
gets the opportunity to make the most of its strengths and get around its internal
weaknesses and learn to deal with them properly. Externally, an organisation learns to
carefully look for market opportunities and recognise possibilities. And they learn how to
control and overcome potential threats.
The TOWS Matrix can also help with brainstorming and developing great ideas to
generate effective marketing strategies and tactics. Furthermore, the model goes
beyond merely finding out the strengths and weaknesses within an organisation and
what opportunities and threats there are in its environment. It forces organisations to
really think about how they can improve themselves, how they can guard against
threats and become more aware of their expertise and potential shortcomings.
External environment
The TOWS Matrix is not just meant for the highest levels of management in an
organization. It can be a very useful tool for departments (i.e. a marketing or sales
team) or for individual employees on an operational level. Once it’s employee’s or a
department’s strengths are known, these can be improved further to become even
better. The TOWS Matrix emphasises the external environment.
It starts by analysing external opportunities and threats. Up next are the internal
strengths and weaknesses, which will subsequently be linked to the external analysis.
And this is where it goes a step beyond the traditional SWOT analysis; strategic tactics
emerge by opposing S-O (Strengths-Opportunities), W-O (Weaknesses-Opportunities),
S-T (Strengths-Threats) and W-T (Weaknesses-Threats).
A next step in the analysis helps when thinking about the option they want to pursue.
Here the external opportunities and threats are compared to the internal strengths and
weaknesses to help identify strategic options:
1. Internal Strengths and External Opportunities (S-O) – how can they use the strengths
to benefit from existing external opportunities?
2. Internal Strengths and External Threats (S-T) – how can they benefit from their
strengths to avoid or lessen (potential) external threats?
3. Internal Weaknesses and External Opportunities (W-O) – how can they use
opportunities to overcome the organisation’s internal weaknesses?
4. Internal Weaknesses and External Threats (W-T) – how can they minimise
weaknesses and thus avoid potential threats?
Strategic Analysis and Choice – Strategic Choice at Business Level Approaches
Once a multi-industry firm has identified business units in terms of invest, hold, or
harvest, each business unit may identify and evaluate its grand strategy alternatives.
A single business should consider a number of approaches in selecting its grand
strategy. Here we will discuss SWOT analysis, experience curve analysis, life cycle
analysis, grand strategy selection matrix and grand strategy clusters.
Approach # 1. SWOT Analysis:
Approach # 2. Experience Curve Analysis:
Approach # 3. Grand Strategy Selection Matrix:
Approach # 4. Grand Strategy Clusters: