The GE Matrix can be used to evaluate business units based on their strengths in the marketplace and the attractiveness of the market in which they are located, and to express a company's portfolio of business units to determine its strengths and weaknesses. The GE Matrix can be used as a basis for strategic planning when broad and flexible definitions of industry attractiveness and business strength are required. Existing businesses (or business units) are evaluated in terms of two dimensions, market attractiveness and business strengths, each of which is divided into three levels and into nine cells to represent different levels of combinations in the two dimensions. Evaluation indicators can be determined on both dimensions according to different situations.
Drawing the GE matrix involves identifying external (industry attractiveness) and internal (business competitiveness) factors, and then weighting each factor to derive a measure of internal factors and external factors of market attractiveness. Of course, it is important to carefully select which strategic undertakings make sense before starting to gather information.
(1) Define the factors. Select the important factors that are needed to assess business (or product) strength and market attractiveness. Within GE, these are called internal and external factors, respectively. Listed below are some of the factors that are often considered (some additions or deletions may be necessary depending on the individual company). The method of determining these factors can take the brainstorming method or nominal group method, etc. The key is not to omit important factors, and not to include insignificant factors in the analysis.
(2) Estimating the impact of internal and external factors. Starting with external factors, go through the table (using the same set of managers) and rate each factor according to its attractiveness. If a factor has a similar impact on all competitors, make an overall assessment of its impact, and if a factor has different impacts on different competitors, compare its impact on your own business with that of a significant competitor. A five-level scale can be adopted here (1=unattractive, 2=unattractive, 3=neutral impact, 4=attractive, 5=extremely attractive). Internal factors are then similarly rated using a 5-point scale as well (1=extremely competitively disadvantaged, 2=competitively disadvantaged, 3=equal to competitors, 4=competitively advantaged, 5=extremely competitively advantaged), and in this section, one of the strongest competitors overall should be chosen for comparison.
The specific method is:
Determine the factors of internal and external influences and determine their weights - Determine the grades (five grades) of industry attractiveness factors and enterprise competitiveness factors according to the industry status and enterprise status - Finally, multiply the weights by the grades to get the weighted number of each factor, and summarize it to get the weighted value of the attractiveness of the whole industry
The following is represented in the form of a line graph and a table respectively. table two forms to represent. (3) Estimate the importance of external and internal factors to derive a simple measure of strength and attractiveness. Both qualitative and quantitative methods are available here.
Qualitative method: Review and discuss the internal and external factors, and based on the scores scored in the second step, rate the strategic business unit's strength and industrial attractiveness on three levels: strong, medium, and weak.
Quantitative method: the internal and external factors are disaggregated and weighted separately, so that the sum of the weighting coefficients of all the factors is 1, and then their scores in the second step are multiplied by their weighting coefficients, and then added up separately to get the scores of the assessed strategic undertakings in terms of their strengths and attractiveness (between 1 and 5, with 1 representing a low industrial attractiveness or a weak business strength, and 5 representing a high industrial attractiveness or a strong business strength). high or business strength).
(4) Label the strategic business unit on the GE matrix. The vertical axis of the matrix is the industry attractiveness, and the horizontal axis is the business strength. Each axis with two lines on the number axis is divided into three parts, so that the coordinates become a grid map. The two axis scales can be high medium low or 1 to 5. Depending on the manager's strategic interest concerns, the same analysis can be done for other strategic business units or competitors. Alternatively, when labeling a set of strategic business units in a business portfolio located in different markets or industries on a graph, each business unit can be represented by a circle, with the size of the circle area in the graph being proportional to the size of the corresponding unit's sales, and the area of the shaded sector representing its market share. In this way the GE matrix can provide more information. (5) Interpretation of the matrix. By analyzing the position of the strategic business units on the matrix, the company can choose the appropriate strategic initiatives. Some of the articles out there boil down to a simple classic phrase "prioritize high, prioritize medium, prioritize low". If you use the above chart to analyze: green area: to take the growth and development strategy, should prioritize the allocation of resources yellow area: to take the maintenance or selective development strategy, to protect the scale, adjust the direction of development red area: to stop, transfer, retreat strategy.