Strategy: The GE–McKinsey nine-box matrix

Excerpted from McKinsey Online: “Enduring ideas: The GE–McKinsey nine-box matrix”, September 2008

* * * * *

The GE–McKinsey nine-box matrix, a framework that offers a systematic approach for the multibusiness corporation to prioritize its investments among its business units.

Below is a summary of the article, a link to the full article, and a link to an online presentation on the topic.

* * * * *

With the rise of multibusiness enterprises in the 20th century, companies began to struggle with managing a number of business units profitably. In response, management thinkers developed frameworks to address this new complexity. One that arose in the early 1970s was the GE–McKinsey nine-box framework, following on the heels of the Boston Consulting Group’s well-known growth share matrix.

The nine-box matrix offers a systematic approach for the decentralized corporation to determine where best to invest its cash. Rather than rely on each business unit’s projections of its future prospects, the company can judge a unit by two factors that will determine whether it’s going to do well in the future: the attractiveness of the relevant industry and the unit’s competitive strength within that industry.

image

Placement of business units within the matrix provides an analytic map for managing them.

With units above the diagonal, a company may pursue strategies of investment and growth; those along the diagonal may be candidates for selective investment; those below the diagonal might be best sold, liquidated, or run purely for cash.

Sorting units into these three categories is an essential starting point for the analysis, but judgment is required to weigh the trade-offs involved. For example, a strong unit in a weak industry is in a very different situation than a weak unit in a highly attractive industry.

The criteria for assessing industry attractiveness and competitive strength have grown more sophisticated over the years.

* * * * *

Full article
Online presentation with interactive matrix
>> Latest Posts

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s