The General Electric Model

Company can rate its different businesses on the basis of two main parameters Market Attractiveness and Business Strength Companies must enter attractive markets and possess the required business strengths to succeed in those markets If one of these factors is missing, the business will not produce outstanding results Neither a strong company operating in an unattractive market nor a weak company operating in an attractive market will do very well

FACTORS UNDERLYING GE PORTFOLIO MODEL

1. MARKET ATTRACTIVENESS
Overall market size
Annual market growth rate Historical profit margin Competitive intensity Technological requirements Environmental impact Social-political legal

FACTORS UNDERLYING GE PORTFOLIO MODEL

2. BUSINESS STRENGTH

WEIGHT

RATING VALUE

Market share
Share growth Product quality Brand reputation Distribution network Promotional effectiveness Productive capacity Unit costs

(FROM 1)

(1-5)

WXR

The axes
Both axes are divided into 3 segments, yielding 9 cells Green Zone
Favourable position with relatively attractive growth opportunities This indicates a green light to invest in this product/service

Yellow Zone
Medium attractiveness. Organisation must therefore exercise caution when making additional investments in this product/service The suggested strategy is to seek to maintain share rather than growing or reducing share

Red Zone
A position in the red zone is not attractive. The suggested strategy is that management should begin to make plans to exit the industry.

5.00

3.67

2.33

1.00 1.00

2.33

3.67

5.00

Investment strategies as per GE model

Build Selectively 1. Specialize around limited strengths 2. Seek ways to overcome weaknesses 3. Withdraw if sustainable growth is not possible Limited expansion or Harvest 1. Look for ways to expand without high risk; otherwise minimize investment and rationalize operations Divest 1. Sell at a time that will maximize cash value 2. Cut fixed costs and meanwhile avoid investments Invest to Build 1. Challenge for leadership 2. Build selectively on strengths 3. Reinforce vulnerable areas Selectivity / Manage for earnings 1. Protect existing program 2. Concentrate investments in segments where profitability is good and risks are relatively low Manage for Earnings 1. Protect position in most profitable segments 2. Upgrade product line 3. Minimize investment Protect Position 1. Invest to grow at maximum rate 2. Concentrate efforts on maintaining strength

Build selectively 1. Invest heavily in most attractive segments 2. Build up ability to counter competition 3. Emphasize profitability by raising productivity Protect and Refocus 1. Manage for current earnings 2. Concentrate on attractive segments 3. Defend strengths