GE-McKinsey Nine-Box Matrix

The framework In the reading offers a systematic approach to prioritize the investments in an
organization. In multi-business enterprises, maintaining profitability is the real problem. This
dilemma was solved by GE-McKinsey nine-box matrix and later developed by Boston Consulting
Groups Growth share matrix.

GE-McKinsey nine-box matrix offers an approach for decentralized corporations to determine the best
areas to invest their cash. A business unit can be judged about its performance on following factors

1. Attractiveness of the relevant industry it consists of many factors like long run growth rate, industry
size, industry profitability, industry structure, demand changes, seasonality, availability of labor, etc.

2. Competitive strength within the industry. it has many factors like total market share, share growth
related to rivals, customer loyalty, brand strength, level of product differentiation, product flexibility,
etc.

The business units, placed within the matrix help in analyzing them by providing an analytical map.
Selective candidates lie on the diagonal while the ones above the diagonal, investment and growth
strategies may be adopted. The ones lying below can be sold, liquidated or run purely for cash. Sorting
units into these categories is an essential starting point for the analysis, but the trade offs need to be
weighed by judgement, for e.g. a strong unit in a weak industry is in a very different situation than a
weak unit in a strong industry. The criteria for assessing industry attractiveness and competitive
strength have growth more sophisticated. Most of large companies model their business referring to
nine-box matrix or its descendant.