General electric model: General electric model Group Members: Durr I Kamil Qaiser Abbas IM SCIEMNCES Peshawar Introduction: Introduction Prepared by McKensey & Company Developed for General Electric in 1970’s Also known as: GE multi factorial analysis Directional policy matrix McKensey Matrix 3*3 matrix Definition:
Definition The GE matrix is an alternative technique used in
and product management to help a company decide what product(s) to add to its product portfolio and which market opportunities are worthy of continued investment. Purpose of GE model Strategy formulation Investment in each SBU Business analysis
Construction: Construction There are 5 steps to construct GE Model Identification of SBU’s or products. What makes this market attractive? Determination of SBU’s position on the basis of factors. Methods of measuring market attractiveness and business strengths. Rank each SBU as high, medium or low. Dimensions of GE model: Dimensions of GE model Market attractiveness Overall judgment of making good profits for long run MA can be measured through long run growth rate size of industry Current profitability of market SCP (structure conduct performance model) Porter’s five forces model Business strengths Sustainable competitive advantage of business BS can be measured through Share price Profitability Brand loyalty How to calculate MA and BS: How to calculate MA and BS Market attractiveness = attractiveness factor 1 rating x attractiveness factor 1 weight + attractiveness factor 2 rating x attractiveness factor 2 weight + ……… Business strengths = strength factor 1 rating x strength factor 1 weight + strength factor 2 rating x strength factor 2 weight + ………… Factors of MA and BS: Factors of MA and BS Market Attractiveness Industry size Annual growth rate Historic profit margin Long run growth rate Competitive intensity Ability to differentiate Technology required Energy required Environment impact Social/political aspect Business Strengths Market share Market growth Product price Product quality Brand reputation Customer loyalty Technology Distribution networks R&D performance Management GE Model: GE Model Market Attractiveness Business Strengths High Medium Low High Medium Low Invest/grow Selectively/earnings Harvest/divest Strategies to be followed:: Strategies to be followed: Invest/grow Fast growing SBU’s Highly profitable Best SBU’s for investment High advertisement High R&D Acquisition PowerPoint Presentation: Selectivity/earnings Left over funds are invested Elastic (narrow/broad) Change in prospects Investment depends upon management and corporate capabilities PowerPoint Presentation: Harvest/divest SBU’s worse than average position. Retrenchment of expenditures. Minimization of investment Invest for sometimes for good reasons otherwise divest it. GE model Vs BCG matrix: GE model V s BCG matrix GE model is 3*3 matrix while BCG is 2*2 matrix GE model is the enlarge form of BCG matrix GE model is more powerful than BCG matrix GE model needs more time to prepare while BCG can be made quickly Advantages: Advantages More sophisticated than BCG matrix Helps managers to think more strategically Helps to improve the performance of business Provide directions regarding resources allocation Helps in the growth of business Helps in downsizing Provides information about strengths and weaknesses Provides information about opportunities available in market Limitations: Limitations There is no hard and fast rule on how to weight factors The interrelationship among SBU’s is not taken into account It requires a huge amount of data & research Factors ranking is subjective and personal Time consuming & costly Proper implementation of strategies are absent PowerPoint Presentation: A ny Q uestion ?