GE - Portfolio Matrix
Framework Summarized by Sam Mishra, MBA (MIT Sloan)
This 3 x 3 matrix is an outgrowth of a framework pioneered by General Electric (GE) in the 1970s to assess its Strategic Business Units (SBUs) along two dimensions: industry attractiveness, and business strength. In the figure below, three possible values of each of these two dimensions are plotted, resulting in a nine-cell 3 x 3 matrix.
All business units of a firm can be represented by circles placed appropriately within the matrix. The size of the circle represents the industry / market size. The market share of the SBU is represented by the smaller sector within the circle. Thus, as you can see, this is a complex framework to evaluate an SBU along four dimensions: market attractiveness, market size, market share, and business strength.
The cells in the nine-cell matrix are colored differently to categorize the matrix into five distinct zones of overall business attractiveness: high (gree cell), medium-high (yellow cells), medium (ocean-blue cells), medium-low (pink cells), and low (red cell).
The strength of this framework is based on the premise that to be successful, a firm should enter attractive markets / industries for which it has the needed business strengths to succeed. However, over-reliance on this framework may lead to undue neglect of existing businesses. SBU owners / managers will also be susceptible to manipulate the parameters so that their SBUs show up on the desired high or medium-high overall attractive zones. Thus, this framework should be used with caution while crafting strategy.
For a real life application of this matrix, plese check out our PRD Template.