Further documentation is available here. However, with the GE bcg matrix in strategic management pdf the dimensions are multi factoral. General Electric in the 1970s.
This model aims to evaluate the existing portfolios of strategic business units and to develop strategies to achieve growth by addition of new products and businesses to this portfolio and further, to analyze which business units to invest in and which ones to sell off. X-axis, both being measured on a high, medium, or low score. The attractiveness of a market is demonstrated by how beneficial it is for a company to enter and compete within this market. SBU’s holdings in the market are equated through a pie chart within the circle and an arrow outside the circle shows the standing of the SBU expected in the future. The arrow is outwards thus showing that the SBU is expected to grow and gain strength and then its tip indicates the future position of the SBU.
SBUs that are classified into this category attract various company’s investment as they are expect to yield high returns in the future. These investments should be split into categories such as research and development, acquisition of other SBU’s, extensive advertisements and expanding production capacity. SBUs that hold a lot of ambiguity fall into this category. They are usually only invested in if there is any prospect of competencies in managerial and corporate capabilities and if companies have any money left after investments in ‘grow’ business units. SBU’ performing poorly in unattractive industries are classified into this category. Companies only invest in them if they generate enough cash to equal the investment amount, otherwise, they may be liquidated. Raises awareness between managers about the performance of their products in the market and aids in developing strategies to get maximum returns from the resources available.
Helps extract information about a business unit’s strengths and weaknesses and to devise strategies to accelerate and improve performance. Aids the business in growing and in providing information about potential market opportunities. It is more complex in comparison to the BCG matrix. There is no set rule to ‘weight’ factors and this process may be subjective across different business unit’s. The formulation of a GE matrix is very expensive and time consuming.
Investment strategies are often not implemented in an accurate and proper manner. The dynamics among SBUs themselves are not taken into account. When compared to the BCG matrix consisting of four cells, the GE matrix is more complex with its nine cells. This means it not only takes longer to construct, but also to implement. The BCG matrix is a lot more simpler and the factors needed to construct it are accessed more easily and quickly. It takes into account a wide range of factors when determining market attractiveness and business strengths, which is replaced by market share and market growth in the BCG matrix. Also, where factors are classified in the GE matrix as high, medium and low, those in the BCG matrix are divided between high and low.