A company’s strengths are its characteristics that give it an advantage over others (competitions/rivals). This variable measures how strong or competent a particular company is against its rivals: it is an indicator of its ability to compete within a certain industry. On the horizontal axis we find the Competitive Strength of a business unit which can also be divided into High, Medium and Low.
When evaluating industry attractiveness, you should look at how an industry will change in the long run rather than in the near future, because the investments needed for a business usually require long lasting commitment.
An industry’s profitability in turn is affected by the current level of competition and potential future changes in the competitive landscape. The higher the profit potential of an industry is, the more attractive it becomes. Industry attractiveness is demonstrated by how beneficial it is for a company to enter and compete within a certain industry based on the profit potential of that specific industry. On the vertical axis of the GE Mckinsey Matrix, we find the variable Industry Attractiveness which can be divided into High, Medium and Low. Therefore, it is McKinsey (not GE) that created the framework as a means to help GE cope with its strategic decisions on a corporate level.įigure 1: GE McKinsey Nine Box Matrix Industry Attractiveness The name of the framework stems from the year 1970 in which General Electric (GE) hired the strategy consulting firm McKinsey&Company to consult GE in managing their large and complex portfolio of strategic business units. This is an important distinction, since the BCG Matrix has been criticized a lot on its use of only one single (and perhaps outdated) variable for each axis. However, different from the BCG Matrix, the GE-McKinsey Matrix uses multiple factors that are combined to determine the measure of the two variables industry attractiveness and competitive strength. By combining these two variables into a matrix, a corporation can plot their business units accordingly and determine where to invest, where to hold their position, and where to harvest or divest. GE Matrix, General Electric Matrix, Nine-box matrix) is just like the BCG Matrix a portfolio analysis tool used in corporate strategy to analyse strategic business units or product lines based on two variables: industry attractiveness and the competitive strength of a business unit.