GENETRAL ELECTRIC SPOT LIGHT MATRIX

GE nine-box matrix is a strategy tool that offers a systematic approach for the
multi business enterprises to prioritize their investments among the various
business units. It is a framework that evaluates business portfolio, allocate
resources and provides further strategic implications.

 The GE matrix is a 9 box matrix which helps corporations to evaluate their

business portfolios and prioritize investments among their diversified units
in a systematic manner.
 The businesses now are becoming more and more vulnerable and dynamic.
 They are more focused on their investment which gives maximum results,
this matrix ensures the company to analyse in a more systematic and precise
manner.

Each business is appraised in terms of two major dimensions – Market

Attractiveness and Business Strength. If one of these factors is missing,
then the business will not produce desired results. Neither a strong company
operating in an unattractive market, nor a weak company operating in an
attractive market will do very well

The strategic planning approach in this model is based on the analogy of traffic
control lights at street crossings: Green (Go), Yellow (Caution) and Red (Stop).

The vertical axis denotes:

Industry attractiveness indicates how hard or easy it will be for a company to
compete in the market and earn profits. The more profitable the industry is the
more attractive it becomes. When evaluating the industry attractiveness,
 analysts should look how an industry will change in the long run rather than in
the near future, because the investments needed for the product usually require
long lasting commitment.
 Long run growth rate
 Industry size
 Industry profitability: entry barriers, exit barriers, supplier power,
buyer power, threat of substitutes and available complements
(use Porter’s Five Forces analysis to determine this)
 Industry structure (use Structure-Conduct-Performance framework to
determine this)
 Product life cycle changes
 Changes in demand
 Trend of prices
 Macro environment factors (use PEST or PESTEL for this)
 Seasonality
 Availability of labour
 Market segmentation
Horizontal axis represents:
Along the X axis, the matrix measures how strong, in terms of competition, a
particular business unit is against its rivals. In other words, managers try to
determine whether a business unit has a sustainable competitive advantage (or
at least temporary competitive advantage) or not.
 Total market share
 Assets
 Market share growth compared to rivals
 Brand strength (use brand value for this)
 Profitability of the company
 Customer loyalty
 Your business unit strength in meeting industry’s critical success factors
(use Competitive Profile Matrix to determine this)
 Strength of a value chain (use Value Chain Analysis and Benchmarking to
determine this)
 Level of product differentiation
 Production flexibility
 Quality of the product
Growth in GE Matrix
· As the name suggests, the business units that fall in this category are
products which will be giving higher returns in the near future.

· So, the investments required here are more in R & D, promotions,

advertisements etc. They are most likely to be successful if backed up with
more resources.

· Suggests you to ‘go ahead’, to grow and build, pushing you through
expansion strategies. Businesses in the green zone attract major
investment.

Hold in GE Matrix
· It is quite similar to the question mark product of the BCG matrix, wherein
the state of the product is still in ambiguity. However, as uncertainty
prevails and as business units are always going to be risky, the final decision
is made by the management which is in line with their vision.

· Cautions you to ‘wait and see’ indicating hold and maintain type of
strategies aimed at stability.

· It might be that the market is dropping in value, or that there is much high
competition which the business unit will be hard put to catch up. In both
the cases, the business unit might not give optimum returns even if
resources are invested. Thus, in this case, you wait and hold the business
unit to see if the market environment changes or if the business unit gains
importance in the market as compared to other players.

Harvest in GE Matrix
· This category is similar to the dog products of the BCG matrix. Herein, the
products are not going to reap the desired profits and are likely to fail.

· Investing in such products will be an in-elevation risk for any organization.

· Indicates that you have to adopt turnover strategies of divestment and

liquidation or rebuilding approach.
Advantages
· Helps to prioritize the limited resources in order to achieve the best returns.

· The performance of products or business units becomes evident.

· It’s more sophisticated business portfolio framework than the BCG matrix.
· Determines the strategic steps the company needs to adopt to improve the
performance of its business portfolio.

Disadvantages
· Needs a consultant or an expert to determine industry’s attractiveness and
business unit strength as accurately as possible.

· It is expensive to conduct.

· It doesn’t take into account the harmony that could exist between two or
more business units i.e., potential synergy and the undercurrents between
two business units of the similar organisations are not considered.

· Determining market attractiveness is a tough task especially looking at the

fast paced market environment. During the dotcom bust, the online market
was least attractive. But look where the online market is now.

· Similarly, determining the strength of the business unit and weighing it

against the attractiveness is difficult. Thus, if the variables are not matched
properly, you might grow a business which is supposed to be held back and
waste unnecessary resources on this business. This might happen if the top
management does not know the core competency of the business units.

· Companies will be limited by resources even if the business unit falls in the
growth criteria. Thus, out of 50 products, if 25 fall in growth criteria, what
does the management do when it has limited resources? Taking decisions
again becomes difficult.