What is GE-McKinsey Matrix?
The GE-McKinsey matrix (developed for GE in the 1970s) plots business units on a 3x3 grid: industry attractiveness (a weighted index of size, growth, profitability, intensity, regulation, social/environmental factors) on one axis, business unit strength (market share, growth of share, brand, distribution, R&D, cost, profitability) on the other. The nine cells fall into three zones: invest/grow (top-left), selective/earnings (diagonal), and harvest/divest (bottom-right). The matrix improves on BCG by using composite scores rather than single variables, but introduces complexity and judgment.
How GE-McKinsey Matrix actually works
The framework breaks down into the following moving parts. Knowing what each piece is — and what it is not — is what separates a B-grade answer from an A-grade answer in a written assignment.
- Define industry attractiveness factors and weights (size, growth, margin, intensity, etc.)
- Score each business unit on attractiveness
- Define business strength factors and weights (share, growth, brand, cost, etc.)
- Score each unit on strength
- Plot on 3x3
- Apply zone rules: invest, selectively manage, harvest
A worked example: GE's portfolio in the 1970s
Jack Welch's "be #1 or #2 or get out" rule was an operationalization of the GE-McKinsey matrix. Business units in attractive industries with leading position got investment. Units in weak position or unattractive industries were divested or harvested. Welch sold or shut down hundreds of businesses applying this discipline, growing GE's market cap from $14B to $410B over twenty years. The discipline has since been criticized — GE's eventual collapse — but the portfolio framework itself remains a standard tool.
Don't lose marks for these
- Picking attractiveness factors without weighting
- Letting subjectivity dominate the scoring
- Treating the 3x3 zones as rigid prescriptions
How to use this on the exam
Score-maximizing moves
- Justify the factors and weights
- Score with evidence
- Recommend zone-appropriate actions
When to use GE-McKinsey Matrix (and when not to)
Use GE-McKinsey Matrix when your assignment asks you to analyze, structure, or recommend — and when you have at least two data points to populate every cell of the framework. Skip it when the question is asking for a numerical answer or a single recommendation, since GE-McKinsey Matrix is a structuring tool, not a calculator.