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					GENERAL ELECTRIC MODEL




        Group Members:
           Babar Rafi
           Durr I Kamil
           Muhammad Rashid
           Qaiser Abbas
              INTRODUCTION

 Prepared by McKensey & Company
 Developed for General Electric in 1970’s

 Also known as:
     GE multi factorial analysis
     Directional policy matrix
     McKensey Matrix
     3*3 matrix
                 DEFINITION
   The GE matrix is an alternative technique
    used in brand marketing and product
    management to help a company decide what
    product(s) to add to its product portfolio and
    which market opportunities are worthy of
    continued investment.

   Purpose of GE model
     Strategy formulation
     Investment in each SBU
     Business analysis
               CONSTRUCTION
   There are 5 steps to construct GE Model

    1)   Identification of SBU’s or products.
    2)   What makes this market attractive?
    3)   Determination of SBU’s position on the basis
         of factors.
    4)   Methods of measuring market attractiveness
         and business strengths.
    5)   Rank each SBU as high, medium or low.
     DIMENSIONS OF GE MODEL
 Market      attractiveness
  Overall judgment of making good profits for long run
  MA can be measured through
      long run growth rate
      size of industry

      Current profitability of market

      SCP (structure conduct performance model)

      Porter’s five forces model


 Business      strengths
  Sustainable competitive advantage of business
  BS can be measured through
      Share price
      Profitability

      Brand loyalty
          FACTORS OF MA AND BS
   Market Attractiveness             Business Strengths
       Industry size                     Market share
       Annual growth rate                Market growth
       Historic profit margin            Product price
       Long run growth rate              Product quality
       Competitive intensity             Brand reputation
       Ability to differentiate          Customer loyalty
       Technology required               Technology
       Energy required                   Distribution networks
       Environment impact                R&D performance
       Social/political aspect           Management
                                  GE MODEL


                          High
Market Attractiveness




                        Medium




                          Low


                                 High       Medium      Low


                                   Business Strengths
 STRATEGIES TO BE FOLLOWED:
 Invest/grow


    Fast growing SBU’s
    Highly profitable
    Best SBU’s for investment
    High advertisement
    High R&D
    Acquisition
 Selectivity/earnings


 • Left over funds are invested
 • Elastic (narrow/broad)
 • Change in prospects
 • Investment depends upon management and
   corporate capabilities
 Harvest/divest


  SBU’s worse than average position.
  Retrenchment of expenditures.
  Minimization of investment
  Invest for sometimes for good reasons
   otherwise divest it.
    GE MODEL VS BCG MATRIX

 GE model is 3*3 matrix while BCG is 2*2 matrix
 GE model is the enlarge form of BCG matrix

 GE model is more powerful than BCG matrix

 GE mode needs more time to prepare while BCG
  can be made quickly
               ADVANTAGES

 More sophisticated than BCG matrix
 Helps managers to think more strategically

 Helps to improve the performance of business

 Provide directions regarding resources allocation

 Helps in the growth of business

 Helps in downsizing

 Provides information about strengths and
  weaknesses
 Provides information about opportunities
  available in market
              LIMITATIONS

 There is no hard and fast rule on how to weight
  factors
 The interrelationship among SBU’s is not taken
  into account
 It requires a huge amount of data & research

 Factors ranking is subjective and personal

 Time consuming & costly

 Proper implementation of strategies are absent

 Complex and difficult to implement

				
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posted:8/31/2012
language:English
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