GE/McKinsey Nine-Cell Matrix: Features, Advantages, Limitations & BCG Comparison

GE / McKinsey Matrix

The GE/McKinsey Matrix, also known as the GE Nine-Cell Matrix or GE Multifactor Portfolio Matrix, was developed in the 1970s by General Electric (GE) with the assistance of the consulting firm McKinsey & Company, USA.

The GE Matrix was developed to overcome some of the obvious limitations of the BCG Matrix. It consists of nine cells (3 × 3) based on two key variables:

1. Industry Attractiveness
2. Business Strength

In the matrix, each of these two dimensions is divided into three possible levels—high, medium, and low, resulting in a nine-cell (3 × 3) matrix.

• The horizontal axis represents Business Strength.
• The vertical axis represents Industry Attractiveness.

The position of a business unit within the nine-cell matrix helps management evaluate its overall strategic position and determine an appropriate strategy, such as investing/growing, selectively holding, or harvesting/divesting.

 

Nine Cells of the GE/McKinsey Matrix

The nine cells of the GE/McKinsey Matrix represent different combinations of industry attractiveness—high, medium, or low—and business strength—strong, average, or weak. After plotting each product line or business unit on the nine-cell matrix, an appropriate strategic choice is made based on its position.

The GE Matrix is also known as the “Stoplight Strategy Matrix” because its three strategic zones resemble the green, yellow, and red signals of a traffic light.

1) Green Zone – Invest/Expand
If a product or business unit falls in the green zone, it generally has strong business strength and operates in an industry with at least medium attractiveness. The recommended strategy is to invest, expand, and pursue growth to strengthen its competitive position.

2) Yellow Zone – Select/Earn
If a product or business unit falls in the yellow zone, its position requires caution and managerial discretion. For example, a business may have relatively weak business strength but operate in a highly attractive industry. Management should carefully evaluate the business's potential before deciding whether to invest selectively, maintain its position, or improve its competitive strength.

3) Red Zone – Harvest/Divest
If a product or business unit falls in the red zone, it generally has average or weak business strength and operates in an industry with low or medium attractiveness. The appropriate strategy may be to harvest, reduce investment, or divest the business, depending on its future prospects.

Advantages of the GE Nine-Cell Matrix

1. More Detailed Analysis – The GE Matrix uses nine cells, compared with the four cells of the BCG Matrix, allowing for a more detailed assessment of business units.
2. Considers Multiple Variables – It considers several factors rather than relying on only a few variables, thereby reducing the possibility of overly simplistic strategic conclusions.
3. Finer Portfolio Classification – The high/medium/low and strong/average/weak classifications provide a finer distinction among different businesses within the portfolio.
4. Flexible Evaluation Criteria – The matrix uses multiple factors to assess industry attractiveness and business strength, allowing organisations to select criteria that are most relevant to their specific situation.

Limitations of the GE Nine-Cell Matrix

1. Complex and Cumbersome – The matrix can become complicated and difficult to manage as the number of products or business units increases.
2. Subjective Assessment – Although industry attractiveness and business strength appear to be objective measures, their evaluation often involves subjective judgements, which may vary from one decision-maker to another.
3. Less Effective for New Businesses – The matrix may not effectively represent the position of new business units operating in developing or emerging industries, where reliable market and competitive data may be limited.
4. Broad Strategic Guidance – The GE Matrix provides general strategic prescriptions rather than specific details regarding business policies, actions, or implementation.

BCG Matrix vs. GE Matrix

Basis of Comparison	BCG Matrix	GE Matrix
Number of Cells	Consists of four cells.	Consists of nine cells.
Key Dimensions	Business units are evaluated based on relative market share and industry growth rate.	Business units are evaluated based on business strength and industry attractiveness.
Number of Measures	Uses a single measure for each dimension—market share and market growth.	Uses multiple measures to assess business strength and industry attractiveness.
Classification	Uses two levels of classification, generally High and Low.	Uses three levels of classification—High, Medium, and Low or Strong, Average, and Weak.
Level of Analysis	Provides a relatively simple and straightforward assessment of business units.	Provides a more detailed and comprehensive assessment of business units.
Limitations	Has several limitations because it relies on a limited number of variables.	Overcomes many of the limitations of the BCG Matrix by considering multiple factors.
Strategic Evaluation	Provides a basic portfolio evaluation and broad strategic directions.	Provides a more comprehensive evaluation of business units and their strategic positions.