GE multifactorial analysis

G.E. multi factoral analysis is a technique used in brand marketing and product management to help a company decide what product(s) to add to its product portfolio and which opportunities in the market they should continue to invest in. It is conceptually similar to B.C.G. analysis, but somewhat more complicated. Like in BCG Analysis, a two-dimensional portfolio matrix is created. However, with the GE model the dimensions are multi factoral. One dimension comprises nine industry attractiveness measures; the other comprises twelve internal business strength measures. The G.E matrix helps a strategic business unit evaluate it's overall strength.

Each product, brand, service, or potential product is mapped in this industry attractiveness/business strength space. The GE multi factoral was first developed by Mckinsey for General Electric in the 1970s.

Construction of the G.E Matrix

The G.E matrix is constructed in a 3x3 grid with Industry Attractiveness plotted on the Y-axis and Business Strength on the X-axis, both being measured on a high,medium,or low score.

File:GE-McKinsey-Matrix.jpg

G.E matrix

Five steps must be considered in order to formulate the matrix;

• The range of products produced by the SBU must be listed
• Factors which make the particular market attractive must be identified
• Evaluating where the SBU stands in this market
• Processes through which calculations about business strength and market attractiveness can be made
• Determining which category an SBU lies in; high, medium, or low.

Market Attractiveness

The attractiveness of a market is demonstrated by how beneficial it is for a company to enter and compete within this market. It is based on various factors; the size of the market and the rate at which it is growing, the possibility of profit, the number of competitors within the industry and their weaknesses.

Business/Competitive Strength

This helps decide whether a company is competent enough to compete in the given market(s). It can be determined by factors within the company itself such as it's assets and holdings, the share it company holds in the market and the the development of this share, the position in the market of it's brand and the loyalty of customers to this brand, it's creativeness in coming up with new and improved products and in dealing with the fluctuating situations of the market, as well as keeping in mind environmental/government concerns such as energy consumption, waste disposal etc.

Measuring Market Attractiveness and Business Strength

Once the factors that determine the two are identified and rated , each factor is then given a certain magnitude and a calculation is made as follows; factor 1 rating x factor 1 magnitude + factor 2 rating x factor 2 magnitude + ..... factor n rating x factor n magnitude.