The General Electric Approach appears to be somewhat similar to BCG matrix. General Electric Approach developed this model with the assistance of McKinsey & Company. This approach is, in fact, an improvement over BCG growth-share matrix. The General Electric Approach focuses on two important dimensions: industry attractiveness and business strength. This makes sense because businesses can succeed only when they enter attractive markets and possess the required business strengths to succeed in the selected markets.
There are nine cells in the model shown. The most favorable situation for an organization is to be high on business strength in an attractive industry (SBU 1). Businesses in cells 2 and 4 are also favorable as both these are high and medium in one of the two factors. These SBUs (1, 2, 4) are said to be in the green zone and the right strategy for these is to invest in developing strategies that would lead to growth. Of course, the degree of investment would vary according to overall value score of each SBU. SBUs 3, 5, and 7 represent high-low, medium-medium, and again high-low combination on two factors. SBUs in the diagonal position are said to be in a yellow zone and the appropriate strategy is to protect their position. This is a strategy of defense to maintain their present market position as they generate positive cash flow (much like Cash Cows in BCG matrix) that can be used for other SBUs. SBUs 6, 8, and 9 are not in a sound position on both factors and are said to be in the red zone. Harvesting is an appropriate strategy for SBUs 6 and 8 by curtailing resources substantially or selling them. SBU9 should not receive any resources, and probably the best strategy is to sell it.
Developing Growth Strategies
Companies should always be looking to the future. One useful device for identifying growth opportunities for the future is the product/market expansion grid. The product/market growth matrix (proposed by Igor Ansoff) is a portfolio planning tool for identifying company growth opportunities through: Market Penetration – making more sales to present customers without changing products in any way. Supporting tactics might include greater spending on advertising or personal selling. Market Development – a strategy for company growth by identifying and developing new markets for current company products. Product Development– a strategy for company growth by offering modified or new products to current markets. Diversification – a strategy for company growth by starting up or acquiring businesses outside the company’s current products and markets. This strategy is risky because it does not rely on either the company’s successful product or its position in established markets.