Convenience

F I G U R E 3 . 4
The BCG Matrix
The BCG matrix helps managers develop a better understanding of how different
strategic business units contribute to the overall organization. By assessing each
SBU on the basis of its market growth rate and relative market share, managers
can make decisions about whether to commit further financial resources to the
SBU or to sell or liquidate it.
Source:
Perspectives
, No. 66, “The Product Portfolio.” Adapted by permission from The Boston
Consulting Group, Inc., 1970.
Chapter 3:
Planning and Strategic Management
8 1
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GE Business Screen
Because the BCG matrix is relatively narrow and overly simplistic, GE developed the
GE Business Screen
, a more sophisticated approach to managing diversified business
units. The GE Business Screen is a portfolio management technique that can also be
represented in the form of a matrix. Rather than focusing solely on market growth and
market share, however, the GE Business Screen considers industry attractiveness and
competitive position. These two factors are divided into three categories to make the
nine-cell matrix shown in Figure 3.5.
30
These cells, in turn, classify business units as win-
ners, losers, question marks, average businesses, or profit producers.
As Figure 3.5 shows, both market growth and market share appear in a broad list of
factors that determine the overall attractiveness of an industry and the overall quality
of a firm’s competitive position. Other determinants of an industry’s attractiveness
(in addition to market growth) include market size, capital requirements, and compet-
itive intensity. In general, the greater the market growth, the larger the market, the
Competitive position
Industry attractiveness
Low
Winner
Medium
High
Good
Competitive position
1. Market share
2. Technological know-how
3. Product quality
4. Service network
5. Price competitiveness
6. Operating costs
Industry attractiveness
1. Market growth
2. Market size
3. Capital requirements
4. Competitive intensity
Poor
Medium
Winner
Profit
producer
Winner
Average
business
Loser
Question
mark
Loser
Loser