GE-McKinsey Matrix
General Electric · McKinsey Matrix
What is the GE-McKinsey Matrix?
- Industry attractiveness × business unit strength, 3×3
- Refines the BCG matrix's coarse calls
- Concludes with three zones: invest, hold, divest
Adopting this tool changes the nature of what is said in resource allocation meetings. Instead of the claim “our division is strategically important,” a coordinate lands on the table: “industry attractiveness 3.2, business unit strength 2.4.” The practical shift is that the debate moves from conclusions to the basis for the scoring. It stops being a room where the loudest division head wins and becomes one that asks who set the weights, when, and with what data.
Each axis typically has 5–7 items, with weights summing to 1.0. The key point is that the two axes are different in nature. Industry attractiveness is the condition of the market itself, which remains even if your company disappears; business strength is your relative position against competitors. If you slip 'our operating margin' into the attractiveness items, the axis is contaminated and you count the same information twice. Unlike the BCG Matrix, which is calculated automatically from two externally verifiable metrics—market share and growth rate—this tool relies on people assigning scores, so recording a source for each item is a practical prerequisite.
Reading the result as just three blocks—upper left, diagonal, lower right—throws away half the information. In practice most businesses cluster in the diagonal selective zone, and what those cells need is not a 'hold' prescription but the next review date and its conditions. Write a numeric trigger next to each one, such as 'consider a sale if the competitiveness score does not exceed 3.5 within two years,' and the matrix becomes more than a report.
The most common failure in practice is reverse-engineered scoring. If a business unit adjusts weights and scores in its own favor to avoid an exit verdict, the 9-box grid becomes decoration that lends support to a conclusion already reached. A company that runs it without separating the scorers from those being scored ends up with a picture in which all five units cluster in the upper left. Another misreading is treating low attractiveness as an automatic exit. This tool only shows a ranking of investment priority; it does not tell you when to exit or at what price to sell.
John KimAuthor of B2B Marketing Design and CEO of Nanum Consulting
Okgum LeeExpert in corporate analysis, fundraising, and business planningGeneral Electric (GE) commissioned McKinsey in the 1970s to help it allocate resources across many business units. It was built as a follow-up to the BCG matrix, whose simplicity was its main limitation.
Consider a hypothetical case. Company A, an industrial parts maker with 240 employees and KRW 110 billion (≈ US$82,298,400) in annual revenue, runs five divisions, including auto parts, industrial valves and rechargeable battery equipment. After company-wide operating margin stayed in the 4% range for three years running, the CEO set a firm deadline: 'Decide by December where next year's KRW 18 billion (≈ US$13,467,000) investment budget goes.' The strategic planning team pulled out the GE-McKinsey Matrix.
- The head of strategic planning ran a three-week workshop with the five division heads to fix six attractiveness items, six competitiveness items, and their weights, and recorded in the minutes the principle that 'our own company's results do not go on the attractiveness axis.'
- Scoring was handled not by the business units but by the strategic planning team and an outside research lead. Taking the scorer role away from the business units was the turning point of the exercise, and every item was given a source.
- Rechargeable battery equipment landed in the lower left, scoring 4.1 for attractiveness and 2.3 for competitiveness. When the head of sales protested, 'We've backed that business for three years,' the team lead pulled out the item-by-item scorecard and pointed to where it fell behind on cost and distribution.
- The valve division scored 2.6 on attractiveness and 4.2 on competitiveness, but it brings in KRW 7 billion (≈ US$5,237,200) a year in cash. It was filed as a conditional hold—'freeze capital spending and keep headcount for two years'—with the re-review set for the first half of 2026.
- Of the KRW 18 billion (≈ US$13,467,000) investment budget, KRW 9.6 billion (≈ US$7,182,400) was reallocated to the auto parts division. The battery equipment division cut KRW 1.4 billion (≈ US$1,047,400) a year by freezing new hires and shifting to outsourcing, and company-wide operating margin rose from 4.2% to 6.1%.