GE Matrix Assignment Help
As businesses are diversified and decentralized, there are multiple strategic business
units under the umbrella of a parent company or as part of a group of companies. More than anything else, profitability of the business units is of prime concern and objective of management
which can be overwhelming. In response and to address this demanding and complex situation, management pundits developed the GE Matrix which was a fitting response to the challenge.
The decision-making process of any business on one side of the spectrum is affected by scarcity of resources. On the other side, opportunities to use them abound. Hence, a choice has to be made in terms of optimal use of cash. At each and every stratum of an organization there is hankering for investment. It’s absolutely nerve-racking for those who have to allocate resources wisely and effectively.
The GE Matrix systematically determines where there would be a maximum return on investment. Instead of a dependency on the projections of future potential of business units, a business unit could be assessed on two criteria by an organization: whether the relevant industry is attractive or not and the unit’s capacity to compete in the industry.
The benchmark to assess whether or not an industry is attractive and can compete has become increasingly state-of-the-art as the years have gone by. Even to this day, majority of big companies that adopt a structured approach to creating a business prototype consult the GE Matrix.
Fact is there isn’t a single business with neither bottomless finances nor time. Had that been the case then probably there wouldn’t be any need of analyzing as to an effective way of allocating resources. In reality though, investments need to be given priority, more so in adverse economic
Undoubtedly this is a challenge for any organization. There could be multiple product groups for example and management could be overwhelmed deciding the group of products to continue with. Furthermore, there could be several sections of the market to concentrate on, or the business units that perhaps need to be sold. Making that decision would require that the benchmark of the business portfolio be set.
The GE Matrix aims at
- analyzing the newest portfolio of business units and how they are placed in comparison with others
- developing growth plans for each business unit individually with the addition of new products and businesses to the portfolio
- deciding the business units that need to be either sold or more investments made for exploitation of opportunities in the near future
Factors that affect the market attractiveness are
- growth potential
- environment and
Business Unit Strength means the capacity of each business unit to compete in terms of its strength, market share, ranking of business units in the market.
Factors that affect business unit strength are
- assets and market that encompass the business unit
- strength of the brand in relation to others
- market share and its growth
- brand loyalty
- distribution channel and scope of reaching out to population
- research and development, patents and innovations
- further investment and access to finances
GE Model leads to four strategic decisions with dependency on the results of this model
Investment is made on the assumption of attractiveness of the existing market in relation to growth. Moreover, its affected by the market share in relation to an organization.
Protect situation arises when a business is averse to any further investment. It would much rather feel secure with the investment that has been made already so as to avoid losses.
A typical harvest circumstance is one where businesses intend to generate cash out of the investment already made. In other words, businesses would rather that stock does not accumulate.
To typify divest, an organization for example would have to decide once and for all as to whether an entire or part of a business unit should be sold or not. Divestment is the final nail in the coffin for businesses.
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