The GE-McKinsey Nine-Box Matrix: a tool for assessing and optimizing a business portfolio
In portfolio management, deciding which businesses to invest in, which to maintain and which to exit plays a central role in a strategy for sustainable growth.
The GE-McKinsey Nine-Box Matrix offers a systematic way for a company to assess and prioritize its business units on two factors: how attractive the industry is, and how competitive the unit is.
Two axes, nine boxes
The matrix has nine boxes formed by two main axes:
- Vertical axis
- Industry attractiveness: high, medium, low.
- Horizontal axis
- The business unit’s competitive strength: high, medium, low.
Three groups of strategy
Where a unit sits in the matrix points to the right strategy:
- Invest & growWhen a unit is highly competitive in an attractive industry, the company should concentrate resources on expanding it and gaining share.
- Select & maintain (Selectivity/Earnings)When the industry is moderately attractive, or the unit lacks a strong competitive advantage, the company should reassess the strategy, focus on improving performance and optimize profit.
- Harvest & divestWhen a unit has weak competitive strength in an unattractive industry, the company should consider cutting investment or divesting to free up resources.
What the matrix helps a company do
- Make decisions based on an objective assessment of the market and internal capabilities.
- Allocate resources effectively across business units.
- Spot investment opportunities and flag areas of high risk.
Compared with the BCG matrix
Compared with the BCG matrix, this model is more flexible for assessing a portfolio, because it weighs more factors than growth rate and market share alone. That gives a company a more complete view when building its long-term strategy.
Which of your business units deserve more resources, and which should you pull back from?
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