Portfolio Matrix Tools

1
Portfolio Matrix Tools

• 1. BCG Matrix
• 2. GE-Matrix
• Purpose tools for strategy formulation
• in diversified firms

2
BCG Matrix

• One of the earliest and simplest portfolio matrix
  tools, developed by the Boston Consulting Group
• A two-variable matrix, with relative market share
  on the horizontal axis (high on left low on
  right) and industry growth rate (high on top low
  on bottom) on the vertical axis
• Creates a 2X2 matrix with four quadrants
• A companys divisions are appropriately arrayed
  within this 2-dimensional space.

3
Strategic Implications from the BCG Matrix

• Cash cows (bottom left) Use excess profits to
  subsidize ?s. Do not milk dry! Defend!
• ?s (top right) Cash hogs need timely
  investment to grow.
• Stars (top left) Relatively neutral cash flow
  position. Reinvest profits for growth. May need
  cash infusions.
• Dogs (bottom right) Divest, harvest, or
  liquidate.

4
BCG Matrix

• Contributions?

• Limitations?

5
GE-Matrix

• A more advanced portfolio matrix tool, developed
  by McKinsey Consulting for General Electric
• Two composite variables business strength on
  horizontal axis (high on left low on right) and
  industry attractiveness on vertical axis (high on
  top low on bottom)
• Creates a 3X3 matrix with nine categories a
  firms divisions are appropriately arrayed in the
  space, and implications are similar to the BCG
  matrix.

6
GE-Matrix

• Advantages?

• Disadvantages?