Page 178 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes Critical Assessment of GE Matrix

Merits
The GE matrix is an improvement over BCG matrix in the following respects:
1. It uses 9 cells instead of 4 cells.
2. It considers many variables and does not lead to simplistic conclusions.
3. High/medium/low and strong/average/low classification enables a finer distinction
among business portfolios.
4. It uses multiple factors to assess industry attractiveness and business strength, which
allow users to select criteria appropriate to their situation.

Shortcomings
The GE matrix, however, has some shortcomings.
1. It can get quite complicated and cumbersome with the increase in businesses.
2. Though industry attractiveness and business strength appear to be objective, they are in
reality subjective judgments that may vary from one person to another.
3. It cannot effectively depict the position of new business units in developing industries.
4. It only provides broad strategic prescriptions rather than specifics of business policy.

Hofer’s Product-market Evolution Matrix

Hofer has suggested a three-by-five matrix in which businesses are plotted according to two
parameters viz. the firm’s business strength (competitive position) and the industry stage in the
product-market life cycle. As in the GE nine-cell matrix, circles are plotted to represent the size
of the industry while market share is shown as shaded segments.
Figure 9.6: Hofer’s Product/Market Evolution Matrix

Development A

Growth
B C

Shake out
Industry Stage Maturity/ D

Saturation

E
Decline

STRONG AVERAGE WEAK
COMPETITIVE POSITION

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