Page 177 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 9: Strategic Analysis and Choice

Stoplight Strategy Notes

GE matrix is also called “Stoplight” strategy matrix because the three zones are like green,
yellow and red of traffic lights as shown below:

Zone Strategic Choice

Green Invest/expand

Yellow Select /earn

Red harvest/divest

The strategies are chosen depending on the zone in which the product or business unit happens

to fall:
1. If the product falls in the ‘green zone’, i.e., if the business strength is strong and industry
is at least medium in attractiveness, the strategic decision should be to expand, to invest
and to grow.
2. If the product falls in the ‘yellow zone’ i.e. if the business strength is low but industry
attractiveness is high, it needs caution and managerial discretion for making the strategic
choice.
3. If the product falls in the ‘red zone’ i.e. the business strength is average or weak and
attractiveness is also ‘low’ or ‘medium’, the appropriate strategy should be divestment.
Thus, products or business units in the green zone are almost equivalent to “stars” or “cash
cows”, yellow zone are like ‘question marks’ and red zone are similar to ‘dogs’ in the BCG
matrix.

Notes Differences between BCG and GE Matrices
BCG Matrix GE Matrix
1. BCG matrix consists of four cells 1. GE matrix consists of nine cells
2. The business unit is rated against the 2. The business unit is rated against the
following two criteria following criteria
(i) relative market share (i) business strength
(ii) industry growth rate. (ii) industry attractiveness.
3. The matrix uses single measures to assess 3. The matrix uses multiple measures to
growth and market share. assess business strength and industry
attractiveness
4. The matrix uses two types of classification 4. The matrix uses three types of
i.e. high and low classification (high/medium/low and
strong /average /weak).
5. Has many limitations 5. GE matrix overcomes many limitations of
BCG and is an improvement over it.

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