Portfolio Analysis

GE Tool for Analyzing Opportunities & Ability to Compete

GE Portfolio Analysis

• Classification of SBUs/products into nine cell matrix based on

• Market Attractiveness– Multiple Indicators

• Business Strength– Multiple Indicators

Steps In Developing GE Matrix

1. Select Factors & Indicators.

2. Assign each indicator a weight (total = 1) based on its importance.

3. Rate the industry on industry indicators and company on business indicators on scale of 1(weak) – 5 (strong).

4. Multiply weight times rating and total for summary measures.

GE Portfolio AnalysisSample Industry/Market Indicators

• Market Factors• Size• Growth Rate• Cyclicality• Seasonality

• Competition• Type of competitors• Degree of Concentration

• Financial & Economic• Contribution Margins• Barriers to Entry or Exit

GE Portfolio AnalysisIndustry/Market Indicators

• Technological• Patents & copyrights• Will it become obsolete

• Sociopolitical• Social attitudes & trends• Laws & government regulations

GE Portfolio AnalysisBusiness Strength Indicators

• Market • Company’s Market Share• Company’s Sales or Share Growth Rate

• Competition• Strength of product, promotion, price, distribution,

financial resources, management relative to competition

• Financial & Economic• Company’s Margins• Economies of scale

GE Portfolio AnalysisBusiness Strength Indicators

• Technological• Company’s ability to cope with change• Technological skills• Patent Protection

• Sociopolitical• Company’s responsiveness & flexibility

GE Portfolio Example

.68

2.66

2.34Distribution Net

1.655.33Product Quality

.331.33Market Share

Business

.68

3.32

2.34Profit Margins

.993.33Growth

1.655.33Size

ValueRating (1- 5)WeightMarket Factor

GE Portfolio Analysis

Market

Low

Medium

High

LowMediumHigh

Business

Divest•Sell at time that will maximize cash value

•Cut fixed costs and avoid investment

Harvest•Minimize Investment•Protect positions in most profitable segments

Generate Cash•Manage for current earnings•Concentrate on attractive Segments•Defend Strengths

Low

Harvest (Gradual Withdrawal) or Limited Expansion•Look ways to expand without high risk•Or Minimize investment

Manage for Earnings •Protect existing programs•Concentrate on profitable, less risky segments

Challenge Leader/Build Selectively•In most attractive markets•Or counter competition•Emphasize profitability by raising productivity

Medium

Overcome Weakness, Find Niche or Quit•Build Selectively

Challenge Leader•Invest to Build Selectively•Reinforce Strengths

Maintain Leadership• Invest to Grow

•Concentrate on Maintaining Strength

High

WeakMediumStrongMarketAttractiveness

PositionCompetitive

Market

1

2

3

4

5

12345

Business Strength

Hig LowMediu