portfolio analysis ge tool for analyzing opportunities & ability to compete
Post on 15-Jan-2016
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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