Explain The General Electric Approach?
Explain The General Electric Approach?
General Electric introduced a comprehensive portfolio-planning tool called a strategic business-planning grid. Like the Boston Consulting Group approach it uses matrix with two dimensions one representing industry attractiveness and one representing company strength in the industry. The best businesses are those located in highly attractive industries where the company has high business strength.
The General Electric approach considers may factors besides market growth rates as part of industry attractiveness. It uses an industry attractiveness index made up of market size, market growth rate, and industry profit margin, amount of competition, seasonality and cyclically of demand and industry cost of structure. Each of these factors is rated and combined in an index of industry attractiveness. For our purposes, an industry's attractiveness will be described as high, medium, or low.
As an example, Kraft has identified numerous highly attractive industries natural foods, specialty frozen foods, physical fitness products, and others. It has withdrawn from less attractive industries such as bulk oils and cardboard packing. Management would also plot the projected positions of strategic business units with and without changes in strategies.
The General Electric approach considers may factors besides market growth rates as part of industry attractiveness. It uses an industry attractiveness index made up of market size, market growth rate, and industry profit margin, amount of competition, seasonality and cyclically of demand and industry cost of structure. Each of these factors is rated and combined in an index of industry attractiveness. For our purposes, an industry's attractiveness will be described as high, medium, or low.
As an example, Kraft has identified numerous highly attractive industries natural foods, specialty frozen foods, physical fitness products, and others. It has withdrawn from less attractive industries such as bulk oils and cardboard packing. Management would also plot the projected positions of strategic business units with and without changes in strategies.