McKinsey matrix (sometimes also called GE matrix) is an analytical technique used to evaluate the position of organization, its strategic business units or product in a particular field. The matrix is constructed as follows - on the horizontal axis the competitive advantages (strengths) of the organization are evaluated, on the vertical axis the attractiveness of the field is evaluated. Competitive advantages include three levels - weak, medium and strong. The attractiveness of the field also includes three levels - low, medium and high. This creates a 3 × 3 matrix, ie with nine fields.
The attractiveness of the field includes factors such as:
- Growth and size market
- Market quality
- Profitability of the field
- Sales stability
- Price stability
- Difficulty and availability of inputs
- Evaluation microenvironment and macro environment
Competitive advantages include factors such as:
- Relative market share
- Relative production capacity
- Relative innovation potential
- Distribution capabilities
- Marketing potential, brand
- Profitability and its comparison with the industry average
- Experience and leadership skills
Partial factors can be narrowed or expanded. After the evaluation the final position of the organization is determined and placed in the appropriate field of the matrix.
For evaluation, the fields are numbered and colored:
- Fields 1, 2 and 4 mean a green zone for investment, the organization can invest.
- Boxes 3, 5 and 7 are in the orange zone, where caution and rather modest investment are recommended.
- Fields 6, 8, 9 are in the red zone, attenuation and shutdown are recommended.
What is the McKinsey matrix for?
The McKinsley matrix is used for deciding in which field or area to develop company in the future. Matrix analysis does not have to be performed for the entire organization, but can be performed on individual strategic business units or product segments. The matrix is used for key decisions made by the CEO and top management of the organization.