Gg General Electric screen matrix (the General Electric (GE) business screen) The GE screen matrix is essentially a derivation of the Boston Consulting Group’s Boston growth matrix. It was developed by McKinsey and Co. for General Electric as it had been recognized that the Boston Consulting Group matrix was not flexible enough to take broader issues into account. The GE matrix cross-references market attractiveness and business position using three criteria for each – high, medium and low.
The market attractiveness considers variables relating to the market itself, including the rate of market growth, market size, potential barriers to entering the market, the number and size of competitors, the actual profit margins currently enjoyed, and the technological implications of involvement in the market. The business position criteria look at the business’s strengths and weaknesses in a variety of fields. These include its position in relation to its competitors, and the business’s ability to handle product research, development and ultimate production.
It also considers how well placed the management is to deploy these resources. The matrix differs in its complexity compared with the Boston Consulting Group matrix. Superimposed on the basic diagram are a number of circles. These circles are of variable size (see Figure 22). The size of each represents the size of each market. Within each circle is a clearly defined segment which represents the business’s market share within that market. The larger the circle, the larger the market, and the larger the segment, the larger the market share.
General environment The term ‘general environment’ refers to the broad macro-environment in which a business operates. Broadly speaking, it can be identified as having four key elements, as outlined in Table 10. 98 Key Concepts in Strategic Management Business position High Invest heavily for growth High Medium Invest selectively and build Low Develop for income Market attractiveness Medium Invest selectively and build Develop selectively for income Harvest or divest Figure 22 Low Develop selectively and build on strengths
Harvest Divest The General Electric (GE) matrix Table 10 Elements of the general environment Political/legal Potential/actual changes in regulations/legislation Foreign trade regulations Environmental protection Changes in government (local/regional/national) Technological New development inside and outside the industry New product development Technological projects in the industry Industry (and government) spending on research and development G Economic GNP growth Finance/market trends Inflation Interest rates Money upply Employment/unemployment Energy issues Socio-cultural Population trends Age distribution Regional movement of population Demographics of the family Lifestyle Consumerism Geographical structure 99 The most rapid of these trends in the general environment are technological and political/legal. The slowest moving are the economic and the socio-cultural. Geographical structure The organizational structure of a major business could be based purely on geographical regions.
This could reflect the following possibilities: • • • that the market is sufficiently remote to warrant a replication of the organizational structure in its geographical region; that the factors of production are sufficiently attractive to set up a geographically-based structure; that the market requires specific support that can only be delivered in the geographical region and not from the remote central headquarters of the organization. Global area structure
A global area structure configures the organization along the main areas (geographically) in which it operates. Typically, the globe would be split up into a series of general areas such that the business can assume that all functions can be carried out by a centralized headquarters within each region. The configuration may take the form depicted in Figure 23. Corporate HQ (in home country and serving home country Northern Europe Southern Europe and Near East Pacific region G Figure 23 A global area structure Global learning
Global learning is a process by which a multinational organization ensures that skills and knowledge flow freely between the different parts of the business across the world, regardless of national boundaries. Global learning can take the following routes: 100 Key Concepts in Strategic Management • • • from the home country to an overseas division or subsidiary; from an overseas division or subsidiary to another overseas division or subsidiary; from an overseas division or subsidiary to the home country. Global matrix structure
A global matrix structure is essentially a horizontal differentiation along product divisions and geographical divisions. In other words, to visualize the organization structure, product groups are placed on a vertical axis and the foreign divisions are placed on a horizontal axis. It allows businesses to reduce costs by increasing efficiency, and to differentiate their activities with innovation and responsiveness. The feature of the global matrix structure is that there is dual decisionmaking responsibility, as there is both a divisional and an area hierarchy.
The system is not without its problems, as many organizations consider this form of structure to be rather clumsy and bureaucratic. There is also the question of slow decision making and a lack of flexibility. Several international businesses have sought to overcome the problems by basing their organizational structure on wide networks with a shared culture and vision, and stressing that the informal structures are more important than the formal structure itself. These forms of organizational structure are known as flexible matrix structures.
Egelhoff, W. G. , ‘Strategy and Structure in Multinational Corporations: a Revision of the Stopford and Wells Model’, Strategic Management Journal, vol. 9 (1988), pp. 1–14. Global product group structure A global product group structure is a variant organizational structure which has product groups along a vertical axis and foreign (overseas) divisions, or business units, on a horizontal axis. The primary purpose of the product group structure is: G • • • • • to to to to to educe costs through increased efficiency; differentiate the organization’s areas of activity; utilize any innovations or technologies; improve customer service; increase the speed of responses. Typically, the structure would appear in the format shown in Figure 24. Global strategic alliances A global strategic alliance is usually formed by two or more organiza- Global strategic planning 101 Corporate HQ Product division A Product division B International division Japan India Brazil Figure 24 A global product group structure ions from different countries. Typically, this involves the allocation of resources from these businesses based in different countries, to a new project or venture which they seek to undertake, using cooperative methods and the pooling of expertise and experience. The purpose of global strategic alliances is to: • • • • • create synergy; accomplish more than could be achieved had the businesses been operating independently; coordinate effort; gain and share technologies; gain entry into an overseas market.
Major multinational businesses routinely enter into global strategic alliances as an integral part of their corporate strategy and the practice has become widespread in recent years. See also green-field investment. G Global strategic planning Global strategic planning aims to maximize global economies of scale and economies of scope, while at the same time incorporating the advantages of local responsiveness to customers in the countries in which the organization operates. 102 Key Concepts in Strategic Management There are three main steps towards achieving global strategic planning: • • The development of a core business strategy – which forms the basis of attempts to create a sustainable competitive advantage (a replica of what has been achieved in the home market). The internationalization of this core strategy – the adaptation of the core strategy to overseas markets, along with expansion as necessary. The globalization of the international core strategy – which seeks to integrate the strategy in all of the countries in which the business operates. Yip, G. S. , Total Global Strategy: Managing for Worldwide Competitive Advantage.
Englewood Cliffs, NJ: Prentice-Hall, 2002. Global strategy A global strategy is often adopted by an international business in order to increase its profitability by taking advantage not only of cost reductions that come from experience curve effects, but also of economies based on the location of parts of its operations. Typically a global strategy will consider the best alternative areas in which to concentrate research and development, marketing or production, choosing the most beneficial location for each of these key operations.
In essence a global strategy can be called a multi-domestic strategy, in as much as the international business seeks to maximize its worldwide performance through maximizing any local competitive advantages, revenues or profits it can achieve. Equally, global strategies seek to maximize performance through integration and a sharing of resources. Stonehouse, George, Hamill, Jim, Campbell, David and Purdie, Tony, Global and Transnational Business: Strategy and Management. New York: John Wiley, 2004. G Global web