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Strategic Analysis for Healthcare
Chapter 13
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
1
General Electric Matrix
The General Electric (GE) nine-block business screen, commonly called the GE matrix, was developed by the consulting firm McKinsey & Company.
It is similar in many respects to the BCG matrix, but it has surpassed the BCG in popularity.
In the GE matrix, the business’s overall strength is compared to the overall attractiveness of the market within which the business competes.
As in the BCG matrix, multiple divisions can be placed on the GE matrix so that the strategist can quickly take in a great deal of data in a simplified format.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
General Electric Matrix
The popularity of the GE Matrix stems from its flexibility as well as from its ability to include a greater number of variables in the analysis.
Whereas the BCG matrix uses the term market growth for the vertical axis, the GE matrix uses market attractiveness.
And where the BCG uses relative market share for the horizontal axis, the GE matrix uses business strength.
Although the differences may seem subtle, the effect on practical application is significant.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
General Electric Matrix
High
MARKET
ATTRACTIVENESS
Low
High Low
BUSINESS STRENGTH
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
Market Attractiveness
What makes a market attractive?
There is no clear definition.
Ultimately, market attractiveness is for the strategist to judge, and as a result, successful strategy development hangs in the balance.
One way to define market attractiveness, as with the BCG matrix, is simply to use market growth.
In reality, market attractiveness is much more complex. The recognition of this complexity is where the GE matrix has an inherent advantage over the BCG.
It has the ability to combine an infinite number of variables to arrive at a customized definition of market attractiveness.
At the same time, however, this imprecision could also be a drawback.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
Market Attractiveness
When determining market attractiveness, the strategist may consider aspects of other industry analysis models, such as the following:
Porter’s five forces
Threat of new entrants
Rivalry among existing firms
Threat of substitutes
Bargaining power of buyers
Bargaining power of sellers
The opportunities and threats sections of SWOT
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
Business Strength
Just as market attractiveness is loosely defined, the same is true for business strength.
When considering the strength of a business, the strategist may think of the strengths and weaknesses sections of SWOT.
These SW issues will likely include things like
market share,
strength of the brand,
quality,
distribution reach,
customer loyalty,
cost structure, and
staff quality.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
Constructing the Matrix
The analyst first creates a nine-block chart.
The vertical axis represents market attractiveness, and the three levels of blocks are labeled “Low,” “Medium,” and “High.”
The horizontal axis represents business strength and is divided into the same three levels.
The company’s divisions are placed on the matrix according to their intersection of market attractiveness and business strength.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
Constructing the Matrix
When the divisions are placed on the matrix, each is represented by a circle.
The size of the circle represents the size of the market within which that particular division competes.
Within each division’s circle, a pie slice represents that particular division’s share within its market.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
General Electric Matrix
High
MARKET
ATTRACTIVENESS
Low
High Low
BUSINESS STRENGTH
Division 1
Division 2
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
General Electric Matrix
Strategic conclusions can be drawn from each division’s position on the GE matrix.
Strategies associated with the upper-left corner of the matrix can be loosely described as “grow and build” strategies.
Those associated with the lower-right corner can be described as “harvest and divest.”
“Hold and maintain” strategies are associated with the boxes running from the lower-left corner to the upper-right.
More detailed strategic conclusions associated with each of the nine boxes are shown in Exhibit 13.3 in your book.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
General Strategies on Matrix Location
Grow and Build: Integration strategies, intensive strategies
Hold and Maintain: Market penetration, product development, joint venture
Harvest and Divest: Retrenchment, divestiture, liquidation
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
Exercise
Form groups.
Develop a GE Matrix for your project company.
Identify the divisions.
Identify the size of the market the division plays in (size of the circle).
Identify the market share the division has (size of pie slice).
For classroom purposes, you can approximate these values. For a research paper, they should be research based.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
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