Briefly discuss the BCG Growth matrix and the GE Business Screen in terms of how they work and what each one provides. In your opinion, is one better than the other? Explain. [4 Marks]
Market Growth serves as proxy for industry attractiveness and the market share serves as proxy for competitive advantage.
The four categories of Growth-Share Matrix are:
Dogs: Low market share and low growth rates. These are cash traps and are candidates for divestiture.
Question Marks: They are growing rapidly so consume high cash but do not generate sufficient cash. To be analyzed carefully for retaining or divesting.
Stars: Generate large amounts of cash because of their strong relative market share but also consume large cash because of their high growth rates. These portfolios must be maintained.
Cash Cows: They generate more cash than they consume, they should be maintained and should be milked as fast and large as possible.
GE Electric Business Screen.
The General Electric Business Screen was originally developed to help marketing managers overcome the problems that are commonly associated with the Boston Matrix (BCG), such as the problems with the lack of credible business information, the fact that BCG deals primarily with commodities not brands or Strategic Business Units (SBU’s), and that cash flow if often a more reliable indicator of position as opposed to market growth/share.
The GE Business Screen introduces a three by three matrix, which now includes a medium category. It utilizes industry attractiveness as a more inclusive measure than BCG’s market growth and substitutes competitive position for the original’s market share.
The GE Electric Business Screen can be utilized in a more analytical manner for taking decisions on the profitability of the portfolios and further whether to disinvest or keep and if keep then what strategy should be adopted.