Matrix Mack Kinsey is one of the most common methods for determining the location of an enterprise in a particular segment and in comparison with other companies. With the correct construction of the matrix and taking into account the necessary details, entrepreneurs clearly understand where and how they need to move.
general characteristics
Matrix Kinsey Mac General Electric, or, as it is also called, the screen of a business, is a method that is used in brand marketing and management to help managers make a decision on product development. There is a conceptual similarity with the matrix of the BCG (Boston Consulting Group), but the described tool is much more complicated.
The McKinsey General Electric matrix was developed by the McKinsey consulting company specifically for General Electric in the 70s of the last century. Ten years later, the model became very popular for determining the position of business and goods in the market.
The main feature of the described method is the use of weighting coefficients and taking into account all industry development trends. Such an analysis provides answers to the following questions:
- in which direction it is necessary to develop;
- activities that will bring great losses;
- what products do not meet the requirements of a potential customer;
- what product is a priority in promotion;
- how to rationally and efficiently allocate resources, etc.
Phased development
The development of the Mac Kinsey matrix is a rather laborious and difficult process. In general terms, it can be divided into five separate phases.
- Detailed assortment analysis. Selection of criteria and factors for further evaluation. They should relate to the attractiveness of the segment and the level of competitiveness of a particular company in all areas of interest.
- Determining the weight or importance of the selected criteria.
- Evaluation of all segments by selected indicators at the time of creation of the matrix.
- An approximate forecasting of the potential of each segment, where consumer requirements and market trends are taken as the basis.
- Selection of targeted areas and equitable distribution of resources.
All the steps are much easier to understand when you have a ready-made example of the Mac Kinsey matrix in front of your eyes.
Segment Attractiveness Assessment
First you need to understand the concept of "attractiveness" of the industry. It shows whether it is profitable for companies to enter this market and compete with already developed firms and novice enterprises. Among the main factors affecting the assessment, three groups appear:
- Market. These include: market capacity, development level, segment growth rate over the past three years, the number of players in this “site” and the degree of advertising support.
- Consumer: the scope of the target audience, the culture of consumption and the level of loyalty to the proposals of competitors.
- Market trends. Here it is necessary to highlight consumer trends and risks caused by changes in the macro environment (we are talking about demographic, social, cultural, scientific, technological, environmental and other factors).
An attractive market is considered when:
- large volumes of potential sales;
- low barriers to entry;
- Opportunities to ensure the company's profit in the long term;
- minimum risks.
Product competitiveness assessment
As for competitiveness, everything is much simpler here. At this stage, the firm’s strength is assessed to deal with existing and potential competitors. The main indicators for assessment are:
- The competitiveness of the product, namely its unique trading advantage.
- Company resources. Attention is drawn to the brand, resources in various fields (logistics, finance, marketing, sales, etc.), the qualifications of the staff.
- The strength of competition, its intensity, the formation of barriers and monopolies.
These criteria help to reflect the long-term ability of the company to compete with other industry representatives in order to take leadership positions in the market. When the indicators are already defined and all the coefficients are arranged, you can create the Mac Kinsey matrix using the example of an enterprise.
Depending on which quadrant the company is located in or individual business units (SBU), a strategic complex is selected.
Strategy selection
When allocating resources and investments, it is important to define a strategy at all levels.
- Grow. This is possible if the company or the SBU have extremely worthy positions. They attract investors thanks to guaranteed returns in the future. It is best to devote resources to research and technological development, extensive advertising and expansion of production by purchasing the latest achievements of science.
- Selectivity, or ambiguity. In this case, it is necessary to invest money only taking into account the potential development of the business due to corporate and managerial abilities. Accordingly, it is necessary to finance the management sphere.
- Harvest. The company operates in an unattractive industry and does it extremely poorly. Here, a transition to another sphere or urgent liquidation is necessary. The best solution is to sell products at the best prices and avoid investing.
So, all possible outcomes are considered. A competent leader and investor will be able to correctly combine the necessary strategies into a complex, which will help the company make its way to the winners.
Matrix disadvantages
The matrix of General Electric, despite its popularity, has several disadvantages:
- difficulty in objective assessment of the weight of each category;
- laborious work costs a lot of money;
- the place of the company in the matrix and the selected alternatives for improvement are exclusively advisory in nature.
In addition, the matrix considers the development of the company and all its parts in one direction. In fact, the need arises to re-develop functional strategies for each business unit.
Also, the matrix does not take into account unexpected situations, sudden changes not only in the local market, but also in the world. Because of this, the results of the study are not highly accurate.
Method Advantages
Despite the shortcomings, the model under study has some advantages that determine its high popularity when developing a business strategy of enterprises:
- raising the awareness of managers about the effectiveness of their activities and the competitiveness of the proposed product;
- understanding of customer desires and the dynamics of his preferences;
- Providing data on potential market opportunities;
- wide strategic choice;
- study of information about the company's strengths and weaknesses, correction of errors;
- This is a more detailed method compared to the BCG matrix.
So, if you clearly understand that the Mac Kinsey matrix is only advisory in nature, then you can correctly build an individual strategic portfolio taking into account all the features of the company.