Blackwell Reference Online

Extract

During the 1970s, the US General Electric Company (GE) developed a portfolio model measuring the relative attractiveness of its multiple businesses for investment purposes. In conjunction with McKinsey and Company, GE developed a portfolio model which differed from that of the Boston Consulting Group's growth share matrix in that it examined those variables assessed by management to be the critical success factors affecting a business. These factors were then used to identify the position of a business in a three by three matrix, each cell of which indicated a recommended investment strategy. A number of factors, the identification of which is found useful, and the matrix itself, are illustrated in figure 1 . The process of positioning a business is similar to that of the Shell directional policy matrix . The position of each business on the two composite dimensions is determined by a qualitative scoring system described in the measurement of “market attractiveness” and “competitive position.” Businesses are plotted on the matrix, with their relative size indicated by the area of the circle representing each one. An alternate method of weighting each variable has been used in some companies, the values of the main PIMS variables ( see pims structural determinants of performance) being subdivided to determine the two composite variables and then used to calculate the relative ... log in or subscribe to read full text