5/11/2018 Difference Between BCG and GE Matrices (with Comparison Chart) - Key Differences

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Di erence Between BCG and GE Matrices

March 21, 2017 By Surbhi S — 1 Comment

BCG matrix is a matrix used by large corporations to decide the ratio in which
resources are allocated among various business segments. Similar to this, GE
matrix also helps firms decide their strategy with respect to different product
lines, i.e. the product they should add in the range of products offered by them and
in which opportunity the firm should invest.

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5/11/2018 Difference Between BCG and GE Matrices (with Comparison Chart) - Key Differences

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Both BCG matrix and GE matrix are two-dimensional models, that are used by big
business houses, having several product lines and business units. The latter was
developed as an improvement over the former, and so overcomes many limitations.
This article excerpt will help you understand the differences between BCG and GE
matrices, take a read.

Content: BCG Matrix Vs GE Matrix

1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart

BASIS FOR
BCG MATRIX GE MATRIX
COMPARISON

Meaning BCG Martrix, is a growth GE Matrix implies multifactor

share model, representing portfolio matrix, that assist firm
growth of business and in making strategic choices for
the market share enjoyed product lines based on their
by the firm. position in the grid.

Number of cells Four Nine

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5/11/2018 Difference Between BCG and GE Matrices (with Comparison Chart) - Key Differences

BASIS FOR
BCG MATRIX GE MATRIX
COMPARISON

Factors Market share and Market Industry attractiveness and

growth Business strengths

Objective To help companies deploy To prioritize investment among

their resources among various business units.
various business units.

Measures used Single measure is used. Multiple measures are used.

Classification Classified into two Classified into three degrees

degrees

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De nition of BCG Matrix

BCG Matrix or otherwise known as Boston Consulting Group growth share
matrix is used to represent the company’s investment portfolio.

Large corporations usually face problems in allocating resources amongst various

units and product lines. To cope with this problem, in 1970, Bruce Henderson
designed a matrix for the Group called as BCG matrix. It is based on two factors
which are:

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5/11/2018 Difference Between BCG and GE Matrices (with Comparison Chart) - Key Differences

The growth rate of the product-market.

Market share held by the company in the respective market, in comparison to
its competitors.

BCG Matrix helps the corporation in analyzing the product lines or business units,
for prioritizing them and allocating resources. The model aims at identifying the
problem of resource deployment, among different business segments. In this
approach, various businesses of a company are classified on a two-dimensional
grid.

BCG – Growth Share matrix

The vertical axis shows market growth rate, which is a measure of how
attractive the market is?
The horizontal axis indicates relative market shares, which is an indicator of
how strong the company’s position is?

With the help of this matrix, the company can ascertain four kind of strategic
business unit or products as follows:

Stars: It represents those products which are growing at a faster rate and
requires the huge investment to maintain their position in the market.
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Cash Cows: The products whose growth is low but holds high market share.
They reap a lot of cash for the company and do not require finance for
expansion.
Question Marks: It indicates those products which possess a low market
share in a high-growth market and so need heavy investment to hold their
share in the market, but do not generate cash in the same proportion.
Dogs: Dogs represents those products, which neither have a high growth rate
nor high market share. Such products generate enough cash to maintain
themselves but will not survive in the long term.

De nition of GE Matrix
GE matrix, alternately known as General Electric Model is a business
planning matrix. The model is inspired by traffic lights which are used to
manage traffic at crossings, wherein green light says go, yellow says caution and
Red say stop.

The matrix comprises of nine cells, with two major dimensions, i.e. business
strength and industry attractiveness. Business strength is influenced by
market share, brand image, profit margins, customer loyalty, technological
capability and so on. On the other hand, industry attractiveness is influenced by
drivers such as pricing trends, economies of scale, market size, market growth rate,
segmentation, distribution structure, etc.

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5/11/2018 Difference Between BCG and GE Matrices (with Comparison Chart) - Key Differences

GE – Portfolio matrix

When various product lines or business units are drawn on the matrix, strategic
choices can be made, on the basis of their position in the matrix. Product falling
into green section reflects the business is in the good position, but product lying
into yellow section needs the managerial decision for making choices and the
product in the red zone, are dangerous as they will lead the company to losses.

Key Di erences Between BCG and GE Matrices

The points depicted below, elaborate the fundamental differences between
BCG and GE matrices:

1. BCG matrix can be understood as the growth-share model, that reflects

a growth of business and the market share possessed by the firm. On
the other hand, GE matrix is also termed as multifactor portfolio
matrix, which businesses use in making strategic choices for product
lines or business units based on their position in the grid.

2. BCG matrix is simpler in comparison to GE matrix, as the former is

easy to draw and consist of only four cells, while the latter consist of
nine cells.
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3. The two dimensions on which BCG matrix is based are market growth
and market share. Conversely, industry attractiveness and business
strengths are two factors of GE matrix.

4. BCG matrix is used by the companies to deploy their resources among

various business units. On the contrary, firms use GE matrix to
prioritize investment among various business units.

5. In BCG matrix only a single measure is used, whereas in GE matrix

multiple measures are used.

6. BCG matrix represents two degrees of market growth and market

share, i.e. high and low. In contrast, in GE matrix there are three
degrees of business strength, i.e. strong, average and weak, and
industry attractiveness, are high, medium and low.

Conclusion
To sum up, we can say that the two models are similar, but have some differences
that cannot be ignored. While BCG matrix is simpler to plot and easier to
understand, GE matrix is a bit difficult to draw and interpret. However, it is free
from certain limitations of BCG matrix.

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Comments

kuldeep mohanta says

October 17, 2017 at 9:54 pm

Nice …it’s really helpful…thank you

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