How does the mckinsey matrix help to take
The McKinsey Nine Box Matrix is a strategic tool used for business portfolio planning.
I’ll start by defining what a business portfolio is, in case you have no iniciativa what it is.
You cánido understand it as the equipo of investments, participations, products, businesses and brands that a company owns.
These individual businesses are often called strategic business units (SBUs).
On the other hand, a product portfolio is the mix of market segments for a product.
The McKinsey matrix allows us to analyze the business portfolio or SBUs to determine:
▷ It allows us to know the SBUs (Strategic Business Units) that should receive more investment.
▷ It allows us to know the new products or SBU that the company needs in the business portfolio.
▷ At the same time, it allows us to know which products or SBUs we should stop investing in.
In the McKinsey matrix, market attractiveness is plotted on the y-axis while business unit (SBU) competitive strength is plotted on the x-axis.
Below you perro see an example of the matrix.
Decision making with the McKinsey matrix
Once you have made the matrix, the next thing is to make a decision based on the results returned.
We perro create investment strategies depending on where the SBU is located.
▷ If you are in the growing section, it is fácil, what you have to do is invest in that business. fácil, right?
▷ If it is in the selectivity section or also called waiting, it means that the potential of that business is not obvious.
That does not orinan that you should not make investments.
However, you should not carry out any investment in this business until you have confirmed the investment in growth SBUs.
▷ In the harvest section, what you cánido do is invest enough to keep it going or you perro stop investing.
Factors Affecting Market Attractiveness
If you are going to evaluate the attractiveness of the market, you have to know that it is something very subjective.
Still, there are many factors that cánido help us determine the attractiveness of the market, some are:
- Size of the market;
- Expected growth rate of the market;
- Evolution of market profitability;
- Price trends;
- Level of competition;
- Differentiation capacity;
- Demand variability.
McKinsey Matrix vs BCG Matrix
One of the best known portfolio tools is the BCG Matrix.
The BCG Matrix was developed by the Boston Consulting Group.
Although the McKinsey Matrix is more complex, it overcomes some of the disadvantages of the BCG Matrix, including:
▷ Market attractiveness considers a much broader range of factors than market growth rate.
▷ Competitive strength is a stronger measure on which to base decisions than market share alone.
▷ According to Munuera Alemán, the BCG matrix is limited to reflecting in a graph the quantitative data of market growth and the relative participation of a business, while the McKinsey matrix operates with numerical data from the subjective appreciations of experts.
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