Assignment 9, Chapter 3, McKinsey GE Matrix of Apple PDF

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McKinsey GE Matrix of Apple that includes everything that is a part of the GE matrix and how apple is trying to fulfill all the components of the GE matrix....

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Assignment 9 Fatima Safdar Ali Section C 19u00548 GE Matrix of Apple General Electric (USA) along with McKinsey developed a matrix for portfolio analysis. This matrix consists of two main variables which are plotted on the X and Y-axis of the matrix. The variables are “Market Attractiveness” and “Business Strength”. Once each product is given a value for its market attractiveness and business unit strength, it is then plotted in the position on the graph. One a place for the product has been allocated, the management can decide the strategy for the product. When it comes to business unit, if it is strong with a high market attractiveness (invest/grow), the company should protect the position which is to invest to grow at a maximum, digestible rate and the concentration should be solely on maintain the strength. If the business unit strength or market attractiveness is medium (selectively earn), the company selectively/manage for earning that is to protect the existing programme and to concentrate investments in segments where profitability is good, and risks are relatively low. Moreover, it is possible that the market is dropping in value, or that there is very high competition which would make it difficult for the business to unit to catch up. In such a case if the business unit or market has become weak (harvest/divest), it is best that the company should sell at a time that will minimize cash value, cut fixed costs, and avoid any further investments meanwhile. Furthermore, if the business strength is strong but market attractiveness is medium(invest/grow), the company should build selectively that is to invest heavily in most attractive segments, build up an ability to counter competition and emphasize profitability by raising productivity. When it comes to business strength being strong while market attractiveness being low (selectively earn), it is best for the company to protect and refocus that is to manage for current earnings, concentrate on attractive segments and to defend strengths. If the business strength is medium but market attractiveness is high (invest/grow), a company should invest to build which can only happen if a company challenges for leadership, builds selectively on strengths, and reinforces vulnerable areas. Additionally, if the business strength is weak while the market attractiveness is high (selectively earn), the company should again build selectively that is to specialize around limited strengths, seek ways to overcome weaknesses and withdraw if indications of sustainable growth are lacking. In addition, if the business strength is weak and market attractiveness is medium (harvest/divest) there is limited expansion or harvest hence the company should look for ways to expand without high risk; otherwise, there would minimize investments and rationalize operations. Finally, if the business strength is medium while the market attractiveness is low (harvest/divest), the company should manage for earnings that is it should protect position in most profitable segments, upgrade its product line and minimize investments. Hence, based on the matrix, a company can efficiently manage its product portfolio and take the right decisions of growing, holding, or harvesting for its products.

Growth/Invest for Apple This is the best section for a company or business unit to be in. A company can reach this scenario if it is operating in a moderate to highly attractive industry while having a moderate to highly competitive position within that industry. In such a situation there is a massive potential for growth. However, to be able to grow, a company needs resources such as assets and capital. The growth/invest part of GE matrix consists of protect position, invest to build and build selectively. For Apple, its Mac and iPhone would come under this category as they have market share of 55% in the smartphone industry which is why Apple should invest more in this category. Moreover, their profits have also increased tremendously, and they have gained the strongest market attractiveness in the past few years while maintaining a strong competitive and leadership position. Selectively Earn for Apple This segment consists of build selectively, merge for earnings and protect and refocus. These companies are either with a low to moderate competitive position in an attractive industry or companies with an extremely high competition position in a less attractive industry. Deciding on whether to invest or not to invest largely depends on the outlook that is expected of either the improvement in competitive position or the potential to shift to more interesting industries. In the case of Apple, the Apple iPad leads in the tablet segment as it holds 31.9% market share which shows the business strength. However, global tablet sales have decreased while the tablet market decreased by 1.5%, perhaps due to its limited content offerings on Apple TV+ which shows a decrease in market attractiveness as well as the competitive and leadership position of Apple’s iPad. Even though there were efforts to increase the sales by the vendors and they increased the sales from 4.1% to 4.7%, they are still less than Amazon and Google. Harvest/Divest for Apple This category consists of limited expansion or harvest, manage for earnings, and divest. These are companies or business units that either have a low competitive position, are active in an unattractive industry or a combination of the two. These companies have no promising outlooks anymore, hence should not be invested in. In the case of Apple, its iPod comes under this category which turned Apple into one of the world’s biggest companies but is no longer found anywhere. The iPod Classic, Nano, and Shuffle are nowhere to be found either. iPod touch was relaunched in 2019 but was soon off the shelf as it was unable to keep up with the iPhone and the rise of music streaming services like Spotify, Soundcloud and Deezer hence Apple should not under any circumstances invest in such a product as it would only prove to be disastrous for the company. Hence this segment shows a decrease in business strength as well as market attractiveness....