Created by consulting firm McKinsey & Company for General Electric (GE) in the 1970s, the McKinsey Matrix is still considered a global benchmark in corporate planning and business portfolio management.
Mastering this type of strategic analysis model is essential for executives, board members, and entrepreneurs, because the McKinsey Matrix is one of the most effective tools for assessing business portfolios, prioritizing investments, and guiding sustainable growth.
To support this need, Esade’s general management and strategy programs offer practical training in advanced strategic analysis models and portfolio management tools such as the McKinsey Matrix. Among these are the Spanish-language Program for Management Development, Programa para Directores Propietarios, and Programa para Consejeros, Programa para Empresas Familiares as well as our top-ranked MBA programs.
Explore them and start making successful decisions using the McKinsey Matrix from a practical, impact-oriented perspective. This article provides the key information you need to understand what it is and how it works, illustrated through the example of a fictitious company.
What is the McKinsey Matrix or GE Matrix?
The McKinsey Matrix, also known as the GE Matrix, is a strategic analysis model that evaluates business units or product lines based on two key dimensions:
- Market attractiveness, which measures external potential.
- Competitive strength, which reflects the internal capacity of each unit.
It is displayed in a 3×3 matrix of nine cells that classifies each business unit according to its position (high, medium, or low) on both axes.
As shown in the infographic below, the McKinsey Matrix helps executives identify where to invest, what to maintain, and where to divest, offering a complete and structured view of the business portfolio and supporting corporate strategy development.
McKinsey GE Matrix – 3×3 investment strategies graphic
In this infographic, each cell in the matrix suggests a general strategic direction (invest, maintain, divest, or harvest, meaning capitalize on the profitability of mature units) as a guideline. Final decisions depend on context, market maturity, and the company’s position.
Differences between the McKinsey Matrix and the BCG Matrix
The McKinsey Matrix is often compared with the BCG Matrix, since both were created with the same purpose: helping companies analyze business portfolios and allocate resources effectively.
However, while BCG was the first model to popularize this approach in the 1970s, the version developed by McKinsey introduced a more comprehensive and adaptable perspective for today’s business realities.
As noted earlier, both tools aim to assess business portfolios and guide investment decisions, but they take different approaches:
- The BCG Matrix focuses on two variables (market growth and relative market share), enabling products to be classified into four categories: stars (high growth), cash cows (cash generators), question marks (uncertain potential), and dogs (low performance), according to the original BCG terminology.
- The McKinsey Matrix expands this approach with a multicriteria model that considers factors such as profitability, innovation, sustainability, differentiation, and competitive position.
- Their structures also differ: While BCG uses a 2×2 matrix, the McKinsey Matrix uses a 3×3 format, offering nine possible scenarios and a deeper, more flexible analysis.
The McKinsey Matrix can therefore be seen as an evolution of the BCG model, better suited to complex business environments where diversification, innovation, and risk management require a more comprehensive view of the portfolio.
Below is a comparison table summarizing the main differences between the two models.
BCG Matrix vs McKinsey Matrix Differences
| Aspect | BCG Matrix | McKinsey Matrix |
|---|---|---|
| Variables | Growth and market share | Multicriteria: profitability, innovation, position, etc |
| Structure | 2×2 (4 quadrants) | 3×3 (9 cuadrantes) |
| Nivel de análisis | Simplificado | In-depth and adaptable |
| Orientation | Product | Business unit |
| Enfoque | Quantitative | Quantitative + Qualitative |
In the next section, we explain how to build a McKinsey Matrix step by step and how to interpret its results in practice.
How to build a McKinsey Matrix: How it works
Creating a McKinsey Matrix combines quantitative analysis and strategic evaluation with the goal of producing a solid, visual diagnosis of the business portfolio.
Through this methodology, companies can determine where to concentrate resources and how to balance their different units or product lines.
To understand how to apply the McKinsey Matrix, it helps to break down its two essential components (market attractiveness and business unit strength) and then follow the key steps in the process.
#1. Degree of market attractiveness
What it is
This refers to the external potential of the sector or market in which the company operates. It measures the ability of that environment to generate growth opportunities and long-term profitability.
Indicators:
Common factors include market size, growth rate, average profitability, entry barriers, industry maturity, level of competition, and technological or regulatory risks.
How it is weighted:
Each variable is rated (for example, on a scale from 1 to 5) and assigned a relative weight depending on its strategic importance. The result is an overall attractiveness index that allows different investment opportunities to be compared objectively.
#2. Competitive strength of a business unit
What it is
This evaluates the internal factors that determine each unit’s competitive position within the organization. It assesses its ability to sustain advantages and generate long-term value.
Indicators:
Variables often include relative market share, innovation capacity, brand reputation, operational efficiency, commercial strength, and available financial or technological resources.
How it is weighted:
Each criterion is scored and weighted using the same numerical system (for example, 1 to 5) to obtain a competitive strength index. The result makes it possible to classify units as strong, medium, or weak and place them in the 3×3 McKinsey Matrix.
Key steps to build the McKinsey Matrix
Once the evaluation criteria are defined, the construction of the McKinsey Matrix can follow these steps:
- Define the business units or product lines to be analyzed.
- Select the evaluation criteria for market attractiveness and competitive strength.
- Assign weights and scores to each criterion based on its relevance.
- Calculate the weighted averages to obtain the global values for each unit.
- Place the units in the 3×3 matrix according to their combined results.
- Interpret the results and define the appropriate strategies: invest, maintain, harvest, or divest.
McKinsey Matrix: example from a company
To understand how the McKinsey Matrix is applied, let’s look at a step-by-step example.
Suppose a company has three business units:
- A: corporate software
- B: executive training services
- C: strategic consulting
1. Market attractiveness evaluation
Management analyzes external variables such as market size, growth rate, average profitability, and entry barriers. Each factor is scored from 1 (low) to 5 (high) and assigned a relative weight.
| Criterion | Weight (%) | A | B | C |
|---|---|---|---|---|
| Market growth | 30 | 5 | 3 | 2 |
| Average profitability | 25 | 4 | 3 | 2 |
| Competition and barriers | 25 | 4 | 4 | 3 |
| Regulatory risks | 20 | 3 | 4 | 2 |
| Weighted average (attractiveness) | 100 | 4,1 | 3,4 | 2,3 |
2. Competitive strength evaluation
Next, internal factors such as market share, innovation capacity, operational efficiency, and available resources are evaluated.
| Criterion | Weight (%) | A | B | C |
|---|---|---|---|---|
| Relative market share | 30 | 4 | 5 | 3 |
| Innovation capacity | 25 | 5 | 4 | 3 |
| Brand reputation | 25 | 4 | 5 | 3 |
| Financial resources | 20 | 4 | 3 | 2 |
| Weighted average (strength) | 100 | 4,3 | 4,4 | 2,8 |
3. Result and positioning in the matrix
With the weighted scores for market attractiveness and competitive strength, each unit is placed in a quadrant of the McKinsey Matrix. From this position, the most suitable strategies are defined: invest, maintain, or divest.
- Unit A: high attractiveness (4.1) and high strength (4.3) → Invest and expand.
- Unit B: medium attractiveness (3.4) and high strength (4.4) → Maintain and optimize.
- Unit C: low attractiveness (2.3) and medium strength (2.8) → Gradual divestment.
4. Strategic interpretation
The visualization of these results in the 3×3 matrix allows investment decisions to be prioritized. Executive committees can allocate resources in a balanced way, strengthening the highest performing units without neglecting the sustainability of the portfolio as a whole.
Conclusion
More than an analytical tool, the McKinsey Matrix is a guide for intelligent strategic decision-making. Mastering this methodology requires a broad view of the company and the ability to integrate data, strategy, and executive intuition — making continuous training essential. .
That’s why Esade offers general management and strategy programs designed to apply tools such as the McKinsey Matrix, the BCG Matrix, and other advanced strategic analysis models. They include the Spanish-language Program for Management Development, Programa para Directores Propietarios, Programa Consejos de Administración en Empresas Familiares, and Programa para Consejeros, as well as globally renowned MBA programs.
All of them combine academic rigor, practical learning, and high-level networking to strengthen competitiveness, leadership, and strategic vision in organizations.
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