THE MATRIX
The McKinsey 9-Box Matrix, also known as the GE-McKinsey Nine-Box Matrix, is a strategic management tool used to evaluate a company's business portfolio.
It was first developed by General Electric in the 1970s with the help of McKinsey & Company. This model helps organizations prioritize their investments among different business units or products based on their growth prospects and market competitiveness.
THE MODEL USES TWO DIMENSIONS:
Market Attractiveness (vertical axis): This dimension assesses the appeal or potential of a particular market segment. Factors can include market size, market growth rate, profitability, trends, and so on.
Business Strength (horizontal axis): This dimension gauges the competitive strength of a business unit in the market. Elements might encompass competitive advantages, product quality, brand strength, customer loyalty, cost structure, and others.
THE INTERSECTION OF THESE DIMENSIONS YIELDS A MATRIX WITH NINE BOXES:
High Market Attractiveness, High Business Strength: These are the "stars" of your business, which should receive substantial investment to fuel their growth.
High Market Attractiveness, Medium Business Strength: These units have potential but require certain improvements or strategies to fully exploit their markets.
High Market Attractiveness, Low Business Strength: These units are in attractive markets, but their weak position might call for a reassessment. Medium Market Attractiveness, Low Business Strength: These are weak units in mediocre markets. Unless they hold strategic importance or improvement potential, consider divesting.
Low Market Attractiveness, High Business Strength: These are strong units in weak markets.
Low Market Attractiveness, Medium Business Strength: These units may need repositioning or a transformational strategy. If improvements aren't feasible, consider divestment .
Low Market Attractiveness, Low Business Strength: These are the "dogs" of the portfolio, with weak prospects and a poor competitive position. Consider divesting unless there are strategic reasons to keep them.
Application- On Apple Inc
ABOUT THE COMPANY
Apple Inc. is an American multinational technology company headquartered in Cupertino,
California.Apple is the world's largest technology company by revenue, with US$394.3 billion in 2022 revenue. As of March 2023, Apple is the world's biggest company by market capitalization
SEGMENTATION
Apple's segmentation approach primarily revolves around demographic, psychographic, and behavioral factors. Demographically, the company targets individuals from various age groups, income levels, and geographic locations.
Psycho graphically, Apple appeals to tech enthusiasts, creative professionals, and trendsetters who value innovation, sleek design, and seamless user experiences.
Apple's product segmentation covers a wide range of consumer needs, ensuring there is an Apple device for every user type. Apple product line includes Iphone (in mobile segment), Mac (in laptop segment), Ipad(in tablet segment), wearables, home units, accessories and Apple Services (such as apple music, apple tv)
SHARE IN REVENUE
Iphone accounts for Apple's 1/2 revenue stream, whereas mac and Ipad accounts for 9% and 8% respectively.
The Service segment of apple accounts for 16% it includes Music, movies, TV shows, stickers, books, and app purchases (from the iTunes Store, App Store, and Book Store). These are billed at the time of purchase. They can also include in-app purchases, pre-ordered music or movies, and subscriptions that automatically renew.
The rest 17% comes from wearables, home units and accessories (which include products like airpods)
MCKINSEY GOALS
Goal # 1
Find market attractiveness for various segments of apple product line Goal # 2 Find Apple's Business Unit's Strength Goal # 3 We have plotted a GE Matrix for apple Inc.
REVIEW
The first step in mapping the box is to find 'Industry Attractiveness' via various factors. These factors then are assigned weights ranging from 1-5 then the various products of the apple are marked ranging from 1-5. After multiplying the weights and marks we get the weighted marks of each product which are indicated as 'WI' for weighted Iphone's marks, 'WM' for weighted Mac's marks and so on and so forth. With totaling of each weighted marks we get the components of our Y-AXIS that is Industry Attractiveness. The second step follows the same routine for calculating Business Unit Strength on X- Axis for each product line. After getting co-ordinates for X and Y axis we simply map them on our box and get the conclusion about the business strategy to follow ahead. The Service segment of apple is a low cost- high margin product which it can grow more by investing into it's streaming services and other in-app purchases service to capture greater market share. Thus it lies in the grow/invest box.
The Ipad on the other hand lies on the selectivity/ earning box as the world tablet market is experiencing an overall 1.5% YoY decrease. Thus apple should build selectively, merge for earnings and protect and refocus. As it's a segment with an extremely high competition position in a less attractive industry.
The IPhone and the Mac together covers 55% of the market share in the gadgets domain. It's a highly competitive and highly attractive market thus apple should aim at growing further in these two segments.
The home unit segment is a growing market space with less competition hence apple should move aggressively in the segment to capture more and more market share.
The accessories and wearable segment of apple faces high competition with increasing TAM (total addressable market) opportunity. Investing into these product lines could further increase the revenue for the company.
WRITTEN BY-Kanishk Bansal & Siddhanth Pandita
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