Mckinsey matrix

Mckinsey matrix

Mckinsey Matrix

The Mckinsey matrix is ​​an analytical tool used to assess the relative attractiveness of various markets in order to configure an optimal business portfolio.

The Mckinsey matrix is ​​used as a strategic guide to evaluate the positioning of a product or service in a certain market and determine whether, given the competitive conditions and other relevant variables, it is convenient to stay in the market, invest to grow or abandon.

Origin of the Mckinsey matrix

The Mckinsey Matrix was created in the 70’s as an improved version of the so-called Boston Consulting Group (BCG) Matrix. Its creator, the international consulting firm Mckinsey, initially developed it to respond to the problems faced by its client General Electric (GE). This company had an extensive portfolio of products, many of which were not delivering the expected returns.

GE knew the BCG matrix, but it required a more complete analytical tool, which was practical and simple at the same time.

Criteria and variables of the Mckinsey matrix

The consulting firm Mckinsey developed a decision matrix that would position the products according to two central axes:

  • Long-term market appeal.
  • Competitiveness or strength of the product or service in the market in question.

These two general criteria are also constituted by the analysis of multiple variables, making the matrix multi-criteria.

Market attractiveness is then analyzed considering the following variables:

  • Accessibility.
  • Growth rate.
  • Lifecycle.
  • Gross margin.
  • Competitors.
  • Possibilities to differentiate (other than price).
  • Market concentration.

Competitiveness, meanwhile, is analyzed with the following variables:

  • Relative market share.
  • Price.
  • Differentiators.
  • Degree of expertise of the company.
  • Distribution.
  • Brand image.

Structure and decision making of the Mckinsey matrix

The McKinsey matrix has two main axes. The competitiveness criterion is located on the horizontal axis, while the market attractiveness is located on the vertical axis. These two criteria are evaluated on a three-note scale: weak, medium, and high. In this way, the matrix is ​​subdivided into 9 cells that determine the decision to be made in the market.

In the following graph, we see an example of a Mckinsey matrix. At the origin is the cell that combines weak attractiveness with weak competitiveness, so it is recommended to divest (abandon).

In the last cell, following the competitiveness axis, we find a weak market attractive situation, but high competitiveness. In this case it is recommended to maintain the position, but not to embark on large investments. It’s about reaping the investment and keeping a low profile.

In the upper left corner of the matrix we find a combination of high market attractiveness, but low competitiveness. The ideal in this situation is to carry out a selective development. That is, invest with caution, look for opportunities that are profitable.

In the upper right corner of the matrix we are in a situation of high market attractiveness and high competitiveness. It is clear then that it is advisable to execute an offensive strategy that allows investment to grow.

The rest of the cells (5) correspond to intermediate cases that require additional analysis, either by reviewing the ratings or supplementing with additional information. Among the strategies to consider are: rethink, reorganize, develop, exit in an orderly manner, etc.

Matrix division

  • Kraljic Matrix
  • Decision matrix
  • Competitiveness