Scribd
Upload
6 views

Stop Light Strategy Model

The Stop Light Strategy Model categorizes business priorities into red, yellow, and green to indicate their urgency and required actions. The GE Nine-Cell Matrix assesses business units based on market attractiveness and business strength, guiding investment decisions. Strategic recommendations for various business units include investing in high-potential areas while managing or divesting from less attractive segments.

Uploaded by

kaurprabhsimar93
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
6 views

Stop Light Strategy Model

The Stop Light Strategy Model categorizes business priorities into red, yellow, and green to indicate their urgency and required actions. The GE Nine-Cell Matrix assesses business units based on market attractiveness and business strength, guiding investment decisions. Strategic recommendations for various business units include investing in high-potential areas while managing or divesting from less attractive segments.

Uploaded by

kaurprabhsimar93
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 11

Stop Light Strategy

Model/ GE Mckinsey
Nine cell matrix
• The Stop Light Strategy Model is a simple but effective tool for assessing and
managing various business priorities or projects. It uses a "stoplight"
approach, categorizing items into three main colors—red, yellow, and green—
to indicate their priority level, status, or recommended action. This model
helps teams quickly identify areas that require immediate attention, can
proceed with caution, or are performing well and need no immediate change.
• Overview of the Stop Light Strategy Model
• Red: Indicates a critical issue or high-priority item that needs immediate
attention. Items in red typically represent major obstacles, problems, or
urgent tasks that require action to get back on track.
• Yellow: Signifies caution. This category includes items that may need
monitoring or action in the near future, but are not critical. Often, yellow
items are at risk of becoming red if not managed properly.
• Green: Represents tasks, projects, or areas that are on track or performing
well. Green items typically require no immediate action but should be
monitored to maintain their positive status.
• The stop light matrix/ GE Nine-Cell Matrix, also known as the GE
McKinsey Matrix, is a strategic tool used to assess a company's
business units or product portfolios based on two dimensions:
• Market Attractiveness and Business Strength. Each dimension is
divided into three categories (high, medium, low), creating a 3x3
matrix of nine cells. This model helps companies decide whether to
invest, grow, hold, or divest in specific business units or products.
• Dimensions of the GE Nine-Cell Matrix
• Market Attractiveness: This includes factors like market size, growth
rate, profitability, competitive intensity, and regulatory conditions.
• Business Strength: This includes factors like brand strength, market
share, distribution channels, product quality, and production
capabilities.
Example Scenario: A Diversified Consumer
Goods Company

• Imagine a large consumer goods company, “Global Household Inc.,”


with multiple business units:
• Home Cleaning Products
• Personal Care Products
• Health and Wellness Products
• Pet Care Products
• Analyzing Each Business Unit in the GE Nine-Cell Matrix
• High Market Attractiveness and High Business Strength (Top-Left Cell)
• Example: Health and Wellness Products
• Analysis: The health and wellness market is rapidly growing, and this business unit
has a strong market share with a trusted brand, wide distribution, and high
product quality.
• Strategy: Invest and Grow. Global Household Inc. should allocate resources to
expand its offerings and improve market penetration.
• High Market Attractiveness and Medium Business Strength (Top-Middle
Cell)
• Example: Personal Care Products
• Analysis: Personal care is a high-growth, attractive market, but Global Household
Inc.'s product line is still building brand recognition. It has some market presence,
but there is room to improve its market share and strengthen brand awareness.
• Strategy: Selective Investment. The company should invest strategically, focusing
on marketing, product innovation, and strengthening distribution channels.
• Medium Market Attractiveness and High Business Strength (Middle-Left Cell)
• Example: Home Cleaning Products
• Analysis: The market for home cleaning products is moderately attractive, with stable
demand but low growth. However, Global Household Inc. is a leading player in this
market with a loyal customer base.
• Strategy: Hold and Protect. Maintain current market position with moderate investment
to retain dominance, focusing on cost-efficiency and gradual innovation.

• Medium Market Attractiveness and Medium Business Strength (Center Cell)


• Example: Pet Care Products
• Analysis: The pet care market has medium attractiveness due to steady demand, but
Global Household Inc. has a modest share with room for improvement in both product
development and marketing.
• Strategy: Selective Investment or Monitor. Consider investing cautiously or monitor for
changes in market conditions before increasing resource allocation.
• Low Market Attractiveness and Medium Business Strength (Bottom-
Middle Cell)
• Example: Traditional Laundry Products
• Analysis: The traditional laundry products market has seen a decline with
shifts towards more environmentally friendly and innovative cleaning
solutions. While the company has a decent presence, the market is becoming
less profitable.
• Strategy: Harvest or Divest. Gradually reduce investment, focusing on
maintaining profitability in the short term. Alternatively, consider divesting
this unit if resources are better allocated to higher-growth areas.
Summary of Strategic Recommendations Based on the GE Nine-Cell Matrix

Business Unit Market Attractiveness Business Strength Strategy

Health and Wellness


High High Invest and Grow
Products

Personal Care Products High Medium Selective Investment

Home Cleaning Products Medium High Hold and Protect

Monitor or Selective
Pet Care Products Medium Medium
Investment

Traditional Laundry
Low Medium Harvest or Divest
Products
• Benefits of the GE Nine-Cell Matrix
• Resource Allocation: Helps companies allocate resources effectively
based on potential growth and current strength.
• Risk Management: By identifying areas with low attractiveness and
strength, companies can proactively divest or reallocate resources.
• Strategic Focus: Enables clear strategic focus on high-potential areas
while maintaining essential but less attractive units with moderate
investment.

You might also like