Answer – GE Business Screen

• Lesson
• Exercise
• Answer

This is the suggested answer to the GE Business Screen exercise on Northwind Industries.

Unit A, Commercial Heat Pumps: Build Selectively

Industry attractiveness comes to (5×0.3) + (3×0.3) + (2×0.2) + (5×0.2) = 1.5 + 0.9 + 0.4 + 1.0 = 3.8 — high. Business unit strength comes to (2×0.4) + (2×0.3) + (4×0.3) = 0.8 + 0.6 + 1.2 = 2.6 — medium. That places Unit A in an attractive industry with a middling position: build selectively. The cost position of 4 is the asset to build on, so the instruction is to pick the segments where low cost wins the order, rather than fund a broad assault on a market where several better-funded rivals have just arrived.

Unit B, Industrial Fasteners: Manage for Earnings

Industry attractiveness comes to (1×0.3) + (4×0.3) + (4×0.2) + (2×0.2) = 0.3 + 1.2 + 0.8 + 0.4 = 2.7 — medium. Business unit strength comes to (5×0.4) + (4×0.3) + (4×0.3) = 2.0 + 1.2 + 1.2 = 4.4 — strong. A strong unit in a middling industry: protect the position, manage for earnings, and do not fund growth the market cannot deliver.

The Harder Question

Unit B scores higher overall, and it is the wrong place for the investment budget. Unit B is where the cash is generated; Unit A is where it should be spent. A strong unit in a slow market cannot convert extra investment into growth, while a medium unit in a growing market still can — provided the spending is focused. This is the point the grid makes and a scorecard would not.

The same portfolio decision, judged on two simpler axes, appears in the Boston Matrix exercise.