The Business Book

193

The MABA matrix

provides a means

of identifying which

business units should

be grown, held at their

current level, or sold.

Those at the top left of

the matrix have a high

business and market

attractiveness, and

should be grown. Those

in the center have

medium ratings for both

factors, and may warrant

selective investment.

Those at the bottom

right have low scores for

both factors, and should

be harvested for cash,

and sold or liquidated.

See also: Study the competition 24–27 ■ Protect the core business 170–71 ■ Good and bad strategy 184–85 ■ Porter’s five
forces 212–15 ■ The value chain 216–17 ■ Product portfolio 250–55 ■ Ansoff’s matrix 256–57

WORKING WITH A VISION

company McKinsey & Company
for conglomerate General Electric,
which had 150 business units.
The MABA matrix is a
systematic, consistent method for
a decentralized corporation to decide
how to share its capital among the
various business units by assessing
each unit’s profitability and market
position. Past methods of budget
allocation relied on each business
unit’s forecasts for growth and
profitability, which were subject to
error. Although designed for large
companies, the matrix can also be
used by smaller companies to assess
the strength of a product line or
brands, rather than business units.

Using the matrix
The matrix allows a company to
judge each business unit on two
factors to determine its future
success: the attractiveness of its
industry or market, and the business
unit’s competitive strength within
that industry. Market attractiveness
is rated according to the market
size, growth rate, profitability,
and level of competition. Business
attractiveness is rated according
to the unit or product’s current
and growth level of market share,
its brand strength, and its profit
margins relative to rivals.
By plotting the attractiveness
of an industry on one axis and the
competitive position of a business
unit in that industry along the
other, large corporations can
compare the strengths of diverse
business units. The matrix
condenses the value-creation
potential of multiple business
units into a single, digestible chart.
Each business unit or product
must be evaluated, using data
analysis, and placed within the

matrix according to their market

and business attractiveness. This

sorts units into three categories:

those that should be “grown”

through investment, “held” (invested

in selectively), and “harvested” for

cash and either sold or liquidated.

Sorting units into these three

categories provides a starting point

for strategic analysis, and for

determining where to invest to

yield the highest growth. Over

the years, the criteria for assessing

industry attractiveness and

competitive strength have grown

more sophisticated. But even today,

most large organizations with a

formal approach to modeling their

businesses use the MABA matrix

or one of its derivatives. ■

MARKET ATTRACTIVENESS

BUSINESS ATTRACTIVENESS

High Medium Low

Low

Medium

High

GROW—

invest and

grow

GROW—

invest and

grow

GROW—

invest and

grow

HOLD—

invest

selectively if

cash allows

HOLD—

invest

selectively if

cash allows

HOLD—

invest

selectively if

cash allows

HARVEST

for cash,

then sell

HARVEST

for cash,

then sell

HARVEST

for cash,

then sell

Why Kraft gobbled up Cadbury

When Illinois-based Kraft

Foods bought British chocolate

manufacturer Cadbury for more

than $19 billion in 2010, it was

because it saw Cadbury’s

competitive strength in an

attractive industry. Cadbury

would be positioned at the top

left of the MABA matrix. Kraft

was already the world’s second-

biggest food business with

strong brands of its own, but

it was generating 80 percent of

its sales from the US and it was

eager to capitalize on the

potential for growth elsewhere

in the world. In the first half of

2009 alone, 69 percent of

Cadbury’s sales growth came

from emerging markets. The

British company offered Kraft

greater access to these markets,

including the BRIC economies—

Brazil, Russia, India, and China.

Cadbury also had some of the

world’s leading chocolate,

candy, and chewing gum

brands. Cadbury’s Chocolate,

for example, was already a

leading brand in India.