General Electric Case Study
In today’s competitive business environment, companies are facing various challenges and opportunities which affect their business growth and performance in the economy. In this paper, it is discussed that General electric is a company and its CEO is Jeff Immelt which is focusing on understanding the requirement of market and redirecting the strategies according to it. In addition to it, this report also focused on determining the requirements of 21st century by analyzing the business environment (Zhang, et al., 2016). The GE resources and capabilities are also evaluated in relation to redirected strategy which helps in providing the competitive advantage to the company. On the other side, Jeff Immelt also focused on necessity to adopt the new strategies for successful organizational change. However, this study will help in determining that GE will be able to execute the strategy efficiently and effectively. Moreover, various alternative strategies are also recommended to the GE for consideration in order to achieve the sustainable position in the competitive market.
Jeff Immelt was appointed as a chairman and CEO of GE in 2001 under which he redirected existing strategy into a new strategy in different and efficient manner. This redirecting the strategy of GE was made because the company was facing the challenges in the corporate market, such as the 9/11, Enron, WorldCom scandals that was done by the high profile corporate organizations. The financial crises hit in the 2008, which had affected the primary growth of the GE (Yoshino & Taghizadeh Hesary, 2014). The impact of these events can be considered as an issue which company faced in terms of slowdown in domestic economic growth of the company in the economy. At the same time, Jeff Immelt need to focus on cutting the cost by producing a new products & services as well as marketing them in efficient manner and eliminating the non-performing asset due to changes in the competitive environment. In concern to it, Jeff required to redirect the strategies in systematic manner so that it develops a long-term transformation strategy for the company (Kumar, 2016). The redirected strategies are involved with the GE’s business portfolio, refocusing on the GE’s competitive advantage, developing customer services and corporate culture. This development and innovation in strategy help company to sustain in the competitive environment in terms of its organic growth, customer focus and innovation for achieving the growth. Jeff Immelt also committed to GE in 2002 that the organic growth rate will be 8% per year because it set organic growth as its primary goal of the strategy.
While studying the market environment, it identified some rising global trends that were developing an opportunity for growth and development in the market in respect of ageing population, demand for sustainable energy & effective development in the infrastructure and so on (Chen, et al., 2015). In context to organic growth strategy, the old ageing people were dependent on the healthcare products and services as a demographic opportunity. GE predicted that there were several investments in the infrastructure and got an opportunity in production of gas, oil, aviation and other energy products. On the other hand, it was also evaluated that nowadays emerging market countries, like China, Russia, Europe, India, and South East Asia would be provided as a business opportunity for GE and this will be helpful for increasing the GDP growth.
In addition, GE also developed many new growth platforms as a core competency for the strong positions in jet engines that are water management, security system and aerospace. While analyzing, it was found that GE was facing problems in terms of growth and development as well as it also having less opportunity due to which less profit or loss was generated from its business (plastic business). For the growth of GE business, the technology was seen as future key drivers for GE which help in successfully focusing on managing the product innovation and quality improvement.
Jeff Immelt wanted to build value for consumers by providing advanced technology, related services by delivering superiors and achieving the high growth rate in the market for the services (Bresser-Pereira, et al., 2014). The growth platform could be helpful for GE in terms of extension of the existing business or entirely into new commercial areas. A GE found that growth strategy will provide high growth potential by introducing a series of divestments and strategic acquisitions. In the 2013, the GE also introduced a linkage between the ‘internet of things’ and big data analysis which was known as an industrial internet.
The GE future growth was only dependent on the technology so there is a need of launch imagination. An essential component was seen for the product innovation and quality improvement by using the new technology and ideas. At the same time, GE expended their capability for doing the research and development with a good financial support. Jeff Immelt was also focused on customer according to their growth strategy to get success in the continuous growth. In this strategy, he was making a several customer oriented programs by the creating the GE’s Commercial Council (Wang, et al., 2013). The new business environment of GE, was identifying the customer needs and wants in order to offer the product which satisfy their needs. Jeff Immelt decided to spent time with customer in order to understand their needs so that company enhance its ability to focus on customer by bundling the products and services which are both technology and support services. In addition, customer focus strategy is effective for enhancing the customer value and their offering by combining with different businesses. However, the overall customer focus was enhancing the value of the business in front of the customer by providing customer service and solutions.
By using this customer focus strategy; Jeff Immelt made one of the innovative valuable strategies across the company. The efforts were becoming helpful to the company’s product selling and bundling to lead the enterprise in the market (Lendel & Varmus, 2011). At the same time, the main focus of the strategy was on the creating advantages of differentiation and through the customer focus on the product and service by the innovation. In this differentiation strategy, the innovation was communicated to the customer for the purpose of selling the product and service. The overall capacity to serve the customer of GE was increasing the chances of the achieving the goals of the organization that was introduced by the Jeff Immelt.
Mostly, Jeff Immelt used the strategy for the purpose of external business development and this strategy was greatly aligned with the essential resources and capabilities. During the years 2001 to 2009, there were several external business events which have occurred such as Enron’s collapse, the Tyco International Scandal, destruction of the Twin Towers. At same time, the financial crises of 2008-09 were also highlighted increasing awareness in the corporate governance. It was believed by investment community that GE has not been provided with the proper sources for generating high or better profits (Freng Svendsen, et al., 2011). It was also realized that it was an economic instability due to which other opportunities for generating the potential profit and overall profits are not transparent. It was resulted into the decrease in the share price of the GE was because of this particular issue.
At end of this era, Jeff Immelt wanted to take a rein on the general Electric because the market economy was sloping downward with the assurance, optimism and enlargement. The GE wanted to restore or build up the confidences of the investors and want to maximize the value of the company but the responses were duplex with the aim. The investors of the GE are communicating to the company regarding more details about the financial reporting. For achieving the growth in the emerging economy, there was a huge need to get influence with the expanded portfolio information (Wilson, et al., 2012). That would extend strategic synergies for the economic growth. GE was invested a high amount for the Research and Development for the new product such as ‘sodium battery’ or Smart Grid that was helpful to build brand reputation in the emerging financial system. The managerial capability was also exploited by the GE, for the purpose of cost reduction and increase in efficiency level in order to satisfy the customers with the organisation development.
According to the Jeff Immelt, the organic growth could switch by the primary driver of growth in the current market situation. It was identified that there were many opportunities for in this emerging global trends such as fear over global warming, nanotechnology, the advent of biosciences etc. Thus, the position of the GE had a strong growth with changing in the environment.
The resources and capabilities of the GE was the key success for the company because the resources are massive in size and it had an ability to adopt new product easily. In the last few decades, GE was adopting new business portfolio as well as company was also adopting the demand and opportunity for its management in this changing business environment. The GE will achieve the successful with the help of innovative ideas and experiments of the research and development team for the new product development according to future demand of the customer (Hervas-Oliver, et al., 2014). The technical leadership of the GE also proved that resources were the competitive advantage for the company, so it was huge barrier for the new entrance in this industry.
In spite of placing greater emphasis on organic growth, innovation and customer focus, GE’s structure and systems must be realigned so that the crucial circumstances can be managed well and as well as their growth and efficiency. In 2002, there was a serious organisational change due to the focus of Immelt on more cross integration, new growth platforms etc.
GE divisions were rearranged into less number of board based sector. There were 5 sectors and each focused on wide markets by 2008. They had a market leadership and better consumer contribution. The 5 broad markets were as follows: GE capital, healthcare, technology, infrastructure, NBC Universal and industrial and commercial. It could be much simpler to recognize the different links among the business by recategorizing the different business into their markets.
GE’S marketing function was reinvigorating by shifting the focus on customer business which made an enormous effect. Among the number of consumer- focused programs, most recognised one was GE’s Commercial Council. Due to the focus on customer business in spite of operating efficiently necessitated the managers to become more of a marketer. The fundamental initiative of the six part growth process in sales and marketing was created by reconstructing GE’s business portfolio and required acquisition. There existed a need of high level coordination across the different organizational units. This introduced a situation of more complexities, and more complication in the management of performance, as it was hard to align the individual’s performance with individual incentives.
The introduction of the new strategy created new issues which resulted in organisational changes. Immelt altered the organisational structure to join the different businesses, yet this lead to a crucial situation as they had gone afar cross selling to enterprise selling. The organisational structure became more difficult due to persistently obtaining new businesses to further fuel growth in technology and energy.
Giving emphasis to enterprise selling and consumers demanded a simple structure. Immelt needs to look for an output to change the organisational structure if he wants to execute his strategies successfully. This will lead in reduction of complexity, and at the same time will help to acquire new businesses for progress.
To boost up the growth, it was a challenge for immelt to reunite GE’s passion of profitability and cost control with nurturing the innovation. Innovation cannot be done easily as it involves risk and threat as well, especially when there are huge, long-term projects. It is seen that when there are big and more opportunities and chances for growth there is a need of cooperation and support from divisions. However, if the required support is not present there are chances of failure. The imaginative breakthrough initiative was created so that the main innovatory projects can accept the investment required to exploit their potential. The main objective of Immelt was to achieve closer integration of technology development.
There was a need to reconstruct the marketing function of GE so that the company became more customer-driven. the new senior position of CMO was created, there was an introduction of a new program called Experience Commercial Leadership Program, and the GE’s Advanced Marketing Seminar was also been recreated. In order to create GE’s sales to customers in markets outside the US, one of the nine business divisions, the GE Global Growth and Operation was made to provide integration and focus across GE’s eight remaining business divisions.
Between 2002 and 2008, Immelt altered many vital changes, which was introduced by Welch in 1980s. There was a need to bunch up the products and services into systems to facilitate more cross-business integration.
Immelt strategy of greater focus on technology, customer focus and increased integrity will be successful. It is necessary for GE to shift their focus to risk taking, innovation so that it can deliver new products and services. Immelt should dispose the companies with low profit, returns and progress, and should emphasise on those which can provide possible growth platforms in future.
The alternative strategies which can be used by GE to reduce organisational complexity are by introducing competitive based pay. This will help to link all the levels of employers from managers to base workers. Additionally, this will also result in cooperation through all levels of employment ladder. Immelt’s strategy to join efficiency and innovation together will help GE to exploit the opportunities of a dynamic world.
Through the funds which were acquired from selling some of the GE’s businesses they will be able to focus on reinvesting the technology and innovation. If GE focuses on a single segment of their business it can be safe from the crucial organisational structure. Integrating the business with its portfolio can be turned out to be competitive advantage for GE. There is a total of 32% of total revenue contributed by the capital of GE. This results in creating a steady source of revenue.
Another thing GE can do is that it should not break up. Doing so, will result in losing of the major or vital competencies and it won’t be able to relish the current market position.
Another strategy that can be effective is by enlarging the requirement of other GE’s business. By the increasing need for product and services, infrastructure there come the opportunity for energy, rail transportation, water and oil for GE. There are new issues like global warming, scarcity of water that leads to create a need for technology and new innovatory responses to reduce these serious issues.
Another reason of not breaking up could be that the group of businesses of GE are quite beneficial, progressive and valuable. New and sustainable systems are required to be developed. The strategy of GE “operating with the best, most beneficial market performers” should be recreated.
There needs to be more transparency among the clients and shareholders. The financial reports can include more details for the experts and shareholders. Insider information like the strategic planning can be showed to the audience. The relations with the clients can also be strengthened by intensifying marketing. GE should focus on its two main vital businesses and get relived from the industrial and financial businesses. GE Capital should be horizontally intermingled to GE’s industrial business.
Another thing can be that, GE should start to dispose the underperforming and non-care businesses. Since 2004, there is a negative growth from the commercial lending, NBC Universal, and the customer and industrial businesses which needs to be divested. Doing so, provide capital to invest in businesses having possibility of high growth.
Another strategy which can be beneficial is ecomagination programme. It not only produces more eco friendly and energy efficient products, but also helps to reduce the water usage. It also helps to reduce the CHG emissions.
GE should also do away with the traditional silos and focus on inventing new ones. doing so, will helps the company to combine activities such as designing creative and innovative products.
GE can also divide the company into stand-alone businesses and can even go for equity distribution to already existing shareholders in the new firms. GE Capital is now considered as more risky as it is difficult to measure and analyse the company. There is enormous and huge shareholder value in GE which is still unrealized, but its being held by risk premium.
Additionally, there is a plan to split the company into energy, technology infrastructure, NBC Universal and let them prosper on their own. Efforts can also be made to deleverage GE. Its future is not in lending. However, it is in other things and areas like medical services, technology infrastructure, etc.
From the above study, it can be summarized that Jeff Immelt a CEO of GE aims to redirect the strategies in order to develop and grow the business in the competitive environment. While studying, various strategies were identified which are redirected strategies of Jeff Immelt such as customer focus strategy, organic growth and innovation strategy. These all strategies helped in understanding and identifying the requirement of 21st business environment according to which GE’s business resources and capabilities are managed and maintained. Moreover, GE must consider alternative strategy i.e., competitive based pay which help in developing a relationship between base workers and all levels of employers (managers). For managing the organizational changes, company need to reconstruct the marketing functions as well as focus more on customer as this help in achieving the high integrity. At last, it can be concluded that GE required to consider the redirected strategies and implement them efficiently and also required to consider the other alternative strategies i.e., competitive based pay.
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