Strategic Planning General Electric Company -Myassignmenthelp.Com

Question: Discuss About The Strategic Planning General Electric Company? Answer: Introduction Jeff Immelt was appointed as the chairman and CEO of General Electric in the year 2001 after which slowly and gradually various events took place which required strict changes in the existing strategy for the company. Immelt handled the situation after deep analysis of the situation and after taking into account all the possible outcomes of the strategy. In what ways has Jeff Immelt redirected the strategy of GE? Answer The corporate landscape of GE was affected by a variety of events that took place soon after the appointment of Jeff Immelt as the CEO of GE (Skarzynski Gibson, 2008). Immediately, he confronted a series of events in the form of challenges which affected GEs business environment. The events included 9/11, and high profile corporate scandals like Enron, WorldCom which caused a crisis of assurance over financial reporting, corporate governance and business ethics. Few years later in the year 2008, GE Capital, which was the main growth source for GE, suffered from a major financial crisis which led to the increase in bad debts and asset write downs. As a result, the domestic economic growth and investors confidence underwent a major downfall. This led to the change in environment which demanded Immelt to change the emphasis of the organization to the creation of new products, services and market. Therefore, his prime focus was to redirect the strategy of GE with the help of con sumer focus, innovation and organic growth (Metzger, 2014). It was long-term transformation approach in which the complete business portfolio of GE was configured around two fundamental businesses of GE i.e. - specialty financial services and infrastructure with a view to redirect the performance goals set by GE towards profit maximization. The strategy also aimed at making technological innovation and customer service as the key strength of GE and also required to make necessary alterations in the structure, corporate culture and management processes. Immelt wanted the company to turn into high technology infrastructure company in the areas where GE had competitive advantage over the other similar organizations (Bartlett, 2006). Therefore, he developed a growth strategy depending upon five crucial elements- Technical Leadership- It was believed that technology was one of the most important drivers of growth for GE from the day it was founded. Immelt further committed to achieve future growth with the help of technical leadership. Services acceleration- GEs capability to serve its customers more appropriately was further enhanced by building service businesses on locomotives, aircraft engines, power turbines, medical devices, etc. while making high profits and increasing the entry barriers for other organizations. Commercial excellence- The main aim revolves around creating a world-class commercial culture in order to overlap the monetary orientation and engineering bias of the overriding business approach possessed by GE under Welch (Abetti, 2001). Globalization- Basically, Immelt focused on the opportunities which still remain underexploited in developing countries like India and China and committed to enlarge its sourcing strategy and market admittance globally. Growth platforms- It was recognized that in order to build new business opportunities that significantly exploit the trends with the view to achieve growth in the future by proper resource allocation. The central theme of Immelts strategy revolved around organic growth of GE which he aimed at 8% per annum in the year 2002. This aim was set with the idea of maintaining the revenue growth between two to three times of the world GDP. GE started concentrating on the businesses where they found strong growth potential like healthcare, energy, technology infrastructure, broadcasting and entertainment by reallocating resources from the slow growth businesses. This required complete analysis and division of market to recognize high-growth segments that have the capability to offer attractive returns to obtain a leading position in the market either by acquiring other business in a way such that various technical, financial and managerial resources are organized or by building upon GEs current businesses (Ocasio Joseph, 2008). Immelt placed emphasis in the areas where GE shared a competitive advantage over other similar organizations. Three sources of competitive advantage were recognized as global presence, customer focus and integrated solutions, innovation and technology. He identified technology as the most important aspect in growth of GE in the coming years and recognized the need to speed up the distribution of new technologies within the company. The customers were considered as the prime focus and attempts were made to build strong relationships with them along with taking proper steps for solving their problems on time and aimed at delivering high quality products. This led to the requirement of increased investment in the marketing function of the company which also includes the appointment of capable marketing executives. A number of evolving global trends were identified by him like the requirement of improved infrastructure, the demand for sustainable infrastructure, opportunities in the developing market and the ageing population. Moreover, GE provided additional financial support to its research and development capabilities. Therefore, it can be con cluded that the whole strategy focused on creating differentiation advantage through the introduction of innovative products and services and improved customer focus. In the year 2006, Immelt recognized General Electrics growth engine as a six-part process which was distributed in the entire organization and also turned out to be an important source of communication to their external constituencies. It involved leadership in technology, globalization, commercial excellence, customer value, innovation and growth leadership (Lea, 2005). Under the business portfolio, Immelt adopted a value creation approach and opted for selected expansion. The main focus was shifted to the long-term earnings along with undertaking those mergers and acquisitions activities which were essential for worldwide growth. It aimed at exploiting all the available opportunities in various areas like infrastructure, healthcare and environmental conservation (Gunther, 2007). As far as performance management is concerned, the customer satisfaction was considered as the prime focus and the investment criteria for marketing was subsequently increased. The organizational structure achieved a level of flexibility as different businesses of the company were combined together and was reduced from six to five. This led to greater level of ease in knowledge sharing and cooperation among the divisions. Moreover, the strategy was influenced to great extent with the personality of Jeff Immelt as he was the man of the people and also an idealist (Ireland, et. al. 2001). He used to encourage people by teasing them, being polite and sophisticated and praising them for their efforts which acted as non-monetary motivation for the employees. This can be better with the help of a BCG matrix also known as growth share matrix which determines the position of business units within important determinants of profitability. There are four categories in the model dogs (low market share, low growth rate), question marks (low market share, high growth rate), stars (high market share, high growth rate), cash cows (high market share, low market growth) (Hanlon, A. 2017). Power, energy management, oil and gas and renewable energy business of the company are stars in the BCG matrix with high growth rate and market share and therefore comprise the areas of competition for GE. GE can use innovative technologies for competing in these industries. Other businesses such as transportation, healthcare, capital and financial business and lighting and appliances are the question mark of GE (Marketing 91, 2018). To what extent is the strategy aligned with a. The requirements of the 21st century business environment? b. GEs resources capabilities? Answer :(a) The business environment of the 21st century placed a challenge before Jeff Immelt to find out the probable sources of profit for GE (Pearce, 2009). The time when Immelt took over the charge of GE was the end of the period when the market economy was growing with optimism and confidence and now it was heading towards a downfall (Kikoski Kikoski, 2004). Under Jack Welch, GE identified the value can be created by the elimination of underperforming assets, reduction of cost and by taking the full advantage of the opportunities offered by the financial services (Slater, 2003). But these sources were completely utilized and of no use thereby requiring Immelt to look into new areas for growth. He further identified that in order to progress in the existing market situation, the growth needs to be organic growth (Prokesch, 2009). Therefore, with a view to achieve profitable organic growth, various important global trends were recognized by him that would offer immense business opportunities for GE (Grant, 2016). These trends were- demography or aging of the worlds population, infrastructure, emerging markets and environment. The changing business environment necessitated GE to prepare itself for faster growth rather than adopting a slow growth process. It focused on reallocating resources to the areas where there were chances of growth while taking the complete benefit of the evolving global trends (Fernando, 2012). Therefore, the growth strategy adopted by Immelt concentrated on recognizing new growth platforms in new business areas or as the extensions of prevailing businesses (Magee, 2009). The strategy can be better analyzed with the help of PESTLE analysis. Political Government support for digitalization of industries created opportunities for GE to bring improvement in its business. Government also supported for the shifting to renewable resources that affected GE Renewable Energy and Oil and Gas operating segments. Therefore, political factors aligned the strategy in a way such that the growth and expansion opportunity can be captured (Kissinger, 2017). Economic Full exploitation of the strategic synergies was planned through proper control on the diversified portfolio in order to achieve its growth objectives in the emerging economies. Growth in GE was seen as a result of the increase in the disposable income which resulted in increased purchase of lighting products and consumer appliances by customers. However, it also required the strategy to be concerned regarding the increased competitive rivalry in conglomerate industry environment. Social The changing business environment also changed the needs, wants and expectations of the customers. With a view to become customer oriented, Immelt started valuing the time spent with the customers and took steps to build strong relationships with them along with considering their problems (Wilson, 2007). Attempts were made to increase the customer value by providing products with support and technology services. Such products will also help GE to achieve new heights in the international markets along with meeting the local market needs. Technological Immelt ascertained that technology was one of the major factors that will lead the organization towards growth but it is possible only after expansion of R D budgets. This was clearly revealed in the Imagination breakthroughs which were promising projects related with technological research and development and were capable of generating $100 million sales over a period of three years. Immelt believed that technology will act as the key driver of sales and future growth for GE (Barlett, Hall Bennett, 2007). Environmental GE has made the investment of billions of dollars for improving and protecting the environment. Wind energy, solar and nuclear power also comprise the significant areas of experience for GE. Sustainability is embedded in the business strategy and culture of GE. Operations of GE are spread over 120 countries which makes compliance with various laws very important. Compliances are infused in every aspect of the business of GE as deals in both national and international business (General Electric IRR, 2018). After the identification of growth platforms, the next step aims at acquiring a leading position with the help of some strategic acquisitions and organization of various technical, managerial and financial resources. The external business events held in the period 2001-09 like Twin Towers destruction, scandal of the Tyco International, collapse of Enron and the financial crises of the year 2008-09 led to increased responsiveness in corporate governance subjects. In the matter of GE, the investment committee has the opinion that the company has not reported their profits in an open and transparent manner which ultimately reduced shares of GE. This led to a drop in the rating of GE from AAA to AA+ (Gall, et. al., 2010). Answer (b) The reason behind the success of GE is its ability to constantly adapt its management systems and business portfolio to meet the demands and opportunities of the changing business environment (Rothschild, 2007). The core competency of GE lies in the recruiting and nurturing of the best people from the globe along with cultivating them in order to develop desires to do things better every day. Moreover, the company makes the selection, adaptation and implementation of the best practices that are most relevant to its immediate future. The management practices are changed and new methods are adopted in accordance with the need (Martin, 2014). The best efforts of its employees along with the application of best practices allowed the full utilization of the resources and capabilities of GE by applying new thought processes, knowledge and innovative skills in order to implement their strategy emphasizing on customer focus, innovation and organic growth. Its success is the result of using correct ideas and innovation and then applying required expertise in managing and formulating the ideas into successful investments. Immelt particularly focused on supporting those projects that provided large-scale market potential. This was clearly revealed in the Imagination breakthroughs which were promising projects related with technological research and development and were capable of generating $100 million sales over a period of three years. Immelt believed that technology will act as the key driver of sales and future growth for GE. He made proper analysis of the evolving trends in the world and developed a complete understanding of SWOT (strengths, weaknesses, opportunities and threats) and then made technical leadership as its competitive advantage. Therefore, the strategy seems to be appropriate with the resources and capabilities of GE. As a result of GEs diversification and variety of technology, more customers are now engaged with the company and share an immense relationship. One of the important features of the organizational change is that it led to increase in coordination between businesses in order to take full advantage of new opportunities for the purpose of bundling the various goods and facilities and sharing resources and capabilities. GE has now make it possible in a way that now such customer orientation, bundling and technology fits in along with increase in performance with cost efficiency and quality. Huge investment was made in the research and development department which also resulted in new products like sodium battery and Smart Grid. The managerial capability was optimally utilized in a manner so as to increase the efficiency along with the reduction in costs. This led to increase in customer satisfaction and building of brand reputation. What organizational changes has the new strategy necessitated? Will GE be able to successfully execute the new strategy? What alternative strategies should GE consider? Answer: The new strategy implemented by Immelt required some changes to be made in the business portfolio, management systems, organizational structure and the adoption of new methods to value creation and competitive advantage (Hitt, Ireland Hoskisson, 2008). The new strategy placed more emphasis on customer focus, innovation and organic growth, therefore, various systems and structures followed by GE needed to be realigned in order to be capable of managing and handling complex circumstances of diversified businesses along with upholding the performance and efficiency (Kumar Rangan, 2012). Major structural change was initiated in the year 2002 due to the focus set by Immelt on new growth platforms and greater cross integration. The regrouping and reorganization of GEs division into broad based sectors made it easier to identify numerous connections among the businesses. GEs broad markets in which it had a market leadership were: GE Capital, technology, industrial and commercial, infrastructure, NBC Universal and healthcare. For making the organization more customer oriented, GEs marketing function was revitalized and various customer-oriented programs were put in place. This led to the transformation of the business from being operating efficient to become a marketer. Moreover, the business portfolio was altogether reshaped by developing opportunities with high level synchronization across multiple organizational divisions. This led to the increase in organizational complexity of GE along with complexities in the performance management as it created difficulties in linking individual incentives with the performance of the organization. Furthermore, organizational structure was changed for the purpose of integration of various businesses but this led to the coordination problem as it was beyond cross selling. The organizational structure became more complex due to the fact that the company was constantly engaged into the acquisition of new businesses to accelerate the growth in know-how and energy sector . The basic requisite of enterprise selling and customer orientation is a simple structure. In order to implement the strategy productively and successfully, Immelt needs to look for a way such that the complexity of the organizational structure can be minimized while having the capability to purchase new businesses to grow in the market (Brady, 2005). It is believed that the strategy adopted by Immelt will be successful but in order to make it possible in the era of 21st century, it is necessary that GE shift its emphasis to sophisticated management, risk taking and innovation (Petrie, 2011). In this way, they will be able to provide new variety of goods and services which will also provide them the opportunity to enter into new markets. Efforts must be made with the view to reduce the organizational complexity which in turn will establish stronger relations among the employees of the organization. Also, the combination of innovation and efficiency will provide success along with the opportunity to meet the demands of constantly changing environment (Bagley, 2015). It is expected that GE will certainly play a leadership role as it is engaged in conglomerate business model and will uphold its significance (Leinwand Mainardi, 2012). The funds acquired from the sale of the businesses will enable GE to reinvest such funds in innovation and technology. Moreover, GE must aim at reducing the complexity of organizational structure and should set its focus on specialization and DE conglomerating (Colvin, 2015). Approximately 41% of the total revenue of GE, between 2000-2015, was contributed by GE Capital but with the view to focus on the high- value industrial businesses, it sold most of the GE Capital assets to Wells Fargo and only retained the financing verticals (GE Capital Aviation Services, Energy Financial Services and Healthcare Equipment Finance) that were directly related to GEs industrial businesses (Reuters Kelly, 2015). As an alternative strategy, GE should always come forward in developing new systems and should not consider the breaking up of GE because that group of businesses has resulted in the growth, benefit and competitive advantage for the company (Govindarajan Trimble, 2012). The company and shareholders benefit from the working systems of GE, therefore, they must be continued. The strategy can be reproduced by GE by working with best and most advantageous performers of the market (Samaha, 2014). Also, GE should bring more transparency within the organization and between the clients and shareholders along with providing detailed financial reports for proper information. After Immelt, the new CEO John Flannery is expected to make changes in the strategy to attain the new heights of success through rejiggering GEs portfolio and cost cutting. Furthermore, in order to achieve sustainable growth Flannery can change the strategies of its most successful lines of business by engaging in new grow th vectors and by investing in capabilities that create new sources of growth (Cohan, 2017). Moreover, the new strategy of the company includes shedding $20 billion in assets in the next two years (Lohr, 2017). Intensive marketing tactics can be adopted for improving relations with clients and thereby strengthening the subject matter of ecomagination which will further contribute towards GEs brand appeal (Hill, Jones Schilling, 2014). Moreover, the developing world continuously offers various opportunities for other businesses handled by GE like entertainment as the population growth leads in expansion in demand. The company is now focusing on the prime business lines- aviation, power and healthcare and is expected to exit majority of other business lines (Cox, 2017). Conclusion Jeff Immelt implemented the strategy tactfully by making the requisite changes in the organizational structure, management systems and taking into account the adoption of new methodology to achieve success. The strategy is expected to achieve greater heights in the future if the inconsistencies are also given proper consideration. Some changes are required to be made in order to remove the organizational complexity and to make the organization prepared to take up the available opportunities and face the challenges in the market. 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