Questions:
1.In what ways has Jeff Immelt redirected the strategy of GE?
2.To what extent is the strategy aligned with the requirements of the 21st century business environment? and GE’s resources & capabilities?
3.What organisational changes has the new strategy necessitated? Will GE be able to successfully execute the new strategy?
4.What alternative strategies should GE consider?
Competitive strategy and innovation are some of the most important aspects of an organisation. In order to dominate the business, it is necessary that every manager develop a strategy that helps them to understand and analyse the market in an effective manner. The essay highlights the strategies adopted by General Electric (GE) under its new manager. General Electric is an American multinational company situated in New York. The company is a public undertaking that was founded in 1892, by Thomas Edison. It is famous for manufacturing aircraft engines, electrical distribution and energy, gas and so on (Ge.com. 2017). The essay analyses the extent to which the new strategies adopted by the company were aligned with the business environment of the 21st century. The resources and capabilities of GE are discussed along with the organisational changes that were required for incorporating these strategies. Alternative strategies developed by the company are also discussed in the essay.
Leading a reputed company such as GE is always a challenging factor for any person. The fact that Jeff Immelt took over the managerial responsibilities of the company from Jack Welch proved a bold decision for the company. Some of the declarations that were made by the new manager included a long-term transformational strategy for the company. The reason for adopting this approach was due to the bombing of the World Trade Centre in 2001. According to Hill, Jones and Schilling (2014), the transformational strategy involves transformation management strategy as a critical component of modern programs. It seeks the support of the individuals as well as the organisation in order to change the functioning of the organisation. The acceptance of the changes comes after its implementation. The benefits of the changes help an organisation as well as an individual to enhance the productivity and skills.
In the case of GE, the transformational change that was adopted by Jeff Immelt involved the reconfiguration of the business portfolio of the company. Apart from this, the manager also focused on directing the performance goals towards the revenue goal of the organisation. This is an important decision given the fact that the city had suffered financial loss due to the bombing of the World Trade Centre. In this regard, the focus of the company was drawn to an innovation of products, particularly in the technological field. The competitive advantage of the company can be maintained by the introduction of new technologies that can help in the growth of the company. The innovative nature of the business can also help in maintaining customer satisfaction by providing proper service. Till 2001, GE had been under Jack Welch who had been considered as one of the best managers of the company. Hence, the organisational structure and culture during that period also needed to change. This is mainly because of the advancement in the business world due to the emergence of new technology and competitors.
However, the high point of the strategy came in April 2015. A decision was made regarding the selling of most of the capital of the company. Despite such ambitious changes in the strategies of the company, the sales performance of the company had lagged considerably. The below figure highlights the changes that took place in the company since the inception of the managerial role by Immelt.
From the analysis, it has been seen that despite the efforts of Immelt, the company had not been able to meet its target. During the early days of his tenure, Immelt had promised to reach new heights with GE. The increase of sales, return on capital and earnings had been the target by the new manager. Instead, not only these but also the stock of the country failed to reach a considerable position. From 2001 to 2014, the sales of the company fell considerably. Hence, the challenges faced by Immelt were more than the expected challenge. The shareholder value maximisation was also not approved off by the new manager. The emphasis was more on transforming the business portfolio of the company. Immelt wanted to identify the sources of profit of the company. In the words of Spulber (2007), the profit-making ability of a company can help it to progress in the competitive market. It was seen that GE had created profit through the process of cost reduction. This means that the assets that were invaluable were discarded by the company. During the time Immelt took over this source of creating profit had been already mined out by the company. Hence, Immelt managed to identify four trends based on the poor growth in the economic world.
The four global trends include:
Demography: With the increase in population, people will need to purchase products that are important in everyday life (Eden and Ackermann 2013). GE manufactures all type of products including entertainment products. Hence, the increase in population will create more demand for these units for the younger generation.
Infrastructure: The infrastructure of the company provides an opportunity to invest in energy consumption, oil and gas production, hydrological development and so on. This can be used as an opportunity to meet the targets of the company (Paley 2007).
Emerging markets: Immelt manage to identify the developing countries that can add value to the growth of the company outside the USA. The GDP growth rates in countries like Australia, India and Russia are three times more than that in other countries.
Environment: Environment challenges are always an important threat to any business (Galavan, Murray and Markides 2008). Challenges such as global warming, scarcity of water and conservation are main factors that Immelt have identified as problems in the business.
According to Johnston and Bate (2013), the selected strategy of an organisation needs to align with the tactics of the organisation. It is important for every business enterprise to ensure that the strategies undertook to address the requirement of the organisation as well as the factors that affect business. These factors can be both internal as well as external. Dealing with the changing business environment is one of the important factors that need to be considered while formulating the strategy. In the case of Immelt, the strategic decisions that were undertaken by the manager needed to align with the business market of the 21st century. La Piana (2004) stated that in order to formulate plans and strategies keeping in mind the 21st century, it is necessary that every organisation focuses on three important aspects. These aspects include competition, technology and innovation. Along with this customer focus and global presence are also important in considering approaches of the 21st century.
In the case of GE, Immelt identified the advent of technology as one of the major factors that can instigate the future growth of the company. The reliability of the technology and the fact that Immelt considered it as important is clear from the fact that he managed to increase the budget set for research and development (R & D) of GE. The transformation began with an upgrade made in the R & D centre in Japan. The construction of new R & D centres across the countries of business also demonstrates the importance given by the managers in the development of technology. Under Immelt, the company had over 37,000 technologies working in the all the areas of the country. The focus was researching on programs that provided fewer, bigger and long-term prospects. Immelt also focused on technology as well as an approach to innovation. According to Carlopio (2010), the breakthrough in the innovation of GE consisted of diagnosing cure for healthcare patients and securing the technologies that are used. Apart from the technologies, the focus on customers is also aligned with the strategic decisions of Immelt. Despite the financial crisis of 2008, GE managed to have increased revenue of $17.8milion. This is due to the cutting down of the expenditure in the R & D department. Immelt ensured that the short-term and long term borrowings were reduced in order to ensure that more cash was flowed in the manufacturing of the product.
Customer orientation and value of time of the customers are two most important factors for gaining the satisfaction of the customers (Weatherall 2013). In the view of Immelt, these factors along with building relationship with customers are also important in order to retain customer loyalty. During the start of his managerial career with GE, Immelt focused his attention on the customer satisfaction level that was required for the organisation. The increase in the involvement of customers also resulted in the increase in revenue of the company. The marketing function of the company generated more responsibilities that included the hiring of talented marketing executives and formulate a process that can be used to identify the new products and services. One of the major applications related to the customer management of the organisation is the fact that it takes into consideration the needs of the customer as a whole (Grant 2014). GE focuses on providing bundling products that support services to customers. For example, a healthcare centre requires lightning, gas, turbines or any other products that are manufactured by GE. GE even started cross-business marketing campaigns to secure more funding.
In order to maintain the resource and capabilities of the company, Immelt set his focus on increasing the growth rate of the enterprise. As stated by Farkas (2016), every manager needs to make strategies that address the growth of an organisation. The growth of an organisation can be attributed to the resources and capabilities that it possesses. Immelt focused on organic growth in order to attain the organisational goals. The organic growth rate of the company was attributed to about 8% per annum. This was an improvement given the fact that the growth rate under the former manager was only 5%. Apart from the growth rate, the earning of the company also improved. Immelt stated that GE can grow two to three times faster with the increased revenue. In this regard, the resources of the company can also grow. With the existing and increase in revenue, the company have managed to expand the market presence of the company. Ivanaj et al. (2015) observed that in order to survive in the business market of the 21st century, it is necessary that every business expand the horizons. GE expanded the business in healthcare sectors, energy, broadcasting and entertainment. The investments in these sectors are important in order to increase the capability of the company.
The application of new strategy can instigate changes in the policies and functions of an organisation. The fact that the new changes are accepted in the organisation is an achievement for a manager (Wirtz 2001). In the case of GE, the existing structure and culture of the organisation define the identity of the company. With the change in strategies of the company and the appointment of a new leader, the company underwent changes in the core areas of management. One of the areas that underwent change is the leadership and development of employees. In the early years, GE managed to develop their leaders by providing internal promotions within the organisation. This is one way to encourage and motivate employees based on the work that is done by them (Johnson et al. 2013). The performance management system was based on the quantitative targets that allowed focus and accountability. The strategic initiatives taken by Immelt focused on the targets that led to the earning and growth of the company. The fact that productivity improvement, reduction in overhead cost and the practice of six-sigma are all based on quantitative target is a highlight of the company. These initiatives taken up by Immelt proved to be a challenge to performance management system that is followed in the company.
Johnson et al. (2013) stated that the manner in which growth rate of a company can be determined is based on the internal talent of an organisation. The shift in the strategic priorities had the implementation of the management system of GE. The growth strategies of GE led to the development of proper internal challenge that is important for the progress of the organisation. In order to do so, the support of the employees is an important factor. Employees are put to test based on the skills and abilities that are possessed by them. These skills and abilities are evaluated based on the performance of the employees. Afuah (2009) stated that a benchmarking strategy can be used in order to identify the traits required for growth in an organisation. In this regard, Immelt managed to focus his attention on obtaining benchmarking strategies based on the analysis of 15 companies. This helped in the growth of revenue in the company and helped in identifying the required trends necessary for growth.
It has been seen that the major change that Immelt brought about is the change in the structure of the organisational. The advent of a new and modern world warranted major changes in the organisational structure that was set up in the 1980s under Welch. Welch had broken the sectors into small divisions in order to have a concise business method. However, in order to organise cross-business integration, Immelt managed to disorganise the sectors and unite them in an effort to restore organisational goals. This reorganised tactics helped in reducing the number of business sectors. This helped in uniting the company and ensuring that the growth rate of the company keeps on increasing. During 2002, 2005 and 2008, the number of business sectors reduced from 12 to 5. However, after the reorganisation, the number was increased to 9. The innovation that was needed to drive the goal of the organisation with the profitability and cost control was the main focus for Immelt. Twomey (2012) observed that innovation in big large projects often led to the cause of risks. The opportunities for the business required cooperation from that increased the likelihood of the business. Immelt also updated the marketing strategies that were used by the company. The development was necessary in order to transfer business from the R & D and the increased technologies that help in understanding the business market. Thus, these changes are necessary in order to align the changed strategies implemented by the manager. The success of these strategies can be based on the fact that the manager and employees of GE form a united effort in meeting the organisational strategy.
Grant (2016) stated that alternate strategies are important in order to ensure that the failure of the initial plan can be backed up. The alternative strategies need to be based on the analysis of the risk factors and other external or internal factors that may hamper the growth of an organisation. In this regard, it can be said that the alternate strategies prove as a method to reimburse the mistakes that were done at the initial stage. In the case of GE, the strategies adopted by Immelt saw both loss and profit for the organisation. The organisation did not have success initially due to the transition phase. The promises made by Immelt were not kept due to the factors that affect the growth of the organisation. The innovation and customer orientation of the company required the high level of collaboration between employees and customers. This can be considered as an alternate method to ensure that the metrics based measurement of performance management can be carried forward. Maritan and Lee (2017) stated that the manner in which most companies in the United States achieve outstanding performance can be used as a benchmark for the organisation. It has been seen that since the inception of the new role as the manager of GE, the performance of the company has been on the downside. The role of Immelt as a manager has not been proven due to the poor results of the company.
It has been seen that the profit in different sectors and products have decreased considerably in the last few years. For example, the profits earned by the company using power and water supply in 2010 were $5.80 billion. However, the profit dropped to $5.35 billion during 2014. In this regard, the alternate solution based on such decrease in profit needs to be made in the marketing department. According to Chevalier-Roignant and Trigeorgis (2011), to ensure the increase in profits, it is necessary that every organisation maintain a formative marketing management that can help in analysing the market of the business. Proper investment regarding the choice of sectors needs to be done in order to maintain profits. In this regard, one alternate solution that was developed by Immelt was the fact that he managed to reduce investments in areas that had low growth and profit prospects. These areas include the domestic appliances, which did not complement the capabilities of GE. The exit from businesses of plastics was also notable in terms of increasing the profit of the organisation. The fact the US Financial Regulation view GE to be an important financial institution justifies the change in the financial sector in the organisation (Di Stefano, Peteraf and Verona 2014).
Another important change that needs to be considered is the internationalisation of business. The global presence of the company proved to be cost-effective as the positioning of the company needs to be based on proper analysis of the market. The fact that the company wanted to work directly with the Government required huge capital investments. The fact that the company targeted Nigeria as a potential market for investment can be a downfall of the company (Porter 2008). This is mainly because of the fact that Nigeria is a poor country can have the severe impact on the profit-making policies of the organisation. Thus, the alternate strategies are important in order to understand the possibilities of risk and analyse ways to mitigate the risks that may hamper the organisation.
Conclusion
Thus, it can be concluded that the new managerial system of GE has not been effective in maintaining the reputation of the company. The fact that the strategies of Immelt have countered the existing culture of GE has made it difficult for employees and customers accept the changes. In this regard, it can be said that the improvement show in the company has been negligible.
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