Competitive strategies are the initiatives taken by an organization, which are intended towards gaining competitive advantage over its rivals (Block et al. 2015). The organization will evaluate the core competences and capabilities of General Electric. General Electric is an American multinational conglomerate, which has different business sections including Automotive, Healthcare, Aviation, Oil and Gas, capital and Transportation and Power and Water (Ge.com 2017). The organization has been selected as the 14th highest profit earning organization in the world. In this study, various academic models and concepts will ne described towards highlighting the core competences and capabilities of the organization. Furthermore, the study will also recommend two strategic options for the organization to be followed in next five years. Apart from that, the study will compare and contrast the management approach of current CEO Jeffery Immelt with that of previous CEO Jack Welch.
Models and Concepts for GE’s Core Competences and Capabilities
Porter’s Generic Model
Industry attractiveness plays an important function in the prosperity and success of an organization. The success of an organization is also highly dependent on its position in the industry. Porter’s Generic Model highlights the specific capabilities of an organization towards getting long-term success (Agyapong, Ellis and Domeher 2016). Hence, this model will be used here towards identifying the core competences and capabilities of the General Electric towards increasing its success potentiality.
The concern of General Electric is always inclined towards making its business model as simple as possible. During the leadership of Jack Welch, The organization had taken cost reduction strategy for almost all of their products. The business strategies of the organization are always aligned with the objectives of the customers. Having centricity approach in the business model, the organization offers best financial and clinical service to the customers (Cusumano, Kahl and Suarez 2015). The customers can avail most excellent critical care treatment at affordable price. Moreover, through this strategy, the organization has become the marker leader in world of diagnosis imaging. Diagnosis imaging includes MRI scanners, X-ray equipments and CT scanners (Chryssochoidis, Dousios and Tzokas 2016). Furthermore, the customers can also avail the facilities like general, military, business and commercial aviation jets at cheapest cost. Moreover, the aviation sector of General Electric also offers aviation facilities at affordable price.
The organization highly value for the money of their customers and helps them towards more savings trough meeting all their needs at cheapest cost. It has ultimately increased the sales volume of the organization. In this way, the revenue and operating income of the GE had been grown by 13% and 14% respectively between the year 2002 and 2007 (Oyewobi et al. 2016). Moreover, the organization has become the central hub for the engineers and scientists, who work with the customers having shared value. Apart from that, the organization provides innovative digital and hardware solutions to the oil and gas sector. General Electric had become able to double its annual sales to $ 1.2 Billion through acquisition of the assets of Enron Wind (Bagnoli and Giachetti 2015).
General Electric has created high level of customer value through adopting differentiation strategy. The CEO of GE Immelt has highly focused on improving the infrastructural products of the organization. Moreover, the increasing development of infrastructural products has ultimately enhanced its scope in rail, aviation, energy, water and oil and gas production. Moreover, in 2012, the organization invested 6% of its revenue back to its research and development for infrastructural improvement (Joseph and Ocasio 2012). “Imagination breakthrough” was an innovative project adopted by General Electric by the mid of 2006. The focus of this project was to make $ 100 million sales over the next three years (Slater, Mohr and Sengupta 2014). During that time, the organization invented energy saving locomotives, which minimizes energy consumptions through saving energy in batteries.
The advancement in industrial manufacturing and utilization of internet made the organization capable of providing super quality equipments. Through the development of Tire 4 locomotive, the organization has gained number 1 position in the market of USA (Gomes et al. 2014). Furthermore, the invention of Smart Grid project has highly supported the energy needs of 21st century. The invention of sodium battery is most important among smart grids, which utilizes the technology of patented battery towards large scale electricity storage (Taylor, Callaway and Poolla 2013). Moreover, the invention of this technology provided a new edge to the global energy system. The discrete automation control process and manufacturing intelligence has led the organization to be the one of the leading energy departments in the world. In the present days, approximately 22000 locomotives of General Electric operate in all over the world. Furthermore, in 2005, the organization invented “Ecomagination” project, which was focused on producing eco-friendly products and services in all through their business sectors (Kotabe and Kothari 2016). General Electric got support from the BHA Group in terms of energy reduction equipments and generated almost $ 21 billion revenue through clean energy.
General Electric has targeted some specific groups for each of its business sectors towards gaining more customer attention. While considering health care sector, General Electric has targeted old age people having medium income towards providing critical medical treatment. Moreover, the organization has adopted cost leadership strategy within this focus group and reduced the prices of critical health care treatment. Furthermore, the organization has also targeted aviation sectors, transportation and health care sectors towards providing financial and consulting services. The clients are highly attracted to the low cost offered by General Electric for these services (Clemons et al. 2013). Furthermore, towards offering enhanced customer value, the organization has also adopted some differentiation strategies. In this way, General Electric has expanded the entertainment portfolios beyond NBC broadcasting and TV business (Teeratansirikool et al. 2013). Moreover, it can be said the differentiation strategies are focused upon media industry.
Figure 1: Porter’s Generic Strategy
(Source: Bavarsad, Rahimi and Seyfi 2014)
|
Competitive Advantage Sources |
|||
|
Differentiation |
System Economics |
||
|
Focus Areas |
Products |
Best Products · HPSC · Super Quality Medical Equipments · Eco-friendly locomotives |
Operational Efficiencies · Enhanced efficiency and smoothness in operational process |
|
Customers |
Customer Intimacy · Increasing customer relationship |
System Lock-In · Enhancing customer loyalty |
Table 1: Source of Competitive Advantage
(Source: Lillis and Sweeney 2013)
The development of eco-friendly locomotives are unique attraction for the environment concerned customers. Furthermore, the invention of super quality medical equipments has assisted a lot to the critical medical treatment of old people. Moreover, HPSC is an innovative financial service, which is only launched for dental and medical practices (Yunis, Jung and Chen 2013).
The infrastructural improvement and advancement in technology has smoothened the business processes of the General Electric. It has specially impacted the manufacturing the locomotives and aviation equipments. The invention of eco-friendly locomotives has ultimately enhanced the smoothness of organizational business processes through mitigating all the environmental issues.
The organization is quite able to build strong relationship with the customers. With the invention of advanced medical equipments, General Electric has assisted enough to the old age group through critical medical treatment (Egorova, Andryashina and Kuznetsov 2016). On the other hand, the customized financial services and consulting services have created high level of customer intimacy.
General is quite capable of creating system lock-in for the customers through reduction in product and service prices. This factor has initiated repurchasing intension of the customers for their products. Moreover, switching cost of the customer is quite low for this organization.
As per the content of the case, the organization has adequate offerings towards gaining the competitive advantage. However, the organization has to adopt following two strategic options for sustaining the competitive advantage over their rivals:
Kotabe and Kothari (2016) stated that hospitality industries are rapidly expanding Asian countries, which is increasing the demand of technological equipments in those countries. On the other hand, Oyewobi, Windapo and James (2015) opined that technological gadgets are in high demand in these developed countries towards improving their hospitality facilities. General Electric has wide ranges of products in its various sectors like financial sector, transportation sector, oil and gas sectors and lots more. However, the organization does not have any products or services related to hospitality and technological industry. Hence, for the next five years, General Electric should invest more on its research and development areas towards inventing some products related to hospitality and technological industry.
Lillis and Sweeney (2013) pointed out that the demand of hospitality industry in the developing countries like India is expected to rise by 22.83% in the next five years. Therefore, there is an increasing demand of electronic equipments towards supporting the needs of this industry. However, the products must be innovative towards being competitive in the market. General Electric always associates itself with the quality products throughout all their products ranges. Therefore, towards gaining competitive advantage in hospitality and technological industries, it should invent innovative products through investing more on its Research and Development areas.
General Electric has wide global expansion with all of its product ranges. However, in some of the countries, the organization is not highly focused. Moreover, the organization uses centralized approach in their business model, which is lagging the success of the organization in those counties. As per Bavarsad, Rahimi and Seyfi (2014), there is an increasing demand of oil and gas sectors in the Asian countries. Therefore, General Electric should concentrate more on this industry in the Asian countries. On the other hand, with the increasing rate of population, the demands of different industries are also increasing in Indian and China. Therefore, the organization should take this demand as its opportunity to grow and concentrate more on these markets.
Figure 2: Johnon and Scholes Strategic Choice Model
(Source: Joseph and Ocasio 2012)
While measuring the suitability of above mentioned strategies, it can be said the innovation of products is much more reliable than developing markets. The oil and gas sectors are highly dependent on the fluctuation of oil and gas prices (Clemons et al. 2013). Moreover, the demand of the customers also fluctuates with this price fluctuation. Therefore, it is better to invest more on Research and Development areas of the organization towards producing innovative products and gather new customer segments.
While comparing feasibility factor between the two strategies, it can be said that deployment of resources in Research and Development is much more feasible than concentrating more on decentralizing the organizational focus. General Electric has reached the maturity stage in almost of its product life cycle (Taylor, Callaway and Poolla 2013). Hence, there is high potential to earn huge cash from all the business units. Moreover, this money can be invested effectively in research and development towards product innovation, which can produce products for new industry section.
While measuring the acceptability factor through financial perspective and stakeholder value, it can be said than investing in R&D will be much more beneficial than concentrating more on market development. The innovation of new products can provide scope of entering in new industry and earning more through enhanced product portfolios.
Finally, after comparing all the three aspects of both the strategies, it can be said that investing in R&D will be much more profitable than developing markets. Hence, General Electric should adopt the strategy of investing in R&D section for the next five years.
The strategy would be monitored and evaluated through the following Kaplan’s Balanced Scorecard model:
Figure 3: Kaplan’s Balanced Scorecard
(Source: Sitawati, Winata and Mia 2015)
|
Perspectives |
Monitoring and Evaluating |
|
Financial perspective |
Ø Financial perspective can help in measuring the overall resource strength of the organization Ø It can also facilitate in measuring cash flow and actual revenue structure of General Electric |
|
Learning and Growth |
Ø This perspective would measure the effectiveness of investing in R&D section through adding new capabilities to the organization Ø The organization can also quantify the product diversification through this perspective Ø It can also help in measuring the impact of technological advancement towards industrial boom |
|
Customer Perspective |
Ø This perspective would help in measuring and monitoring customer satisfaction level through new strategy Ø It can also be effective for evaluating the customer retention rates Ø Customer perspective can also evaluate the brand strength of the organization through new products |
|
Internal Process Perspective |
Ø This perspective can help in quantifying the resource allocation for the new strategy Ø This process can also control the quality of the new strategy |
Table 2: Monitoring and Evaluation of Strategy
(Source: Kotabe and Kothari 2016)
Jack Welch was the predecessor of Jeffery Immelt and previous CEO of general electric. Jeffery Immelt replaced the previous CEO Jack Welch. However, the management approach of Jack Welch was extremely popular. Moreover, as per Gray Hamel, the management approach of Jack Welch was quite different from that of the current CEO Jeffery Immelt (Gomes et al. 2014). Welch always ruled and managed the employees through intimidation. He used to believe in the fact that higher productivity is the ultimate goal of the organization. Therefore, this CEO used to show less concern for the employees and maintained strictness in his behavior with employees. Moreover, he was the supporter of autocratic leadership and used to force employees towards following only his instructions for achieving the organizational success. On the contrary, Jeffery Immelt is more flexible and friendlier with the employees. He follows the regular guy approach in his management approach and shows more concern for the employees. Jeffery Immelt use to cheer the employees than always threatening them towards achieving organizational success (Sitawati, Winata and Mia 2015). However, both the CEO used to measure the performance of the employees through some quantitative measures. Furthermore, both of them believe in measuring employee success through metric driven approach. Jeffery Immelt is a strong believer that employee success cannot be measured without any output metric.
Welch usually followed hierarchical approach to manage the employees and get organizational success. As per hierarchical approach, the employees were to follow the strict orders of the management and work as per their instruction. In contrast to this approach, Jeffery Immelt follows flat organizational approach, where the employees are free to share their innovative ideas towards organizational success. Employees are more flexible to share their issues with the management. In contrast to Welch’s approach, Immelt follows charismatic approach in his leadership style. According to this approach, Immelt act as the role model for the employees andf often contribute his innovative ideas towards organizational success. Hence, it can be said that Immelt is versatile and capable of handling multitasks in dynamic business conditions. Welch used to adhere to the centralized management approach, whereas, Immelt used to adhere to the decentralized management approach.
The management approach followed Immelt is based on long-term business perspective, whereas, the approach of Welch is based on short-term business perspective. Obviously, Welch used to believe in change management, but he always believed in managing employee strictly. On the contrary, Immelt strives for future development of the organization and build high level of respect and trust with the employees. Moreover, Immelt follows transformational leadership in his management approach.
The nature of today’s business is highly VUCA (volatile, uncertain, complex and ambiguous). In this kind of business environment, the management approach adopted by Immelt seems to be effective towards achieving long-term business sustainability. In the context of changing customer needs, it is quite difficult to forecast the exact customer demand. In such situation, customer driven approach followed by Immelt is highly preferable towards recognizing the exact customer demands and serving the customers by meeting those demands (Bagnoli and Giachetti 2015). Furthermore, Immelt always prefer to bring organizational changes as per the changing context of business environment.
General Electric may have high potential towards facing business uncertainties, as it has various business units. In such situation, decentralized management approach of Immelt assists the employees towards deciding the required strategies as per the changing business situation. Immelt follows transformational leadership and allows employee towards sharing their innovative ideas in the organizational decision making process (Slater, Mohr and Sengupta 2014). Through this approach, the organization can get wide ranges of effective solutions towards mitigating any business issue and choose the best alternative for mitigating that issue. Moreover, the open communication approach adopted by Immelt helps in recognizing the ambiguous business environment.
Conclusion
While concluding the study, it can be said that the core competencies and capabilities of the General Electric can be best evaluated through Porter’s Generic Model. The organization has become the market leader through offering high products at affordable prices. The organization has become highly popular through upholding the centricity approach and diagnosis imaging. Furthermore, the clients are capable of availing advanced aviation equipments and medical treatment in reasonable prices. It has made its unique market position through the invention of smart grids projects and sodium batteries. However, the organization should keep on investing more on research and development towards developing new products and capture new customer segments. The current CEO Jeffery Immelt is quite flexible and approachable that the previous CEO Jack Welch. Moreover, the management approach of Jeffery Immelt is more suitable in today’s dynamic business environment.
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