In what ways has Jeff Immelt redirected the strategy of GE? To what extent is the strategy aligned with the requirements of the 21st century business environment?
General Electric is a company which was founded in 1892 which was formed with the merger of Thomas Edison’s Electric Light Company merging with Thomas Houston company (Ge.com. 2018). Jefferey Immelt was appointed the CEO of General Electric when the company was facing crisis. As per the opinion of Immelt, the only way the business can attain stability over the business cycle is by following diversified portfolio for the business. Moreover, it was the view of Immelt that the principle of Shareholder’s value maximization should be replaced with the long term economic growth objective of the business (Ge.com. 2018). As per the policies of General Electric, the business will be focusing on those strategies which will be helping the business to gain competitive advantage in pursuance of the goal of the company (Abdi and Awartani 2013). The core competencies and capability of the company includes best planning process for the purpose future planning and continuously evolving the techniques which is used by the business in the production process. The strategies which was adopted by Immelt was focused on how the business will be competing in the with the rival industries in the market (Drucker 2017). The main objective of the company under the leadership of Immelt was to develop competitive advantage for the business which can be achieved through technological innovations and global presence of the company. Immelt identified certain factors which can help the management attain competitive advantage so that the company can become more competitive in the market (Saeidi et al. 2015). Some of the factors which affect the business are discussed below:
Thus, from the above discussions it is clear that the company under the leadership of Immelt is trying to utilize the core competencies and capabilities of the business so that the company can compete against the rivals both in domestic and international markets.
The market of 21st century is continuously changing and have been immensely competitive in nature. The business was suffering from business cycle when Immelt become the CEO of the company. Just in a few days the company’s business environment was affected as the world trade center was hit by two hijacked planes (Kontorovich, Epov and Eder 2014). As per Immelt, the only way the management of the company can combat present market condition is by the use of diversified portfolio. The company had earlier lot of businesses in a portfolio which were Insurance, Infrastructure, Capital Finance and Plastic Media. In 2016, the company had more investments in the infrastructure industry and also investments in capital finance. Another major change which was brought by Immelt was that he discarded the policy of Shareholder’s Value Maximization and adopted long term earning growth approach which will be focusing on attaining the long-term growth objectives of the business which will indirectly result in increasing the values of shares of the company (Piketty 2014).
As per Immelt, the critical challenge of the business environment of 21st century was to identify what were the potential sources through which the company can earn revenues for the business. In addition to this, the previous policies of the company to tackle the competitive environment were cost reduction techniques, eliminating underperforming assets and the opportunities which were provided by the use of financial resources had become outdated. Such techniques are nowadays used by most of the companies. Therefore, the company needed to come up with a strategy which could differentiate them from the competitors. Such a strategy as per Immelt was to diversify the businesses and use a diversified portfolio of the business. The strategies of the business is suitable for the business as such will reduce the risks which the business faces and also in a way increase the profitability of the company.
The new strategy of the business is to make more investments in research and development which could bring about innovations in the business. As per the belief of Immelt, the business will be able to achieve growth and gain competitive advantage the market if the business can make technological innovations or similar other kinds of innovations (Eggers and Kaplan 2013). The resources which are available to the company is that the company has access to funds which can be taken from the banks for investments purposes. In addition to this, the company has a global presence in international markets. Moreover, the company has around 37,000 technicians who are involved in innovative activities and the company has Research centers in most of the cities it operates. Under the leadership of Immelt, an Imaginative Breakthrough Initiative was designed in order to ensure that the projects which has the potential to bring about development in the business were funded properly. Such funding decision of important projects were directly taken by Immelt and the board of directors of the business (Barge-Gil and López 2014). An example of the breakthroughs which the company has been able to achieve are introduction of evolved hybrid locomotives which could channel the energies lost in brakes of an automobile and store the same in battery cells, the introduction of smart grids which combined IT and electrical goods which could efficient meet the requirements of the 21st century.
The core competencies which are associated with the business is that the business have the required funds and resources which can used by the business for the purpose of innovation and overall development of the business.
The changes which were brought to the company mostly relates to technological advancements and other similar innovations. The major changes which were brought about by Immelt related to changes in the organizational structure of the business. The previous CEO of the company has sub divided different industrial sector of General electric into more smaller divisions. The main aim for such a division was to ensure that the company becomes more responsive and performs better in terms of profitability. Immelt changed the organizational structure by reorganizing the different smaller divisions of the business and made broad based divisions which could function effectively (Thortveit et al. 2014). The reorganization process was slow and therefore in 2002, 2005 and 2008 the company slowly brought down the business sectors reporting to Immelt from 12 to 5 which was further reorganized in 2010 and 2012 and the number of business sector reporting to Immelt was brought up to 9. In addition to this, another important change which was brought about was that the products were provided along side with support services. Such support services include services related to finance, technology and other similar kind of services.
Moreover, the management of the company is of the view that the company needs to diversify its business further in order to ensure that the management can earned increased amount of revenues and profits for the business. Immelt has identified certain business sectors who have promising future as per his expectation and he plan to expand the business in such sectors which are discussed below:
SWOT Framework analyzes the strength, weaknesses, opportunity and threats which are associated with the business. The analysis helps the business to conduct internal markets analysis as well as external market analysis (Bull et al. 2016). In the case if General electric the strength, weaknesses, opportunities and threat are given below:
PESTLE Analysis is useful in analyzing the different factors which affect the business of the company (Kolios and Read 2013). A PESTLE analysis of General Electric is undertaken and where analysis of the factors which affect the company are discussed below:
In case the businesses strategy of innovative approach and diversified portfolio is not able to generate the amount of profits which was expected by the business then the business need to have an alternative plan in order to restore the business and survive. The alternative strategy of the business will then be to focus on those line of business which are more profitable such as infrastructure, energy. While the management can cut off the revenues from other business activities which the business engages in so that the extra costs which are incurred on such activities are saved. The savings in costs will enable the company to earn decent profits. The goals of the business in such a situation will then be to survive the market conditions and secure its position in the market. The company needs to build up the profits of the business and ensure that the company is established in the infrastructure and energy generation industry.
The management of the company will then also look to reduce the unnecessary costs which are related to the business activities of the company. The alternative strategy of the company will be to attain a suitable market position for some time period after which the business can go back to the goal of the company to expand its business further. The management of the business however need to continue the innovations so that the business through such innovations can gain competitive advantage. The management of the company will be adopting this course of action in case the main plan developed by the company is not successful
References
Abdi, M.R. and Awartani, A., 2013. Business strategy and corporate identity using balanced scorecards. Journal of Current Issues in Finance, Business and Economics, 6(2/3), p.213.
Barge-Gil, A. and López, A., 2014. R&D determinants: Accounting for the differences between research and development. Research Policy, 43(9), pp.1634-1648.
Bena, J. and Li, K., 2014. Corporate innovations and mergers and acquisitions. The Journal of Finance, 69(5), pp.1923-1960.
Boons, F. and Lüdeke-Freund, F., 2013. Business models for sustainable innovation: state-of-the-art and steps towards a research agenda. Journal of Cleaner Production, 45, pp.9-19.
Bull, J.W., Jobstvogt, N., Böhnke-Henrichs, A., Mascarenhas, A., Sitas, N., Baulcomb, C., Lambini, C.K., Rawlins, M., Baral, H., Zähringer, J. and Carter-Silk, E., 2016. Strengths, weaknesses, opportunities and threats: A SWOT analysis of the ecosystem services framework. Ecosystem services, 17, pp.99-111
Drucker, P.F., 2017. The Theory of the Business (Harvard Business Review Classics). Harvard Business Press.
Eggers, J.P. and Kaplan, S., 2013. Cognition and capabilities: A multi-level perspective. Academy of Management Annals, 7(1), pp.295-340.
Ge.com. (2018). GE | The Digital Industrial Company | Imagination at Work. [online] Available at: https://www.ge.com/ [Accessed 30 Jan. 2018].
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Kontorovich, A.E., Epov, M.I. and Eder, L.V., 2014. Long-term and medium-term scenarios and factors in world energy perspectives for the 21st century. Russian Geology and Geophysics, 55(5-6), pp.534-543.
Lary, D.J., Faruque, F.S., Malakar, N., Moore, A., Roscoe, B., Adams, Z.L. and Eggelston, Y., 2014. Estimating the global abundance of ground level presence of particulate matter (PM2. 5). Geospatial health, 8(3), pp.611-630.
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Saeidi, S.P., Sofian, S., Saeidi, P., Saeidi, S.P. and Saaeidi, S.A., 2015. How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of Business Research, 68(2), pp.341-350.
Thortveit, E.T., Bøe, M.G., Ljøstad, U., Mygland, Å. and Tveiten, A., 2014. Organizational changes aiming to reduce iv tPA door?to?needle time. Acta Neurologica Scandinavica, 130(4), pp.248-252
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