Jeff Immelt and the Reinventing of General Electric - Case Study Example

Case Study – Jeff Immelt and the Reinventing of General Electric Name Professor’s Name Course Name and Code Institution Name City and Location Date Introduction Developing growth platforms entailed scrutiny as well as market segmentation to ascertain high-growth segments which enable attractive returns. Diversification strategy enables firms to use their core competencies to take advantage of opportunities in their external environment. Product diversification is also a key type of corporate-level strategy it is about the scope industries as well as markets that firms competes and how its CEO buy, develop as well as sell different business so that they can match skills as well as strengths with opportunities available to the firm. Customer focus, innovation and technology are key to successful performance of the organization. R&D has helped in development of technologies that are innovative and market-driven. Identification of strategic issues and problems Organic growth was a key theme in Immelt’s strategy for GE. Immelt committed GE to an organic growth of 8% per annum as well as to “double digit” earnings from growth. The 8% growth in revenue was founded on the fact that GE is supposed to grow which is two or three times the world GDP (Case 22). According to Immelt profits were supposed to grow faster compared to revenue since reduction in administrative and general expenses as a percentage sales as well as higher margins that result from novel products and services. Comfortably, GE met its 2002 and 2007 targets since revenue increased by 13% each new year and operating earnings at 14%. Nonetheless, during the financial crisis, both profits and revenues experienced a sharp drop (Case 22). GE had slow-growth business and reallocated business which had weak growth prospects. In most cases GE’s growth approach entailed existing business that had chances of expanding the firm’s market share. For instance, in healthcare GE was the best in diagnostic imaging: CT scanners, X-ray equipment and MRI scanners. Under the leadership of Immelt this became a key sector for growth, expanding products as well as service offered as well as increasing the firms’ geographical presence (Case 22). Some of its major acquisition included HPSC (financial services for medical and dental practices), Amersham and Abbott Diagnostics. Power generation has been GE’s oldest business. Additionally, the firm has developed an important business through supply of equipment to gas and oil sector. According to Immelt he considered energy to be a key growth platform. Alternative energy was also another major growth area considered by Immelt. The firm also acquired various firms, for example, BHA Group, Enron’s wind energy business, Hydril Pressure Control. During Immelt’s tenure, GE increased its entertainment services beyond cable TV and NBC broadcasting business (Case 22). Some of the key acquisition during Immelt’s tenure included Telemundo, Vivendi Universal’s entertainment business. Nonetheless, by 2009 it was clear that NBC Universal was not fitting Immelt’s identification since GE was a technology-based industrial company. Therefore, NBC Universal merged with Comcast’s cable TV channels and the novel firm 49% owned by GE while the rest was owned by Comcast. Technology infrastructure was instrumental for Immelt growth initiatives. For instance, in 2003 Immelt announced that he was taking the firm to places that can hardly be followed (Case 22). Some of its growth platforms entailed: security systems, water treatment as well as aerospace (Fishman, 2012: 356; Case 22). Developing growth platforms entailed analysis as well as market segmentation to identify high-growth segments which gave chances for attractive returns, developing GE’s existing businesses, as well as use of acquisitions to aid in deploying GE’s technical, financial as managerial resources to develop a strong position. In addition to sale of most of its shares in NBC Universal, the firm exited other business especially plastics since it held that high prices of petroleum would restrict growth opportunities. Nonetheless, GE’s greatest diversity issue was limited opportunities for growth. The firm’s Capital growth between 2001- 2007 was reinforced through acquisition of commercial finance, equipment leasing, consumer finance, as well as credit cards. Nonetheless, prior to the economic meltdown, Immelt was very committed with pruning GE’s capital. Between 2004 and 2005, GE disposed most of its insurance business (Case 22).When crisis rocked the world GE was prompted to reduce its Capital assets, for instance, reducing loan exposure. Progressively, Capital was considered to be a leasing and lending, financing in Ge’s domains as well as few specialty finance segments. Analysis and evaluation Diversification strategy enables firms to use their core competencies to take advantage of opportunities in their external environment. Therefore, diversification plays a key role in large farms. Like an organization’s corporate and business-level strategies, corporate-level strategy value is determined by the level in which a business’sportfolio are worth under management of the firm that under other ownership. Therefore, one way of determining success of any corporate-level strategy involves determining if the aggregate return in the business unit is more than returns without the general corporate strategy according to the organizations capability to create value and attain high performance. Product diversification is also a key type of corporate-level strategy it is about the scope industries as well as markets that firms competes and how its CEO buy, develop as well as sell different business so that they can match skills as well as strengths with opportunities available to the firm. For instance, GE had several opportunities that presented themselves, for instance, technology infrastructure was a key umbrella that Immelt used in his growth initiatives. At one time, Immelt announced that he wanted to take the firm to a path which has not been followed by many people in the business field. Some of the opportunities that GE took advantage of include security systems and some of its acquisitions in this sector included Edwards Systems Technology, InVision Technologies along eith Interlogix. The firm also took advantage of water treatment since it acquired BetzDearborn and Ionics. GE also had interests in aerospace and it developed sturdy position in jet engines so that it could diversify into avionics (Case 22). Successful diversification helps in reducing variability in an organization’s profitability in that revenue is generated from various business units. Since business incurs monitoring and development costs when they diversify, the best business portfolio ensures a balance between diversification benefits and costs. In any business customer focus, innovation and technology are key to successful performance of the organization. According to Immelt technology is considered to be a key aspect in GE’s growth and he ensured that new technologies are diffused at a faster rate and turned GE corporate R&D center to become a hothouse. Immelt’s commitment to technology was illustrated by GE’s R&D budgets. This started with $100 million upgrade of GE’s corporate R& D centre in New York (Magee, 2009: 97; (Case 22). This was preceded by development of a novel Global Research Centers in Munich, Shanghai and Rio de Janeiro. Immelt’s commitment can further be illustrated by the fact that the firm had 37,000 technologists who worked in its business and research centers. Evidently, the importance of technology cannot be under estimated in the present cut-throat business environment. For instance, Apple has been able to be the best firm that sells computers devices owing to its emphasis on R&D. R&D has helped in development of technologies that are innovative and market-driven (Case 22).These technologies have revolutionized the business environment and acted as a game changer among competitors. Immelt’s approach is in line with 21st century requirements since this is the ‘digital century’ and many people have embraced technology. Immelt was very keen and ensured that the firm embraces technological development since the firm can easily afford to have the resources required to conduct R&D, for instance, the firm had about 37,000 employees who had specialized on doing research and design. Under Immelt, the firm focused conducting research on fewer, bigger and long-term programs. This was depicted in the firm’s Advanced Technology Programs in nanotechnology, advanced propulsion, energy conversion, molecular imaging and diagnostics and sustainable energy (Daft, 2006: 385). Immelt was always interested in identifying as well as supporting projects which had a large-scale market potential. Evidently, Immelt should have a conducted a Cost and Benefit Analysis (CBA) when determining how long the projects would last and how sustainable the project were since he would not make business sense if he had not conducted CBA. It makes a lot of sense spending more amount of money on projects that are likely to be fruitful. This was Immelt’s strategy of ensuring that the firm becomes more productive. Immelt launched Ecomagination program of business and product development. This program was aimed at addressing challenges that touched on the need for reduced emissions, efficient source of energy, more sources of clean water, cleaner energy sources. Basically, Ecomagination program offered funds as well as coordination for making environmentally friends products as well as business solutions in various business sections at GE (DeNisi & Griffin, 2013: 94; Mello, 2014: 62). Immelt placed emphasis on customer focus. A firm which is market oriented will allow the needs and wants of customers as well as potential customers to drive how the firm runs. Immelt ensured that GE corporate culture was committed to developing customer value. For any company to determine what a customer’s wants the firm will be required to do marketing research. Application of customer focus concept can be considered to be a procedure that entails three steps. Firstly, customer needs and wants are researched, the information is then disseminated through the firm and the products are developed. Lastly, the customer satisfaction is scrutinized and necessary adjustments are made. Some of the approaches which firms institute to understand customers include: conferences, user groups, continuous user programs, visits to customers facilities, customers hotlines, customer complaint department, face-to—face meetings with customers, face-to-face meetings with frontline staff, quantitative and qualitative marketing research, industry research and market research. While at GE, Immelt emphasized on spending time with customers, solving their problems, developing relations with them. Increased focus on customer entailed increased investment on GE’s marketing function; this entailed hiring talented marketing executives as well as developing process which identified novel services and products along with unfulfilled customer needs. Palpably, this is in line with requirements for 21st century business environment. Having a department that ensures that there is focus on customers is an approach which is well aligned and is instrumental in attainment of organizational objective of customer focus. GE will be effective in ensuring that the market department is effective in attainment of its objectives. Porter’s five forces There is threat of new entrants since the sector is very profitable. Nonetheless, GE can evade this through reducing competition. This will be attained by ensuring that the firm becomes more diversified so that it can be able to withstand competition from new entrants who will reduce its profitability. The firm has been in existence for a very long time now and it renowned brand that can easily withstand new entrants. Capital requirements can also help in reducing threat of new entrants since the sector is capital intensive. GE is an established brand and has many customers unlike new entrants who do not have a customer base. There is threat of substitutes products and services but GE will still overcome this since it deals in quality products and services that their competitors cannot provide. Just in case the threat increases it will imply that GE has to increase its marketing strategies so that more people can buy their products or services. Customers have a high bargaining power but this can be overcome by the firm introducing a loyalty program, this will help in reducing alternatives that a buyer has hence GE will be its preferred choice. Supplier’s bargaining power can be considered to be the market input. GE has many suppliers this implies that its competitors experience stiff competition that prompts decline in the prices of materials sold to GE. Most GE suppliers cannot survive if they lost their market. This is a great advantage to GE since it can determine how the suppliers will behave. There are some suppliers who have refused to work with GE. In this case GE has been prompted to use substitutes. GE experiences competition from many players in the sector this implies that it has had to do away with products/ services that have a lot of competition and earns them less profits and specialize on areas that earns them a lot of revenue with less competition. Recommendation GE needs to have a clear mission, vision and goals. Having a clear mission, vision and goals will be instrumental in ensuring that successive administrations adhere to the clearly stated mission, vision and objectives. Having a clear mission, vision and goal can help an organization benchmark and this will be effective in ensuring that the goals of the organization are attained. For any firm to be successful in needs to identify some of the key success factors; for instance, customer wants, how firms survive competition as well as some of the key success factors. It is always the desire of each firm to be very competitive and have a wide market share. This has prompted firms to be diversified and GE has not been an exceptional since it has ventured into different sectors before, for instance, insurance, capital finance, infrastructure, as well as plastic media. Usually, diversification is a strategy of entering new industry in which a business has not operated while developing new product for the new market. Diversification is usually a very risky venture since the business does not have prior experience in the market and have no idea whether the new product or venture will be fruitful. Diversification adds flavor in business practice. At all times, customers need to have choices which are attained when the business is providing complementing products at varying prices to warrant purchasing power (Daniels, 2011, 171). Diversification is an approach which businesses must acknowledge. Nonetheless, diversification needs to be done cautiously since when it is not done well it can result in collapse of the new venture and in some cases it can lead to the collapse of the entire business. In any business venture, diversification needs to take two fronts: market diversification and product diversification. Product diversification helps in ensuring that customers at different levels are captured. Market diversification is very critical aspect in ensuring that there is wide market coverage. For effective diversification the administration should ensure that there is proper planning to ensure that the new venture is fruitful. Conclusion The market place has a myriad of players and each player wants to be competitive to ensure that the organization becomes more relevant. This has prompted organizations to develop strategies that will enable them to be relevant amidst the cut-throat competition. Some of the strategies that most organizations have instituted to ensure that they become more relevant include market segmentation, customer focus, R&D, technological development and innovation. Diversification has also been an approach that has been used by many organizations in ensuring that they become more competitive and earn more revenue. However, diversification should be done cautiously since it can lead to collapse of an organization. References Case 22 Jeff Immelt and the reinventing of General Electric Daft, R 2006, Organization Theory and Design, Cengage Learning, Belmont Daniels, J 2011, The Business Director-Army General, Xlibris Corporation, New York. DeNisi, A &Griffin, R 2013, HR 2, Cengage Learning, Belmont Fishman, C 2012, The Big Thirst: The Secret Life and Turbulent Future of Water, London, Simon and Schuster. Magee, D 2009, Jeff Immelt and the New GE Way: Innovation, Transformation and Winning in the 21st Century: Innovation, Transformation and Winning in the 21st Century, New York, McGraw Hill Professional. Mello, J 2014, Strategic Human Resource Management, Belmont, Cengage Learning Read More