General Electric's Strategic Management - Case Study Example

Name: Institution: Title: General Electric (GE): Strategic Management Tutor: Course : Date: Why General Electric under Jack Welsh was such a successful company General Electric was successful because Jack Welch used management and motivation model that included goal setting and organizing the company on a corporate level for competitive challenges. He empowered workers at each level of the corporation and communicated his new visions and goals through the whole organization. Welch employed human relations management theory to motivate workers to contribute to change. Human relations management theory stresses the significance of understanding motivation of employees in the place of work and believes that employees are motivated as a result of encouragement, recognition and rewarding of personal contributions. Motivation is also encouraged by better communication between workers and managers, greater involvement of managers in the working lives of employees and working in teams or groups ( Henderson, 2002) Welch used goal setting to motivate greater levels of accomplishment throughout the corporation, through setting corporation wide goals and precise performance objectives for individual divisions and companies. He employed competitive strategy to stimulate performance in different business units through requiring them to attain number two or number one status in based on their market share in the their particular fields. Welch recognized that he could motivate greater degrees of performance through setting of goals that were much greater than a manager would have set for himself and the stretch goals usually enables people to outperform their original goals. However, goal setting is accompanied by emotions like stress and relief. Stress is occurs when one is trying to achieve the goal or when a goal is not achieved while relief is felt when the goal is achieved (Reeve, 2005). Welch played on these emotions in application of his setting of goals and since he set extreme stretch goals, he had the incented effort towards the goals which seemed unattainable. He recompensed individuals by offering bonuses in they attained higher improvement towards these goals, even if they failed to achieve them. This drove people to work beyond original set goals and even when they did not achieve stretch goals, Welch recognized their superior performance. Workers recognized that although they did not achieve stretch goals, they still acted upon their greatest possible level and thus enjoyed personal satisfaction in their efforts to achieve the goals. General Electric was also successful because Welch used employee empowerment style of management and had a vision of establishing an organization where individuals could be held liable for their personal work and make decision for betterment of their work. According to Lanshley, (2001), employee empowerment puts a manager in the role of sponsor, facilitator or adviser and decision making is usually pushed down to lowest organizational levels. Empowerment is beneficial to the employees because it enables them to become more responsible in their jobs. Employee empowerment raises level of involvement of employee and thus generates an increased sense of satisfaction and greater levels of motivation. The goal of Welch in empowering employees was not to control them, but to liberate them. He created a boundaryless corporation in which employees were self motivated and directed to efficiently achieve their goals. Welch realized that the company had an overwhelming 9 management layers and this bureaucracy resulted to inward focused, unresponsive, corporation whose workers found difficulty in communicating with each other. Welch eliminated the entire management layers, consolidated overlapping business units and jobs, and workers at all levels to be more responsible for their work. He also employed work out as an empowerment concept. Thousands of employees got the chance to mingle and share knowhow, thoughts and ideas, whist creating and fostering a more team oriented and creative atmosphere. The work out encouraged accountability and communication and the eventual objective was to drive performance above the average team performance. Through offering every team member with the chance of contributing his thoughts in the process of decision making, Welch anticipated to induce people to constructively challenge their superiors and promote a highly motivated workplace. Welch realized that people are not machines and that every person possesses the potential to boost productivity. Some of the Strategic Management criteria Performance, particularly management performance is vital to the growth and sustenance of a business within a competitive economy. Armstrong (2003) argues that in order to offer increasing value to consumers and to stay competitive an organization must both recognize and develop the skills and talents of its employees. Jack Welch employed sustainable competitive advantage to determine the performance of general electric company. Before, Welch became the chief executive officer, General electric had numerous management layers which slowed down communications between managers and employees and hindered swift action in marketplace. In order to attain global market dominance, Welch set out to deliver on the company’s mission to stay in forefront of technology and to develop best solutions and products within a competitive global market economy. Welch identified that the competitive advantage of the company lied in the capability of the employees to innovate and therefore regarded the company’s employees as the greatest asset. The General Electric Company began when Edison merged his General Electric Company with its major competitor, Thomson-Houston Electric Company. In order to continue with the success that had early on been accomplished by Edison, Welch identified that the company needed to be served by a culture of constant learning and good performance practices of management. In the front position of implementation plan and transformational strategy of the company were two agendas, with one aimed at developing and promoting learning culture and the other aimed to recognize and nurture talents of employees. These plans were developed to derive the company into the next century which Welch envisioned as a greatly competitive global marketplace. In order to attain and maintain market leadership and market share, Welch’s goal was to be first and fast with development, production, innovation and marketing innovative products. A learning culture was implemented through work outs that emphasized personal empowerment where employees were required to give their views on the current management. Every worker was asked thought provoking and open ended questions so that members of all levels were able to share and build on one another’s ideas and knowledge. Welch believed that a performance driven company would encourage managers to perform to their capabilities limits and also nurture these capabilities. He also deemed that the ability of the company to outperform its competitors greatly depended on possessing outstanding workers and the company therefore offered opportunities for development of career and skills and expertise acquisition. Welch also rewarded employees who performed well. The Progress of the GE Performance The legacy that Welch left at General electric company continues to date and the company continued to prosper. The strategy of differentiation and performance management continues to be a success at the company. The high performance of general electric company has been greatly favored by its global market dominance and the ability of Jeffrey as the CEO to develop great leaders and to build strong teams. The performance practices of continue to reward workers and the company and employees with outstanding company and individual performance. The company successful executed a learning culture, which is to date, the major driver of the market leadership of the company. The culture of general electric company of continuous learning displays how multicultural and diverse employees can work jointly in spite of time, cultural and language barriers to reach at innovations that enable their organizations to remain competitive in today’s competitive global economy. The Appropriateness of Immelt's strategies Immelt’s strategy was not appropriate. The key strategic responsibilities of a CEO are setting the overall strategic goals, allocating resources for the different business areas, deciding if the corporation must strip itself of some of its business and determining if the corporation must acquire new companies. This means that the role of Immelt is to create strategies span different businesses and build and manage the business corporate portfolio I order to maximize profitability of the corporation. It is not the specific responsibility of Immelt to make strategies for competing in individual areas of business, like financial services. It is the responsibility of the general managers of the respective businesses or business level managers to develop these strategies (Hill, 2006). A business unit offers a service or product for a specific market. The general level manager or the principal manager is the head of the division and the strategic role entails translation of general statements of intent and direction that come from corporate level into actual strategies for the individual businesses. Therefore, corporate level managers have the role of developing strategies that cover individual businesses; the business level manager has the role of developing strategies that are precise to a specific business. At General Electrics, the main goal is to be second or first in each business under which the firm competes. Then general managers of every segment work out a business approach for their business that is in consistent with the corporate goal. Nevertheless, it is the responsibility of Immelt to look into strategic thinking of the business level managers to ensure they pursue strategies that will direct the General Electric toward maximization of long run profitability. It is also the role of Immelt to motivate and coach these managers, to recompense them for exceeding or attaining goals and holding them accountable for poor performance. Corporate level managers also act as a link between the individuals overseeing strategic management of the firm and the shareholders. These managers and especially the CEO, is seen as shareholder agents. It is their role to make sure that the business and corporate strategies that the corporation pursues are steady with profit growth and profit maximization (Jones, & Hill, 2004). GE should remain a "conglomerate” Using Five Forces Approach General Electric should remain a conglomerate because its size and diversification enables it to have a strong hold on numerous separate markets. The threat of new entrants is affected by the capability of other companies to enter the market. Porter (2005) argues that it costs little money or time to enter the market your market and effectively compete and if there are les economies of scale put in place, new competitors can easily enter your market and weaken your market position. The threat of new entrants for General Electric conglomerate is low because of the repeating trends of market requirement that General Electric employs. People have solid relations with the GE brand name, and it is very expensive for a new entrant to attempt and compete with GE. In addition, all companies of GE are in large scale economies which are hard to break into. The threat of substitution is influenced by ability of your consumers to get a diverse way of doing what your company does. If substitution is simple and viable, it weakens your power in the market. The products that GE creates have threat of substitute products but the financial sector is not vulnerable to threat of substitutes as other segments. The competitive rivalry of a company is determined by the capability and number of your competitors. If there are numerous competitors offering equaling attractive services and products, then your company will have less power in this situation since buyers and suppliers will be able to get these goods and services elsewhere( Porter , 2008). Remaining a conglomerate will keep GE at its competitive end because customers are not likely to change their monetary provider, since it is their light bulb brand. The bargaining power of buyer is determined by how simple it is for buyers to propel prices down. This is driven by number of buyers, the significance of each buyer in your business and the cost they incur when switching from yours services and products to those of another company. If there are powerful and few buyers, they usually have the ability to dictate terms to your company. The GE conglomerate enable the company have a significant bargaining power for majority of their products. For majority of their businesses, the switch cost for the consumers is extremely high. For several companies, like GE healthcare, volume per buyer is large in both cost of goods and quantity of goods and this makes changing cost for buyers high and this gives GE companies an advantage over their buyers. The bargaining power of suppliers is determined by the way suppliers are able to drive prices up. This is propelled by the figure of suppliers of every major input, the distinctiveness of their service or product, their control and strength over you, and the cost of switching from one company to another. So the few supplier choices a company have, the more it needs the help of suppliers implying that these suppliers are powerful. The bargaining power of suppliers is comparatively low for GE several industries. The shear quantity of goods that the company purchases form their suppliers denies supplies the capability to bargain with General electrics. Using Value Chain Management From value chain management point of view, GE should remain conglomerate because it will be able to integrate its resources and integrate materials, labor, information, logistics and facilities of individual companies into a capacity managed, time responsive solution that will maximize financial resources and reduce waste. GE value chain links to value chains of downstream buyers and upstream suppliers. As a conglomerate, GE has bigger streams which help it to develop a competitive advantage through value systems of individual companies (Weinrich, & Koontz, 2006). Using McKinsy Matrix According to McKinsey matrix which measures the attractiveness of an industry, GE should remain conglomerate. This is because it has high growth rate, large market size, global opportunities, and high profitability. Using this matrix, General Electrics has been effective in allocating resources within an attractive industry when it is able to leverage the competitive strength of business units. The company is able to divest from less attractive industries and where it doesn’t have competitive advantages (Campbell, & Collis, 2005). Bibliography Hill, C, 2006, Strategic Management Theory: An Integrated Approach, Cengage Learning, London. Porter, M, 2005, Competitive advantage: Creating and sustaining superior performance, Free Press, New York. Jones, G, & Hill, C, 2004, Essentials of strategic management, Cengage Learning, London. Porter, M, 2008, On competition, Harvard Business Press, Harvard. Campbell, A, & Collis, D, 2005, Harvard business review on corporate strategy, Harvard Business Press, Harvard. Henderson, G, 2002, Human relations issues in management, Greenwood Publishing Group, California. Reeve, J, 2005, Understanding motivation and emotion, Harper & Row Publishers, New York: Lanshley, 2001, Empowerment: HR strategies for service excellence, Butterworth -Heinemann, New Jersey. Armstrong, M, 2003, Performance management: key strategies and practical guidelines, Kogan Page, London. Weinrich, H, & Koontz, H, 2006, Essentials of management, McGraw – Hill, New York. Read More