Corporate Strategy and Portfolio Analysis (Coursework Sample)

CORPORATE STRATEGY AND PORTFOLIO ANALYSIS OF GENERAL ELECTRIC
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CORPORATE STRATEGY AND PORTFOLIO ANALYSIS OF GENERAL ELECTRIC
Method to Map General Electric’s Business Portfolio:
The method to map General Electric’s business portfolio can be carried out as follows (Koller, Goedhert, & Wissels 2010, p. 422):
The current market value of General Electric is $274.34 Billion (Yahoo Finance 2015).
General Electric Current Situation is as follows (MarketWatch 2015);SalesEBITARevenue GrowthROICDCF Value of Business Plans$'Millions$'Millions%%$' MillionsAppliances for business 45,852  22,467  9  25  34,389 Aviation 21,214  10,395  6  24  15,911 Capital 14,463  7,087  15  12  10,847 Consumer Electronics 1,248  612  8  14  936 Critical Power 4,582  2,245  5  12  3,437 Power Project Consulting 12,423  6,087  12  9  9,317 Energy Management 7,825  3,834  9  9  5,869 Appliances for consumers 9,542  4,676  4  13  7,157 Health Care 6,425  3,148  6  10  4,819 Home Improvement 4,865  2,384  18  14  3,649 House Wares 4,568  2,238  4  21  3,426 Industrial Solutions 4,587  2,248  7  25  3,440 Intelligent Platforms 4,652  2,279  8  17  3,489 Lighting for business 14,712  7,209  5  29  11,034 Lighting for consumers 12,457  6,104  13  24  9,343 Mining 9,845  4,824  8  18  7,384 Oil and Gas 8,975  4,398  6  16  6,731 Personal Healthcare 3,515  1,722  4  13  2,636 Power and Water 4,587  2,248  12  9  3,440 Power conservation 6,458  3,164  14  22  4,844 Power Economics 4,582  2,245  5  18  3,437 Power Systems Operations and Planning 4,632  2,270  7  12  3,474 Power Systems Software Products 4,582  2,245  6  31  3,437 Software Transportation 5,891  2,887  8  16  4,418 Total 222,482  109,016  166,862 Debt (53,254)Equity Value 113,608 Less: Stock Market Value (77,125)Value Gap 36,483 Percent of Stock Market Value32%
General Electric statement of cash floes for the 4 quarters of 2014 is as follows (Amigobulls 2015):
Cash Flows2014-Forth Quarter2014-Third Quarter2014-Second Quarter2014-First QuarterGeneral Electric Net Income Cash Flow15.35B10.01B6.5B2.95BDepreciation Depletion Amortization Cash-Flow9.28B7B4.5B2.28BNet Increase (Decrease) in Assets Liabilities998M-2.82B942M680MCash From (used in) Discontinued Operations307M107M-116M-15MOther Adjustments Net1.78B1.95B-1.61B-931MGeneral Electric Net Cash from (used by) Operating Activities27.71B16.25B10.21B4.96BIncrease (Decrease) in Prop Plant And Equipment-7.47B-4.79B-3.71B-2.17BAcquisition Disposition of Subsidiaries543M-1.25B-1.29B-1.2BIncrease (Decrease) in Investments-4.27B849M2.89B3.17BOther Cash Inflow (Outflow) from Investment Activities6.16B3.27B1.99B1.99BGeneral Electric Net Cash from (used by) Investment Activities-5.03B-1.92B-118M1.79BIssuance (Purchase) of Equity Shares1.62B1.48B-1.38B-1.34BIssuance (Repayment) of Debt Securities-15.83B-8.49B-7.59B-2.83BIncrease (Decrease) in Bank & Other Borrowings7.17B3.05B1.14B-2.16BPayment of Dividends & Other Cash Distributions-8.85B-6.64B-4.43B-2.22BOther Cash from (used by) Financing Activities-1.07B-472M-102M40MGeneral Electric Net Cash from (used by) Financing Activities-16.96B-11.08B-12.37B-8.5BEffect of Exchange Rate Changes on Cash-3.49B-1.36B196M73MGeneral Electric Net Change in Cash & Cash Equivalents2.23B1.89B-2.08B-1.68BCash & Equivalents at Beginning of Year88.79B77.46B84.62B79.09BCash & Equivalents at Year End91.02B90.67B86.71B87.11B
From the table of current situation and the 2014 quarterly cash flow statement, the value gap is $36,483,000,000 representing 32% of the stock market value, which shows that the investors and the managers of general electric have different perspectives on the company’s value (Cravens & Piercy 2008, p. 51).
The value opportunities that General Electric can use to improve its internal operations include increasing its capital efficiency, accelerating the areas of the company that generate core revenue such as appliances for business, consumer electronics, and power project consulting among others, and increasing their margins (Hollensen 2015, p. 121).
Some of General Electric’s businesses such as personal health care, oil and gas, and mining among others should be divested since they are not in line with the core business of the company. Divesting such businesses will give room for the company to concentrate on its core businesses, which will help in generating more revenue and increasing the company’s competitive advantage (Wilson & Gilligan 2012).
General Electric’s potential acquisitions and other initiatives that can create new growth for the company include acquiring smaller companies in the industry such as Danaher Corporation, Eaton Corporation, and SMC Corporation among others. This initiative can help the company increase their market share, which will give them a competitive edge over the main competitors.
General electric can also increase its values by increasing its number of shares through stock split. This will have an effect on its capital structure since the stock price will reduce, which will attract more investors to the company and raise more capital for financing the company’s investing activities, operating activities, and financing activities (Hutt & Speh 2012.).
The Areas of key Competence and the type of Corporate Strategy Pursued by General Electric:
A value chain analysis of General Electric covers the inbound logistics, which covers the receiving, storing, and distribution of raw materials, operations, which covers the process of coming up with the company’s finished products, outbound logistics, which covers the storing and distribution of the finished company products, marketing, which covers the generation of sales and identification of customer needs, and service, which covers customer after sale support (Lee & Carter 2011).
In terms of inbound logistics, General Electric can come up with a strategy to develop an infrastructure that makes the receiving, storing, and distribution of raw materials easy. This can be done by coming up with an organizational culture that has control systems that enables raw materials to be received, stored, and distributed effectively in the company such that there is no loss of raw materials or wastages that can result to losses (Foxall 2014, p. 63). The company should also ensure that the right procurement procedures are followed by developing and organizational culture and organizational structure that caters for procurement of supplies and materials (Mudie & Pirrie 2012). This will also ensure that the company avoids wastages and unnecessary losses that come about as a result of poor procurement procedures.
In terms of operations, General Electric can utilize their human resources effectively in order to achieve the required output. This can be achieved by hiring the right human resources in the different departments, training the available human resources on different competencies that can improve performance, and compensating the available human resources appropriately for motivation (Bickhoff, Hollensen, & Opresnik 2014, p.11). The company should also ensure that there is the right infrastructure in terms of organizational culture and organizational structure that supports high performance. Technology can also be useful in ensuing that systems are in place since General Electric operates in a technology –based industry. The company should ensure that they utilize the latest trends in the industry that support high productivity.
In terms of out-bound logistics, the company should ensure that the storing and distribution of the finished company products is effective by using the right human resources, technology, and setting an infrastructure that supports effectiveness in outbound logistics (Chernev 2014). This can be done by ensuring that the ware houses and distribution channels in the company are effective in order to avoid wastages and unnecessary losses.
In terms of marketing, which covers the generation of sales and identification of customer needs, General Electric should enhance its marketing campaigns in order to reach more target customers since there is increasing competition in the electrical industry especially from companies from China (Penaloza, Toulouse, & Visconti 2013). The company should focus on quality and meeting customer needs since it is well known for producing quality products. The company should also utilize different marketing techniques such as promotions and extensive advertising in different media to reach more target customers.
In terms service, which covers customer after sale support, General Electric should en...