A Strategic Management Discusssion on GE Case (Essay Sample)

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1. General Electric Today
General Electric is the American Diversified Corporation, the world's largest manufacturer of many types of equipment, including locomotives, power plants (including nuclear reactors), gas turbines, aircraft engines, medical equipment, also lighting equipment, plastics and sealants appliances etc. During 115 years, the leaders of GE formed a multidisciplinary group of leaders in their fields of industries (Hofer & Schendel 1978). They have developed a set of corporate programs to increase production and reduce costs.
The continuous development of financial resources and internal controls allowed the company to grow even during the most difficult times (Boyd & Walker 1990). Nevertheless, over time, the company had to give up the self-organization of division to buy the whole company and further turning it into an additional department of GE was much more profitable.
1.1 Vision, Mission and Goals
The mission of GE Healthcare includes reducing costs and improving service quality and efficiency around the world. By 2012, GE Healthcare (the UK) planned to reduce the cost of energy consumption ultrasound scanners at 25%, which would provide medical assistance to people at a lower price but with better quality (Tang, Chin & Kibbe 2010).
In 2005, the new chairman of the Board of Directors launched a new program of Ecomagination, the priority of which is the production of ecological products; the goal of this new introduction was to reduce emissions in production, in the Code of Ethics for all parts of the rules for compliance with environmental cleanliness at its production sites.
For agriculture, an innovative system of Advanced Biological developed, which allows effective protecting the environment from excessive levels of nitrates, selenium and other heavy metals in waste water flows from operations in power plants, mines, and agricultural facilities (Sontesgard).
1.2 Business definition and Philosophy
General Electric philosophy is to provide instant access to products, services, and information, so as to continue to transform the way the company conducts business. Currently; General Electric has 6 large units. GE Energy manufactures water treatment equipment and water purification equipment for power generation, secure and reliable distribution of electricity, natural gas equipment, including the turbine.
Apart from that, GE Healthcare manufactures medical equipment; GE Transportation provides freight and passenger locomotives, railway signaling, diesel engines for rail and sea transport, as well as drive systems for mining trucks and drills; GE Aviation produces jet engines, gas turbines for use in shipbuilding and also serves aircraft; GE Capital including GE Money Bank and GE Commercial Aviation Services; Home & Business Solutions include GE Lighting. Intelligent Platforms has been producing lighting equipment and uninterruptible power supply.
1.3 Culture and Leadership style
Over the years, starting in 2001, the company actively used the principle of staff rotation: the leaders were moving from one direction to another, in fact, having no special knowledge about the specifics of a business for example, from chemical production to television, from investment fund to the turbines manufacturing etc. (Rousseau & Wase-Benzoni, 2006). The company has consistently achieved high results. However, it seems that now, 13 years later, after the introduction of the principle of rotation. GE began to feel the negative effects of such inside-the-company leaders’ rotations.
Apparently, GE is going to dramatically change its personnel policy, which has recently been causing dissatisfaction and even resentment of current CEO Jeffrey Immelt, who was forced to admit “the people of Siemens, engaged in development and construction, for example, of wind power, are far ahead, they just better understand engines and other relative equipment than GE people do.”
1.4 Choices of organizational structure and rationale behind
GE organizational structure is founded on general organizations, resources, procedures, initiatives and culture in amalgamating the organization’s various dealings and releasing genuine economic worth.
GE has got difficulties at present practice with those rotations, introduced in 2001 by the chairman of the Board of Directors, Jack Welch. So far, the company practiced moving the head of one sector to another no matter which field is left and given: production or investment, every 2-3 years so that one could get an excellent and complete understanding of the whole GE business process. It is understood that this approach does not let people have enough time to accept the specific of a particular job environment with its unique problems, tasks and solutions.
Now, apparently, the GE will analyze the basis of training methods of its main competitor Siemens (Boyer & Biggs 2001). The Siemens government uses the principle: “Specialists, not generalists” when working with the staff. According to this principle, senior managers are focused on the study of the industry as a whole and on specific products in particular. So GE's own experience comes to that a good leader is not all-rounder but an expert in a particular area of business. GE made a number of fundamental changes in the organization of research and development work (Prokesch 2009).
In the old system, two-thirds of R&D funding came directly from the executive bodies of the corporation. It led to the fact that there were many projects not related to current needs of strategic business unit of corporation (Kerzner 2009). Since the mid-80s, this practice has changed: now, half of funding to R&D comes from strategic business unit, a quarter of funding comes from external customers and only a quarter from the central funds of the corporation.
1.5 The Company core competence and distinctive capabilities
GE business is not limited to the use of sources of technology. Those can be universities, national laboratories, or even competitors. The only requirement is that it does not reduce funding for R&D divisions of the corporation more than 20% per year. This system is suitable for such widely diversified companies like GE. Such a "market mechanism" contributes to the financing of the projects that are vital to the corporation. At the same time, 25% of funding from the headquarters of the corporation provides important processes to the future growth of the corporation and especially risky ones.
The current mission of the R&D Services Corporation is co-operation with the business through multiple generations of products, processes, technology platforms for new products/processes, the search for new technologies around the world, creating a reserve of high-tech personnel to GE. Center for Research & Development strategy is closely linked with the whole strategy of GE. Today, the main thing is the quality of service and growth. Business leaders have realized that the achieved successes in quality cause the results which are directly reflected in the profit. To use the factors to improve the quality (improvement of production, product design and corporate R&D organization), R&D experts are part of the team in all kinds of businesses.
Another favorable growth opportunity through the service is to use the Internet. GE is a leader in the use of Internet in all applications from marketing to find new technological information and partnership deals with consumers and investors. R&D center is working with the SBU over the Internet, serving such SBU, as GE Capital Service, GE - information service, cable television channel NBC, GE - medical system, GE Plastic and others (Jonk 2007). Today, GE corporate initiatives are globalization, quality and growth through service.
2. Five forces profile for GE capital and the rest of GE
According to Michael Porter, the first step in developing an effective strategy is the ability to separate it from the operating efficiency. The fact is that the operating efficiency is easily simulated due to the development of competitive analysis and technological progress. Operational efficiency is a necessary but not a sufficient factor for success. if the operating efficiency is to achieve excellence in selected activities (e.g., speed of production, product quality, cost reduction), the strategy is more related to their combination. Therefore, the strategic decision is a synergy of all activities (O’Shaughnessy1995).
These considerations have inspired Porter to create a model of "five forces." He noted that the top management very narrowly understands issues of competition: here we and the competitor are, we are doomed to fight for the market 24 hours a day, 7 days a week. Porter decided to offer a holistic view of the economic sector, and numbered as many as five factors ("forces") affecting it.
Destruction of the four types of barriers is not just to reduce bureaucracy, but also to the development of self-sufficient leaders who can make effective decisions. Thus, the strategy is more than deciding what to do. Strategy is primarily a decision of what not to do ever.
2.1 Competitive rivalries within an industry
Every corporation raises the product quality and tries to lower production costs. Moreover, the advanced approaches and technologies can be easily imitated. One can also bypass the competitors only when the company will find a distinction that the company will be able to keep. Consequently, according to Porter, operational efficiency is doing the same thing as competitors but better. A strategy is producing not the same product as competitors, or at least produce it in another way.
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