External and Internal Environments of General Electrics - Case Study Example

? External and Internal Environments External and Internal Environments Introduction GE (NYSE: GE) or the General Electric Company is one of America’s multinational conglomerate corporations specifically incorporated in Schenectady in New York and its head office is in Fairfield, Connecticut in the United States. This company operates within four sections namely: capital finance, technology infrastructure, consumer, industrial and energy (Griffin, 2012). In 2011, the Fortune 500 ranked General Electrics Company as the sixth largest company within the United States in terms of its gross revenue. This also indicated that this firm is the 14th most profitable when compared with many other firms of its size (Kurtz & Boone, 2011). Upon considering further metrics, Forbes Global 2000 ranked General Electrics as the third largest company in the world. This paper seeks to discuss the internal and external environments of General Electrics Company. Segments of the general environment The general environment revolves around every condition in the outside or external environment, which is part of a background context of a managerial decision-making. In simple terms, the general environment of an organization is generally the outer layer that widely affects the organization indirectly and in many ways (Heide, 2008). Typically, environmental issues that may affect an organization consist of the social cultural conditions, economic conditions, technological conditions, political and legal conditions and demographic conditions. With reference to the General Electrics Company, two segments of the general environment would rank highest in their influence on this corporation. They are technological conditions and economic conditions (Griffin, 2012). Particularly, every company that chooses to invest heavily in technological advancements stands to benefit a lot especially when it outshines its competitors. General Electronics deals with products and services wherein technology plays a huge role in their success or failure. For instance, General Electrics offers healthcare products (P&Ls) for surgical operations (Kurtz & Boone, 2011). In this business, General Electrics offers a market-leading healthcare in interventional imaging and intra-operative that facilitates guidance for minimal invasive surgical procedures. Imaging products for surgery are integral in more than one sector as they are also pragmatic in other fields, which include orthopedics, general surgery, neurosurgery, cardiology, urology, GI and for specified processes such as management of pain (Heide, 2008). Indeed, technological conditions rank highest in its influence on the General Electrics operations. This is so because the world is today flooding with different ways of meeting the same goal but with different means indicating that technology is playing a huge role in influencing the functioning of many corporations (Ireland, Hoskisson, R. & Hitt, 2008). Economic conditions would also rank highest in their influence on the General Electrics provision of services since economic conditions change with time. Profoundly, a company’s performance and operations depend highly on the economic conditions of the time (Ireland, Hoskisson, R. & Hitt, 2008). Economic conditions would rank highest in influencing the operations and performance of this corporation because uncertainty regarding current global economic status poses great risk as its core consumers may continue postponing their spending decisions (Kurtz & Boone, 2011). This could be in response to negative financial news, unemployment, tighter credit and/or deterioration of the asset or income values. Hence, economic conditions would rank highest in influencing the service provision of this corporation given such uncertainties could cause material negative effects on demand of the company’s products and services (Griffin, 2012). General environmental factors like the economic conditions and technological state have a heightened rank in the operations and performance of General Electrics mainly because the company focuses much on products mostly influenced by such conditions. Assessment Generally, General Electrics deals with technologically oriented products whereby improved technology means increased production of different products and services and increased sales resulting in increased profit margins (Heide, 2008). Improved technology entails the fact that General Electrics home and business solutions in addition to General Electric’s technology infrastructure business are booming. Technological conditions influences General Electric’s operations in that, with improved technology in the business, there will be improved production of industrial automation, railway locomotives, medical imaging equipments and aircraft jet engines among other technologically favored products (Griffin, 2012). General Electrics will therefore be in a position to accrue more profits, perform better and increase its operations. Technological conditions will affect the industry in which General Electrics operates through competition. If other companies operating in this industry happen to have more improved technology than that of the General Electrics, it would be unhealthy, as it will face stiff competition from them (Kurtz & Boone, 2011). The five (5) forces of competition In most cases, managers tend to define competition very narrowly such that others understand it occurs only among and between today’s direct competitors. What they do not declare is that competition goes beyond the already established industry rivals to consist of four other forces of competition namely: substitute products, potential entrants, suppliers and customers (Griffin, 2012). This entails that the environment under which businesses operates is full of threats, which comes in the form of either competition or loss. However, these four competitive forces form the extended rivalry, which define the structure of an industry and shapes its force as well as determines the nature of competition interaction in that industry. According to Michael Porter, there are forces, which shape the competition in an industry (Kurtz & Boone, 2011). They are five and they include new entrants’ threat, suppliers’ bargaining power, rivalry among and between the existing competitors, buyers’ bargaining power and services or product substitute threat (Heide, 2008). Considering the five forces of competition, threat of new or different entrants and services or product substitute threat are the most significant for the General Electrics. Indication or presence of threats based on entry of new firms in the same line of business as General Electrics is healthy for this corporation in a number of ways (Kurtz & Boone, 2011). First, the business can improve its abilities to produce products that are more sophisticated, improve its technological support and attain potential service provision by eliminating laxity at work as there is threat brought in by new entrants. Specifically, it is essential for the firm to have challenges brought in by other firms operating in the same of business (Griffin, 2012). Nevertheless, one should understand that increased or intensified entry of new firms in the same market and offering similar products or presence of services or product substitute threats might prove to be unhealthy hence unhealthy for this corporation. There might be increased competition due to this aspect and for that reason entry of new firms is only significant when it affects the business positively (Ireland, Hoskisson, R. & Hitt, 2008). Evaluation For the last two years, General Electrics has been addressing the issues of new entrants’ threats and threat of substitute products through different methods. For one, reports show that the firm has been involved in various dealings of acquisition, reorganization and divestitures (Kurtz & Boone, 2011). In these ways, the company has been eliminating any problem that may come along and end up hindering the operations and performance of General Electrics. Additionally, the company has been setting high standards of operations and produce products without a match in the market, a move that has seen General Electrics stand out as if it operates in that line of business on its own (Heide, 2008). Ways of improving its ability The threat of new entrants poses significant challenges to a firm’s operations and realization of profits. In short, entry of new firms in the same line of business puts in place a possibility of market rivalry and competition (Kurtz & Boone, 2011). General Electrics can improve its ways of addressing new entrants’ threats and products’ substitution threats by ensuring that the capacity of new entrants is low. Where the threat of substitute products or new entrants is low, industries are more attractive and their potential for increasing profits is high. In order for the General Electrics to address these forces easily, it is important for the company to put in place platforms capable of maintaining a balanced market line. This will help reduce the issue of expectations of retaliation from the existing firms (Griffin, 2012). The company might also seek to ensure customers do not go for another product or service even if there are other similar products on the market. The company may do so by creating a strong client base, which has a strong taste and liking for General Electrics’ products (Griffin, 2012). However, in order to avoid the threat of substitute products entirely, the company may also establish a mode whereby it can set standards or simply restrictions for other firms trying to venture into this market. Such platforms can help reduce the issue of competition from substitute of products and can assist in addressing these forces much better in the future (Kurtz & Boone, 2011). Ideally, with favorable environmental conditions and predictable market, other firms will definitely want to join in the same area of business but General Electrics can address that issue substitute products and services by analyzing the market, environment, customers and competition level and come up with strategic systems and trends capable of avoiding or suppressing the threat of other products. External threats affecting this corporation Traditionally, approaches undertaken by managers when assessing a firm’s internal environment aimed primarily on determining the company’s relative weaknesses and strengths. Such is the purpose of the SWOT analysis, where managers analyze the relative weaknesses and strengths of a firm and determine its relevant opportunities in addition to possible threats within the external environment (Kurtz & Boone, 2011). The General Electric Growth Council finds this model suitable for determining and assessing the company’s internal environment since it concentrates on the potential and crucial segments of the business, which have a great impact on its operations. One of the major external threats affecting this corporation is competition. Truthfully, considering operating in a market that is so stiff competition wise is a threat by itself (Griffin, 2012). Similarly, General Electric risks losing its potential clientele to its competitors just like any other company operating in such a competitive market (Ireland, Hoskisson, R. & Hitt, 2008). Financial crisis is yet another external threat affecting this corporation since the global financial turmoil has posed a serious effect on many corporations worldwide. Sensibly, the overarching increase in prices coupled with shrinking bank lending rates are depriving many companies including General Electric of the much required or rather needed capital and profits respectively (Kurtz & Boone, 2011). In addition to that, General Electric faces other external threats that affect its operations such as information security and media depictions. Information is a very substantial item in every company. Thus, when it comes to the security of a firm’s information, many of them stand to lose an ideal component of their operation through problems like employee dishonesty, natural disaster and hackers (Heide, 2008). Analytical studies show that loss of information by a company may lead to a slowdown in its production activities and may greatly hinder the company’s general activities. General Electrics has fallen victim of deception and according to sources, General Electric was involved in the biggest scandal (Enron Scandal) which hindered its performance by causing loss of investor confidence. Opportunities available to the corporation Since its foundation, General Electrics has taken part in many acquisitions and mergers. In the recent past, the company has taken part in many mergers. Mergers help companies to grow not only globally, but also diversify its operations towards new areas hence realizing increased productivity (Kurtz & Boone, 2011). So far, General Electrics have merged with such companies as Whatman Plc, Interbanca S.P.A, Turbomecanica Combustor Products and VetcoGrey. In general, mergers help General Electrics diversify its activities and increase its production since this spectrum of merging extends business operations. Moreover, the merger between Vivedi and NBC plays a critical role in providing better opportunities for General Electrics’ initiation in the media business (Griffin, 2012). Opinions on dealing with the most serious threat and the greatest opportunity The greatest threat facing General Electrics is competition and devising a way in which the company can handle this issue can be imperative. In my opinion, by intensifying and coming up with better production techniques manufacturing technology General Electrics can deal effectively with competition (Kurtz & Boone, 2011). This is so because it can be in a position to outdo other products in the market by producing much better products. Merging, research and development are the General Electrics’ greatest opportunities. Consequently, it can reap maximum benefits from them by widening its search for potential firms for acquisition or merging (Ireland, Hoskisson, R. & Hitt, 2008). Opinion on the corporation's greatest strengths and most significant weaknesses With reference to my opinion, global recognition is the General Electrics’ greatest strength. Having ventured into business long time ago, it has a huge level of recognition due to its unique services and products. Research results indicated that General Electrics was the world’s most recognizable firm in 2007 (Heide, 2008). In 2009, Forbes magazine ranked this company’s brand, as the globe’s largest firm. This kind of recognition has seen General Electrics gain a competitive edge over other firms because of its stability to attract more clients (Griffin, 2012). I find under performance in its energy sector being the greatest weakness faced by General Electrics. The energy sector is not performing the way prospects expected it to perform. Frequent fluctuation of fuel (oil and gas) prices commonly caused by shortages is threatening General Electrics’ profitability (Kurtz & Boone, 2011). Conclusion In conclusion, General Electrics can take maximum advantage of its strengths by reducing unwanted diversification and improving its opportunities. To fix its most significant weakness, General Electrics should adopt a strategy or tactic capable of making the underperforming energy sector perform tremendously by ensuring that it reduces cases of limited supply of gas and oil (Heide, 2008). The company’s resources, capabilities and core competencies are its energy provision, financial provision and global recognition (Griffin, 2012). The value chain of General Electrics shows that the company delivers valuable products to its clientele. Nevertheless, it can create more value in the market by delivering not only valuable products but also costly products. This paper has discussed the internal and external environments of General Electrics Company. References Griffin, R. (2012). Management. Mason, OH: CENGAGE Learning Custom Publishing. Heide, M. (2008). Harvard Business Review Case Study: General Electric Medical Systems (2002). Mu?nchen: GRIN Verlag GmbH. Ireland, R., Hoskisson, R. & Hitt, M. (2008). Understanding business strategy: Concepts and cases. Mason, OH: South-Western Cengage Learning. Kurtz, D. & Boone, L. (2011). Contemporary marketing. Mason, OH: South-Western, Cengage Learning. Read More