General Electric Capabilities and Core Competencies - Assignment Example

Case study of General Electric (GE) 04258 Table of Contents Table of Contents 2 Introduction 3 Answer to Question 3 1. Internal Analysis (Value Chain) 3 1.2. Capabilities and Core Competences 5 1.3. External Analysis of GE Before 2009: 6 Answer to Question 2 7 2.1. SWOT Analysis: 7 2.2. PEST Analysis 9 2.3. Kaplan’s Balanced Scorecard 10 Answer to Question 3 12 Conclusion 14 Reference list 16 Introduction General Electric or GE is one of the major USA based international multidepartment organisation. They are dealing in different type of industries like building, curing, moving and powering in the global segment. It has been observed that the firm is penetrating into various industries in order to gain larger profitability and growth (Alexander, 2008). They are offering various products like “airline engines, electrical sharing instruments, electric motors, power, money and investment, healthcare products, illumination equipments, train engines and spare parts, lubricates, various software, packaged drinking water and wind turbines” (Ge.com, 2015c). According to the Fortune 500 rankings, General Electric is the 26th positioned firm in the USA as per the gross revenue generation. On the other hand, Forbes Global 2000 report stated that the firm is fourth largest in the world as per performance and operational policies. In the current study, an in depth analysis of reinvention strategies of General Electric Company by Jeff Immelt will be made. He took the charge as chairperson and CEO of the General Electric Company from the Jack Welch. At that moment of time, GE was facing huge challenge or turbulence from economic, political and technological challenges (Ge.com, 2015b). Answer to Question 1 In the current section, core competences and potential of the General Electric in their international segment is discussed. In addition, it can be said that such factors are helping the organisation in increasing operational efficiency in achieving success in the international aspect until the year 2009. 1.1. Internal Analysis (Value Chain) Value chain analysis is one of the major internal analysis tools for justifying the organisational resources. This tool is opting three-step procedure in order to justify various internal and external resources to increase competency in international market (AidaAnasovna, 2014). Figure 1: Value chain analysis (Source: Ouzrout et al., 2009, p.263) Primary Activity Analysis: Product and service delivery actions must be cleared by the top level management of GE. Highest value of the products and services must be outlined to meet the perception of international customers (Bolwig et al., 2008). General Electric is collecting their resources from different parts of world. Inbound logistics are referring to the process of transferring resources to various operational set up. Operations: GE are using highly efficient operational set up using modern and innovative technologies. Outbound logistics: the firm is having highly efficient transportation system to reach the end customers. Marketing and sales: global market is aimed to grab potential of higher sales. Service: GE is offering different financial, technological, power and post sale service. Support activity assessment and planning: GE management needs to assess their operational or production plan in order to identify the requirement changes. Supporting activity of General Electric is including various activities like procurement or purchasing of raw materials, human resource management, technological development and infrastructural development. Resources of the General Electric are segmented into tangible and intangible segment. In addition, potential and core competency are outlined to develop the strategic fit for the post 2009 operational strategies (Alexander, 2008). General Electric developed different HR strategies according to their branding policies and core competency. They are differentiating their strategies as per their resource and product line. Currently, value chain of GE is quite compatible with other conglomerate industries. Such value chain will be helping them in post 2009 period. Major strategic development concentrated on acquisition strategies to increase the compatibility (Bolstorff and Rosenbaum, 2007). 1.2. Capabilities and Core Competences Healthcare: GE leaded the diagnostic products industry. They produce healthcare equipments like “CT scanners, X-ray equipment and MRI scanners” (Ge.com, 2015d). Jeff Immelt targeted the healthcare segments for expanding products and services range. He targeted new geographical areas and acquisitions strategies (Buckley, 2002). Under his management, GE acquired ‘Amersham’ which is a British diagnostics and health checking kit producers, ‘HPSC’ which is mainly a financial services providers for the patients and institutes providing medical and dental exercises, and ‘Abbott Diagnostics’ which is leading vitro diagnostics (Ge.com, 2015e). Energy: GE started with the power generation business and started to develop power supplying equipment. Such instruments got popular in the oil and gas industry. According to Immelt’s, observation energy segment can provide them with the relevant growth (Brenneis, 2006). GE started to produce various products for alternative energy resources. GE acquired wind energy production system of Enron (Ge.com, 2015a). Further, they acquired “BHA Group specialised in emission decreasing tools, coal gasification setup of ChevronTexaco and solar energy producing company AstroPower” (Ge.com, 2015c). “Vetco Gray and Hydril Pressure Control” are acquired by the GE too increase global competency (Ge.com, 2015a). Technology infrastructure: Recently, infrastructure business is one of the major growth areas of GE. Immelt adopted various growth initiatives in order to manage international demands of diversified customers. Technology infrastructure segment of the GE group are the source of competency in the international segment. The CEO or HR department of the firm started to concentrate on security systems, electricity systems and many other lighting materials. They acquired different technology infrastructure, “Vision Technologies who specialised in the explosive detection systems, Edwards Systems Technology offering fire detection and Interlogix producing security systems.” In case of “water treatment policies, they acquired Ionics and BetzDearborn” (Ge.com, 2015d). Smiths Aerospace was acquired by GE to expand their aviation support business (Ge.com, 2015a). 1.3. External Analysis of GE Before 2009: Political: before 2009 the firm was enjoying stable political condition in developed countries like UK, USA and developing country like India. Economical: It has been observed that healthcare and lighting products are increasing demands in the international market. However, in 2007-2008 financial crisis hit the market harshly reducing the scope of profitability. Social: Large population would increase opportunities for increased sale of various GE products and services (Buckley, 2002). Technological: Jeff Immelt forecasted about a gigantic funding in the infrastructural development in outside USA. GE is concentrating on developing different types of infrastructural products, electrical instruments and financing facilities. Power, airlines and locomotive instruments are the major opportunity for GE in the international segment (Fearne, GarciaMartinez and Dent, 2012). Environment: GE is dealing with different types of petroleum products, so they are having certain obligation for the sustainable business issues. They have to maintain strategic section for the challenges like global warming, scarcity of natural resources and preservation of locality. Therefore, GE developed certain environment friendly strategies like carbon footprint, carbon credit, CSR and use of renewable energy resources (Fisher, 2006). Legal: Jeff Immelt aimed for business expansion in the booming economies. Therefore, GE expand their business in the Asian countries like China and India, South East Asia, Eastern Europe, Russian region, Latin America Middle Eastern countries and African region. In these countries, legal systems are differing with each other (Currie, 2004). Answer to Question 2 Jeff Immelt took the charge as the CEO of General Electric Company; the firm was facing turbulence. The firms faced post destruction time of World Trade Centre of New York. They were facing the challenge of financial crisis during the 2007-08. After that time, they were facing the challenge of inadequate corporate governance, less efficient financial reporting and business ethics in different developing countries (George, 2003). Thus, Jeff Immelt developed effective strategic direction with the help of internal and external analysis, SWOT, PEST and Kaplan’s Balanced Scorecard in order to achieve higher growth within 2014. 2.1. SWOT Analysis: SWOT Analysis of General Electric Strength General Electric is having diversified product portfolio including consumer electronics, aviation, automobile, power, software, investments, healthcare products and lighting equipments are attracting huge customers. Jeff Immelt CEO of the USA based organisation employed various research and development strategies that increased capabilities of their employees They are having more than 310,000 skilled and educated employees in the worldwide segment (Ge.com, 2015a) Proper value chain is helping the conglomerate firm in generating revenue from various operational sectors by mitigating business risk (Hussey and Ong, 2012). During the year 2009-2011, GE increased their operational channel into more than 175 companies Innovative technologies are used to increase the CSR activities, green environment initiative and workplace safety and attraction Sharing of operations in different countries is increasing revenue generation prospect (Kang and Zardkoohi, 2005). Weakness Jeff Immelt increased the international set up in terms of increasing the profit from new markets; however, it increases dependency on indirect suppliers. Such dependency could result low quality raw materials. Court case and other conflicts can affect the brand image of General Electric (Kannegiesser, 2008) Opportunity Capital investment of GE is concentrating on stakeholders’ welfares like “Evolution hybrid locomotive, Smart Grid and Sodium batteries” which increases attraction of the global stakeholders. Acquisitions and merger with various local power, healthcare products, lighting equipments and software firms will be enhancing potential profitability and market share. Countries are able to mitigate challenges from financial crisis effects. Therefore, use of the luxury products, infrastructural development products and financial instruments are gaining popularity among the international market (Ge.com, 2015b). Threats In the international market, GE will be facing the challenge of strict government policies. Moreover, ecological regulatory rules can limit operational success. Risks of counterfeiting are increasing for the powerful brand in the global segment. E-commerce safety and other corrupted activity harmed brand image of the global MNC firm (Kaplan, 2005). Exchange rate risk and economic recessions are affecting profitability and market share growth. 2.2. PEST Analysis PEST analysis is mainly the external analysis of GE in the international segment. The USA based conglomerate organisation is facing the challenge of various external factors, economic factors and competition. Political: General Electric is one of the major multinational companies having global presence in more than 175 countries in the year 2014. Thus, they are facing diversified and complex political systems and taxation rates present in separate nations. Such political frameworks are limiting competency and growth of GE business by creating tricky circumstances. Jeff Immelt has developed business strategies as per various tax rules and regulations of different countries (Keller, 2014). GE headquarter of the United States is controlled by the Internal Revenue Authority and they are submitting tax liability by April 15 every year. They are also enjoying lower intervention from the government and favourable business environment (Kuada, 2008). However, the firm is facing high government intervention in the Asian countries like China, India, Malaysia and Singapore. Tax return submission period is also different in such countries. The firm have to pay off their return by the month of March in such countries. In addition, regulations of FDI (foreign direct investment) are different in Asian, African and Latin American countries (Laliman, and Roiz, 2014). Economic: GE faced huge challenge of financial crisis in the year 2007-2008. However, GDP growth rate reported as 2.5 in 2010 which reduced to 1.6 in 2011. Henceforth, it reported as 2.3 (2012) and 2.2 (2013) (Data.worldbank.org, 2015). Jeff Immelt identified that the interest rate swaps, currency exchange rates reduction and declining fund value reduced overall operational profit for General Electric (Rajani, 2013). The unemployment rate reported highest during the 2010 (9.8) and it reduced to 9.2 in the year 2011. Henceforth, USA economy faced reduction as it reported as 8.3 (2012), 8 (2013), 6.6 (2014) and 5.7 (2015) (Data.worldbank.org, 2015). Foreign exchange rate of USD observed huge fluctuation. USD and Euro conversion rate reported 0.7535 in the year 2014, in 2013 it was 0.7532, 0.7781 (2012), 0.7188 (2011) and 0.7546 (2010) (Data.worldbank.org, 2015). General Electric also faced the challenges like increased cost of the raw materials and lower capital fund availability for increased debt interest rates (Kolk, Lindeque and vandenBuuse, 2013). Socio-cultural factors: international customers of GE are having diversified background, thus, management faced complexity of custom, culture, belief and family backgrounds. Jeff Immelt faced similar challenge for developing marketing and product development strategies in different Asian and African countries (Rajani, 2013). After 2009 the organisation have faced higher challenges as the racial issues in developed countries and the instable political situation also hampered the operational policies of GE. It has been observed that African and Asian ethnic peoples are facing the highest discrimination of racial and religious factors (Yau, 2012). Technological: GE is specialised in the financial market, power infrastructure, aviation, healthcare, and lighting instruments. Modern technologies for computing, operations and communication is increasing possibilities of higher production and reaching potential and existing clients (Venkataraman, and Pinto, 2008). Technology is crucial for producing products, increasing features of products and service. Innovative products are attracting people in the competitive market. Technology is also helping the firm in utilising resources optimally (Rajani, 2013). E-commerce software and online selling portals are used by GE to attract global customers. However, there are certain risks of hacking and cloud failure in such system (Keller, 2014). 2.3. Kaplan’s Balanced Scorecard Balanced Scorecard is one of the mostly used strategic development tool. Robert Kaplan and David Norton of the Harvard Business School developed the model in the year 1990 to increase feasibility of decisions (Kaplan, 2012). According to Kaplan and Norton, there are certain businesses which develop the strategies according to financial aspects. Some of the businesses are using the past data in order to evaluate the growth and profitability. This strategy is used by Jeff Immelt, CEO of General Electric Company for gaining higher market share and profitability in international segment (Kaplan, 2005). Balanced Scorecard developed an unconventional path for GE in the post 2009, in order to increase their performance. Such model helped the management in developing strategic directions according to mission and vision statement of the international setup. Gradually, it helped Jeff Immelt in synchronising strategic plans in different stages (Kaplinsky, 2000). Firstly, the management will be concentrating on their financial position of the firm which helps in developing investing and divesting strategies. Then strategies must be considering on current operating policies and organisational structures. GE must set certain strategies for increasing the knowledgebase of the existing and new recruited employees. Finally, they are dealing with vast products portfolio, thus, management must design their products in such a manner so that they can enjoy optimal customer satisfaction (Kaplan, 2012). Department Areas Finance Return on investment reported 26% in the year 2001 and it reduced to 11.9% in the year 2011. Cash flow reported 13.7 in 2001 and 14.2 in the year 2011. Return on capital employed reported huge decline as in the year 2001 it was 27% and in 2011 it reported 11.6% (Ge.com, 2015e) Internal operational process  The firm is producing diversified products and their conglomerate business is aiming to launch 880 new products. Jeff Immelt decided to go for international setups in different prospective countries. Process alignment helps the management in allocating jobs among the right department. Blockage and computerization of operational process will help the firms in increasing the compatibility (Kuada, 2008). Knowledge and development Currently, the firm is having nearly 301000 employees in their global segment. In the post 2009 segment, Jeff Immelt planned for recruiting almost 56.5% non USA based employees. Thus, GE started providing effective training and development programs for the employees in order to increase the quality of products and service. Gradually, GE can be enjoying lower employee turnover as the employees’ job satisfaction increases. Such program will be increasing the potentials of achieving opportunities (Ge.com, 2015d). Customer GE planned to deliver excellence in their conglomerate products and increase customers satisfaction and loyalty (Laliman and Roiz, 2014). Answer to Question 3 Jeff Immelt took the charge as the chairman and CEO of General Electric Company from Jack Welch. He adopted various management approaches in order to increase efficiency and operations of firms and employees. Volatile, uncertain, complex and ambiguous situations are management very well. Both the CEO have different behavioural attitude to meet distinct situations in different countries. It is observed that the management styles and leadership styles are different of Immelt and Welch. Mainly, they acted differently as per the volatile, uncertain cases, complex situations and ambiguous situation. Following table will be helping in outlining different leadership styles and management approach of the former and existing CEO of General Electric (Li and Harrison, 2008). Jack Welch Jeff Immelt Jack Welch developed higher inclusive strategies as per contemporary market situation. His analytical and managerial skills helped General Electric in meeting the challenges of financial crisis. He was concerned for the stakeholder’s values. Under the management of Welch business portfolio of the firm got reformulated and they planned to meet the challenges (Lucas and Tsai, 2013). Mainly, he was able to identify low growth segments in the group. Welch selected diversified strategies for their manufacturing industry and increasing service providing like the financial services and electricity infrastructure (Mitrega, 2006). His managerial traits helped GE Capital wing to grow. Gradually, half of the GEs revenues were obtained from the capital or financial system wing. Welch has implemented integrated strategies for increasing the performance culture (Montoya, 2010). Wide-ranging appraisal systems are using highly influential monitoring performance. They developed certain targets for the employees which helped Welch and GE to create influential incentives schemes for achievement (Rajani, 2013). Welch was mainly a bureaucratic leader having concerned on various level of hierarchy. Welch’s leadership and management style was straight forward, personal and argumentative (Terpstra, 2000). Such leadership styles helped him to increase the capacity of the managers by encouraging them with the commitment. In addition, Welch guided the employees to meet predetermined performance goals. He influenced the subordinates to take intense pressure of external environment and deliver best possible performance in the international aspects (Walters and Rainbird, 2004). Welch redefined management systems of the firm as the strategic planning process and HR management systems are changed. Welch changed the employee training system. New system was underpinning short time challenges and increasing efficiency of the employees (Venkataraman and Pinto, 2008). Jeff Immelt joined as the CEO of General Electric after the retirement of Jack Welch in the year 1994. It was observed that Jeff Immelt is posing strong leadership skills. Leadership capabilities are quite democratic of the new CEO. He emphasised on revitalizing and motivating employees. According to Immelt, workplace development influences lifestyle and motivation which results in major growth of the entire global HR (Mitręga, 2006). Jeff Immelt has democratic behavioural traits and leadership style which is totally different from the bureaucratic leadership and management style of Welch (Yau, 2012). Welch influenced employees with pressure and achieved the potential goals. Immelt offered friendlier place of work and common person approach is used to communicate with employees (Ouzrout et al., 2009). After the analysis of General Electric’s internal and external factors it has been observed that development of strategic management policies are depending on various items. “VUCA or volatile, uncertain, complex and ambiguous” are major factors that are affecting the strategic development of GE. Globalised businesses are facing the challenge of changing environment and stakeholder behaviour. Thus, it can be said that management must be flexible to meet the challenges of uncertain and complex situation. Uncertainty is major factor that controls the strategic management policy of the GE managers. Conclusion From the study, it is observed that the General Electric is one of the major conglomerate multinational companies. They are dealing with various technological products, financial and electrical support and providing financial services. Jeffrey R. Immelt used the USP as they are developing products having higher demands. Moreover, the firm is developing daily needed products. The management of the firm has segmented market as investment, power communications, and aviation, healthcare, household and commercial solution. They are using highly skilled employees and marketing strategies to meet the global conglomerate industry. GE is facing competition from 3M, Hitachi Ltd, Honeywell international, Siemens AG, Mitsubishi Corporations and Textron Inc. Thus, Jeffrey Immelt developed high end value chain system and product development strategies. In the post 2009 period, they are allocating diversified strategies to increase compatibility and growth in global segment. Reference list AidaAnasovna, S., 2014. The Republic of Tatartsan Petrochemical Complex Value Chain Structure Analysis. ASS, 10(24). Alexander, C., 2008. Market risk analysis. Chichester, England: Wiley. Bolstorff, P. and Rosenbaum, R., 2007. Supply chain excellence. New York: AMACOM. Bolwig, S., Ponte, S., duToit, A., Halberg, N. and Riisgaard, L., 2008. 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