Decision Making Simon - Essay Example

General electric company: Salem Assignment Decision Making Simon Name Institution Contents Contents 2 Introduction 3 History of the General electric company 3 Products of General electric company 4 Political factors and impacts on operations of this company 5 Economic factors 6 Social factors 7 Technological factors 8 Stakeholders of General electric company and its legal frame work 9 Critical deliverables 9 Suppliers 10 Investors 10 Employees 10 Customers 10 Monitoring the effectiveness of the critical deliverables 11 Legal frame work of general electric company 11 Statutory duties of the company, political dimension and responsibilities 11 Risk assessment 12 Risk management schedule of general electric company 12 Critical services necessitating emergency response in this company 13 Dealing with Disruption crisis 13 Examples of activities that General electric management can deploy when company is in danger 14 Working out the risk assessment 14 Assessment of threat to the deliverables 14 Embedding, implementing and testing the crisis control plan 15 Conclusion 15 References 16 Introduction Continuity or perpetuity of a business is largely dependent on how well managers or stakeholders of a particular business enterprise manage the threats and risk that face the business. Basically, this process of risk mitigation and threat management as defined in the business continuity management entails the identification of the possible risks, threats and other contingencies that a business may be faced with, both in the internal spectrum as well as other exogenous environment. According to Randeree, Mahal & Narwani (2012, p. 480), business continuity management is aimed at securing the future of the business enterprise through taking care of the factors that would make the business flop in the current period. However, this process of management would be futile if the business owners did not identify the various factors that affect their businesses on a negative scale (Jarvelainen, 2012, p. 335; Castillo,2004, p. 10). This paper will take an illumination into the business continuity management by taking an outlook into the General electric company. The paper will provide a business continuity management plan for the company through the identification of the risks involved and offering the possible ways onto how to mitigate or eliminate these risks in the future. History of the General electric company The General electric company could be deemed to be among the most valuable company in the world. This conclusion is derived from the overall market capitalization as well as the revenues that the company turns in every year from its massive investments in all corners of the world and with an employee base of over 305, 000 as of the year 2011 (Fortune 500 global magazine website, 2012). The tentacles of this company extend globally forming a massive network of branches in the global spectrum (General electric company website, 2012). The company was formed in 1892 with the merger of two giant companies, Thomas Edison's Electric Light Company and the Thomas Houston Company. The headquarters of this company are in the United States of America. Products of General electric company The company started as a major producer and supplier of electricity and electrical appliances in the early years of the 21st century. This saw the company become a global giant and a major player in the electricity and electrical supplies industries during the 1920s and through both world wars. The company’s massive growth was fuelled by the increasing demand for electricity as well as electrical products during this period as well as the massive investments the company made in research and development in a bid to anticipate the market needs and offer solutions. Investment in R&D, according to Bromiley & Washburn (2011, p. 200) and Farina (2010, p. 22), is most times a sure way of creating and enhancing the perpetuity of a company. Later on, the company diversified into a whole range of products as well as other services and also widened its scope of operations to include the global market. Acquisitions became the order of the day in line with the company’s expansion policy. By the new millennium, the massive investments that this company had made in almost all sectors of economy throughout the world made it a recognized brand and a major player in the industrial sector in the world. By the year 2006, the company has diversified to include a credit branch to its operations. This was one of the most profitable branches of the company during this particular period. However, the financial crisis that engulfed the USA in the year 2008, following the sub-prime mortgage of 2007 posed a massive risk to the future development of the company. The great company faced massive debt and was on the brink of collapse. However, a loan of $3 billion dollars from the real estate mogul saw the company uplift itself considerably and avoid the collapse that had seemed imminent and even inevitable. Massive bailout from the US government also contributed to the revival of this giant company. A PEST (political, economic, social and technological) analysis of this company will be conducted in the ensuing paragraphs aiming at assessing the continuity of this company from all perspectives. Political factors and impacts on operations of this company The fact that General Electric company operates on a global platform makes it susceptible to a number of political insurgencies and sometimes upheavals in the political systems of the different countries in which it has a branch. These political factors have impacted heavily on the business continuity of this company in a number of ways as the following sentences outline. One of the major effects created by political influence is ripples emerging from deregulatory policies and measures that the political systems in the different countries in which the company operates adopt. Political instability smothers technological advancements by discouraging potential investors and disrupting operations of existing businesses (Aisen & Veiga, 2011, p. 15). Different countries adopt different policies and regulations on how business transactions should be done in these countries. These regulations affect the way of operations of the business in these nations. For instance, the general electric company, in a bold expansion plan had started setting up factories and outlets in Africa. However, the hostile political atmosphere in most of these African nations forced the company to close down and look for alternative investment destinations elsewhere. the periods between the years 1990- 2000 were very violent years in most African nations. The management and stakeholders of the company were concerned about the stability of the political structures of these nations and the capability of the political systems to protect their investments. Despite the company being in operation in this continent for almost 100 years, the challenges facing the company emanation from political irregularities were overwhelming and sometimes smothering the operations and potential investments of the company. However, the political structure could also form one of the basic and strongest pillars for the growth and continuity of these companies. For instance, when the General Electric company was face by a looming bankruptcy and collapse resulting from bad massive investments in financial services that plunged the company into massive debts, the policies that the political setup of the USA came up with allowed the government to issues bailouts amounting to many billions of dollars to keep this gigantic company afloat. If the political system in the UK was not flexible enough during this subprime crisis period, the General Electric company would have surely collapsed, and with it, many other subsidiaries that directly or indirectly depended upon it. Economic factors These factors could perhaps be the most challenging ones that this company had to deal with during its scope of operations in its various branches and networks in the world. As a global company, the global economic recessions that have occurred over the years have resulted into a massive decline of the sales of the company’s products. Global recession always has an adverse effect on the way businesses operate on different levels (Frost, 1994, p. 10). The hardest and most prominent global recession that threatened to affect the operations of major businesses all over the world occurred in the year 2008. This was as an aftermath of the subprime mortgage crisis in the USA. The adverse effects of this crisis were felt in as far as the Middle East, India and other Asian countries that had a stake in the game (Bhatt, 2011, p. 212). Economic recession disrupted the operations of many of the companies operating in different parts of the world. The General Electric company was among the many companies affect by this global economic recession that hit the world resulting from the subprime mortgage crisis. With the collapse of financial giants, the Lehmann Brothers in the USA and other companies all over the world, the economy of many nations was heading for a snow dive. General electric was on the verge of collapse too until it was rescued. This serves to illustrate well how companies get affected by economic meltdowns and economic pressures. In the same sense, the stability of a company and continuity has a very high degree of dependency on the economic condition of the country in which it operates in. the years preceding the subprime crisis were years in which the global economy was stabilizing saw the general electric company expand very rapidly. The expansion was disrupted in the economic crisis. Social factors Social factors relate to the way different people view a certain product or company (Ojha & Gokhale, 2009, p. 348; Henttonen & Kettunen, 2011, p. 96). Social factors may be underrated but in essence, they are among the most important factors that affect the operations of a particular company. Luckily for general electric company, it enjoys a considerably favorable social status. The company has been in operation for a very long time and as such, it has been able to capture a client base and create its own cradle of customers who are loyal to the general electric brand. Social factors that affect the way a company operates or even the perceived perpetuity of a company may include the factors enumerated in the following paragraph. Perception of a company in the eyes of the people may either attract people to buy products from the company or refrain from buying. For instance, the products of the general electric company are perceived to be of excellent quality. For this reason, there will always be a market for the products of the general electric company amongst these people. People encourage other people to buy from the general electric company in preference to other companies thereby becoming advertising agents in their own right to the advantage of the general electric company. if the company faltered or comprised the level of its quality, the people would refrain from purchasing products from this company. As such, the social effect is that the people and the surrounding keep the company on its toes because the management understands that a slight falter or alteration in the quality of the products will push the customers away. Technological factors Technology, especially in the twenty first century has come to establish itself as a factor that many companies or corporations in the world can’t do without. The advancements in technology have fuelled many companies who have embraced them to greatness or have made other become obsolete when they ignored them. It is sad to note that many companies in their production process are still using machines and softwares that have already undergone through the entropy (Avramescu, 1980, p. 295; Msezane & McBride, 2002, p. 348). Entropy renders these softwares redundant. The general electric company has made great tidings in initiating technological advancements in its production process. The company has employed the use of technology in all its factories. The company has automated all its operations in all its factories. This has culminated into production of goods on a higher capacity and with the maintenance of quality throughout the production process. Technology has also increased the ratio of output turnover while reducing the production cost at the same time. These advantages that the company has enjoyed as a result of adoption of technology in the production process have impacted positively on the continuity of the company. Stakeholders of General electric company and its legal frame work There are various stakeholders of this general electric company as shall be outlined in the following discussion. The stakeholders that impact upon the operations of this company can be broken down into a number of facets. These facets are investors, suppliers, customers and even the government. All these affect the operations of this company in one way or the other. The different governments of various nations where this company has branches are also influential in having an impact on the operations of this company. The players in the government come up with policies that either encourage the continuity of this company or inhibit upon the operations of the company thereby hindering this continuity (Msezane & McBride, 2002, p. 350). Other stakeholders that may advertently affect the operations of this company are the community in which the company operates in. Critical deliverables The company has a number of critical deliverables who are critical in ensuring that the services of this company. These are the suppliers, the investors, the employees and the customers. The roles of each deliverable are outlined in the following paragraphs. Suppliers The suppliers of the various raw materials that the company uses to convert into finished products are among the most influential stakeholders of the company. They are the ones who provide the vital components that the company uses to convert into quality products. Investors Without the investor’s input, the general electric company would never operate. The investors provide the necessary capital that is required to make sure that all the operations of the company are funded and up and running. The capital given by them is important to push the production of these products and to buy the necessary equipment as well as working capital (Heng,1996, p, 18). Employees The employees of general electric company form another facet and angle of stakeholders in this company. Without the input of the great cradle of skilled employees that this company enjoys, the products that they assist to deliver would not be in top quality. Employees are among the very fundamental inputs and resources of any given company (Wan, S., 2009, p. 25; Low, Liu, & Sio, 2010, p. 225). Customers Customers are the ones who put purpose to the whole process of production because the goods produced are meant for them. Without clients, the products of the general electric company would have no meaning and the company would not be in a position to accumulate revenues (Paton, 1999, p. 127). They form the last part of the company’s stakeholders. Other deliverables include the premises that the company has its factories in. then transportation features and equipments such as vehicles, planes and other transport means. Monitoring the effectiveness of the critical deliverables The above critical deliverables are monitored each in its own aspect because each deliverable has different outlooks from the others. For the investors, their effectiveness is monitored by how fast they are able to raise the needed funds when the company requires them. For the suppliers, they should be able to deliver the raw materials in time. The employees should be capable of meeting the objectives of the company and in the stipulated time-frame. Legal frame work of general electric company The general electric company operates on a public frame work. The company is a public company being listed in a number of stock exchanges in different platforms over the world. The company trades its stocks in the New York stock exchange using the market symbols GE. The company also operates as a Dow Jones Industrial component and as a S&P 500 component (General electric company website, 2012). Statutory duties of the company, political dimension and responsibilities The general electric company has a number of statutory duties. The company has a very vast grounds, markets and products that fall under these statutory duties. These duties involve among others, the provision of petroleum products, steel products, home appliances, financial services, entertainment services, transportation services, electricity, lighting and industrial appliances. The primary services of this company include the provision of electricity and electrical products and appliances. These had been the major activities that the company had been involved in from the initial inception years. Electricity production is the activity which has the greatest impact in the short-term. Due to its sheer size, the company enjoys some influence in political circles. The governments of the nations in which the company operates value the input and fiscal advantage the company creates. These advantages range from job and wealth creation as well as economy uplift of the nations in which they operate in. Risk assessment The general electric company has managed to mitigate the risks that it is faced with through a lot of diversification into a lot of investment options. There are so many avenues through which the company receives its revenues. These avenues are electricity, oil, energy, financial, industrial appliances, transport, financial services, entertainment and medical services. The risk factors lie in avenues where they are dependent upon. These are the suppliers, customers, governments, investors and the employees. Risk management schedule of general electric company The following table will show how the level of risks and how these risks are managed. Risk avenue Risk status Suppliers Green Employees Green Investors Green Customers Ember Government Ember Other exogenous factors Green Rubric Status Description Green everything works fine Ember something not operating properly Red mobilize the crisis planning team Critical services necessitating emergency response in this company Due to the vastness and diversity of the products offered by this company, the risk assessment would be very wide. To be able to define this risk and act on it effectively, one needs to break down the company into the divisions and services that it offers. For instance, the critical area that would necessitate emergency fire response would be in the manufacture of home appliances and plastic products. Another service is the delivery of petroleum and oil products. For the manufacturing division, the maximum tolerable period of disruption (MTPD) would be as soon as possible. This implies that the service disruption would occur for as long as the crisis is at hand. Once it is arrested, the services go back into the mainstream. In the petroleum, oil and gas delivery services, the tolerance is zero percent. The maximum tolerable period of disruption (MTPD) here is almost nil. Dealing with Disruption crisis To deal with these disruptions in the company, the management team should employ the services of specialized personnel who are qualified to deal with such kind of crisis. The personnel should be well versed with the operations of all facets of the company. They should be placed in strategic places mostly in the factories where the production actually occurs. The operation process should be manned by a crisis team leader who should co-ordinate all the other members to deal with this disruption. Examples of activities that General electric management can deploy when company is in danger If the risk level of any risk factor identified above is classified as Red, the company management should immediately deploy a crisis team to develop measures that will mitigate these risks. Some of the possible measures that could be applied here are outlined in the following discourse. The management may open up channels of communications between itself and the avenue where the risk emanates from. Another form of risk mitigation activity would be to re-inventing the objectives of the company and contacting the right personnel who are qualified in risk mitigations (Morwood, 1998, p. 30; Smith, 1995, p. 18). Another way would be to conduct a risk evaluation and testing through research activities. Working out the risk assessment The staff of this company can work out the risk assessment in the manner outlined in the following discussion. The staff could assess the risks facing this company through a number of steps. These steps are identification of the risk itself. This is the basic step in this process. The next step is to measure how this risk will impact upon this company. Here, the staff needs to decide who might get hurt and to what extent. The next stage would be to have preset precautions and possible risk management concepts. The other step involves recording the findings and implementing them and lastly, reviewing this assessment to verify the applicability to the general electric company. Assessment of threat to the deliverables Negligible Marginal Critical Catastrophic Certain Supplier delay in delivery of raw materials Likely investors delay in delivering the necessary funds Possible global recession wiping out investments Unlikely Rare explosions disrupting oil wells Embedding, implementing and testing the crisis control plan Once the crisis team comes together and discovers avenues of risk exposure to the deliverables outlined in the preceding discussion, the team is tasked with the duty of implementing it. The testing criteria the team would employ would to weigh the results of this implementation with the objectives of the crisis team. If the implemented plan meets the objectives of the crisis team, then the plan is said to be successful. Conclusion The preceding discussion has clearly provided the linkage between business continuity management and the various anecdotes that affect this continuity. The discussion has illustrated the relationship between the business continuity and risk management. It has been observed that risk management is a factor that every business person has to take into consideration when undertaking the production process. From the case study of general electric company, it had been observed that the management of this company is very much interested in the identification, assessment and mitigation of the risks that affect this company. This has led to the preparedness of the company every step of the way implying that the perpetuity of the company in the future is guaranteed. References Aisen, A & Veiga, F. J., 2011, ‘How Does Political Instability Affect Economic Growth?’ IMF Working Paper, January, Vol. 11, No. 12, pp. 1-26, Retrieved January 24, 2013 from http://www.imf.org/external/pubs/ft/wp/2011/wp1112.pdf Avramescu, A., 1980, ‘Coherent informational energy and entropy’, Journal of Documentation, Vol. 36, No. 4, pp.293 – 312. 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