Business Policy and Strategic Management - Case Study Example

Title: Strategic Management By: Institution: Course: Instructor: Date Strаtеgiс Маnаgеmеnt - Jeff Immеlt and the Reinventing of Gеnеrаl Еlесtriс Саsе Introduction Strategic management in a broader term involves the formulation and implementations of organizations’ prioritized goals and objectives often carried out by the top management, considering the organizations resources, internal environment and external environment in its industry usually on behalf of its owners. To a larger extent it constitutes the specifications of organizations objectives, development of policies and plans on how to achieve them and then the allocation of the required resources to help in their implementation (HILL & JONES, 2012, pg 9). In essence, it helps in the provision of the ultimate direction of an organization. In the case presented of the General Electric Company, Strategic management as a discipline is one of the core areas that have made the business successful and sustainable over the decades with the different leadership approaches it has undergone. With different approaches in strategic management, revolutionized over the decades, GE has managed to whether the financial turmoil and difficulties to become one of the few successfully businesses in the United States and over the world. It has been recognized as a conglomerate multinational company that prides itself in the ownership of many business units that operate internationally in different countries over the world with divisions including GE Capital, GE Oil and Gas, GE Power and Water, GE Aviation, GE Transportation, GE Healthcare and GE Home and Business Solutions. Through the divisions, it has operated in the market majorly by generating, transmitting and distribution of electricity, (both nuclear, solar and gas), provision of lighting, medical imaging equipment, industrial automation, aircraft jet engines, motors, railways locomotives and aviation products. It has also provided financial services through GE insurance, GE Commercial Finance, GE Equipment Services and GE consumer finance over the decades. These businesses of the GE Company have varied over time and this has been as a result of acquisitions, reorganizations and divestitures. Regarding the change in command at the helm of its operations, from Jack Welch to Jeff Immelt, there were involved numerous changes especially in its strategic market strategy. Apart from inheriting a rich and successful business of which Immelt had to live up to, in his tenure he experienced a lot of upheavals that seriously impacted on the GE business of which sound strategic decisions were required for prosperity. Most of these decisions, as considered, have been partly divergent and more different from his predecessors. Faced with these challenges, the terrorist attack at the moment he took over, and the financial crisis that hit the world, with his different kind of leadership style, there have been a different approach given to most of the strategic and corporate strategies, difference to most of the organization structures and the systems of management. Identification of Strategic issues and problems In recognition to the history of GE as the most valuable company and to its successful operations and its massive size, it would be a daunting task for any CEO who would have been given the task to take over its management. The company had adapted over the decades, both its business portfolio and its management style to the recurrent demands and opportunities it were faced with. With this in mind and the changing business environments world over, both economically and politically, a lot had to be taken into considerations before any strategic management policy was formulated and implemented. Most of the strategic changes and problems were derived from the history of GE management. Considering Jack Welsh tenure, a lot had been carried out considering the re-organization of the business. He reformulated GE business portfolio by exiting the low-growth extractive and manufacturing units and expanded the financial services through the GE capital which at his time had represented a larger part of GE revenues. He had also laid down comprehensive systems of monitoring performances and setting of targets and provided a lot of incentives towards their achievement. Another notable strategic issue that was carried out in Welsh tenure was the stripping out of the layers of bureaucracy that had existed in the organization. At his time every aspect of management was redesigned from ground up. He encouraged managers to commit to the performance targets and ensured that both the managers and their subordinates were under pressure to deliver for the company. With these strategic plans compounded with his direct, personal and occasionally confrontational management style, he led to a successful and outstanding corporate performance. With his obsession on performance, he managed to improve to a larger extent the company’s revenues, net income and annual returns to the stakeholders, something that gave him a celebrated status in the company’s ranks. The Strategic management issues and problems came to the fore considering the management style and systems, the education and professional experience of his successor, Jeff Immelt. A major difference that led to most of the management and organizational changes was the leadership styles of the two personalities. In contrast to Welsh confrontational style, Immelt’s was more friendly and opted more often for a regular-guy approach style. Starting his reign in adverse business environments and reduced stakeholder’s confidence in the company, Immelt endured hard times and demonstrated great leadership capabilities to whether the storm and take the company through successfully. Out of the fundamental strategic issues was Immet’s transformational strategy he brought in with him to GE. It involved the following: Reconfiguring GE’s business portfolio around two core business, infrastructure and specialty financial services Reorienting the company’s performance goals towards revenue growth Changing the competitive advantage focus of the company towards technological innovation and customer service Adjusting the company’s management process and structure In a bid to improve the profitable organic growth of the company, he did identify the key external global trends that offer them business opportunities and invested heavily in them. Some of these trends included demography, infrastructure, emerging markets and the environment. In response, he invested in healthcare for the old, provided infrastructure products and services entered the emerging markets exploring various opportunities and creation of technological innovations to help curb some of the emerging environmental issues. In reshaping the business portfolio of the company, and a strategic measure, was the creation of new growth platforms where the slow growth businesses were exited allowing for relocation of more resources to other businesses whose growth prospects were stronger. The new growth platforms involved either the expansion of existing businesses or opening up entirely new business units. Identification of such businesses became one of the strategic issues of the GE Company. Most of these platforms though involved existing businesses and the most units that were considered included the healthcare, energy, broadcasting and entertainment and technology infrastructure units.GE emerged as one of the greatest providers of these products and service in the US and most of the emerging markets. This strategy involved acquisition of several other companies and assets like in 2002; it acquired the wind turbine manufacturing assets of Enron Wind forming GE wind energy. It also acquired Smiths Aerospace in 2007. In Immelt’s tenure a lot of acquisitions which cost GE a lot of capital were made but this was done in order to expand the businesses with stronger growth potentials. It also leased off most of its businesses that did not offer enough revenues for its strategic objectives. This involved the plastics business units and most of its insurance businesses. It also sold majority of its shares in NBC universal later in 2009 after it emerged that it did not fit Immelt’s idea of GE being a technology based industrial company. All these involved market segmentation to help in the identification of the differences in these business units. Appropriate technical, financial and managerial resources would then be deployed to assist in building a leading position. Immelt, also as a strategic shift in its competitive advantage focus placed emphasis on three sources; technology and innovation, customer focus and integrated solutions, and global presence. These ingredients become some of the core competitive advantages of the company over its rivals. More funding was provided to innovative technologies that provided better growth potentials. In far reaching effects, Immelt increased funding in GE’s marketing function hiring experienced marketing executives and introducing processes that helped in the identification of new products and services and unmet customer needs. He also invested more and further into the international markets to help gain from his customer orientation approach. Analysis and evaluation In the analysis and evaluation of the rationale of the GE’s new strategic issues and challenges, especially in relation to the requirements of the 21st century and the company’s resources and capabilities, a lot would have to be considered to be able to determine whether GE would be successful or not. In strategic management, the most important step is the formulation of strategy, before it is even implemented. The steps involved are crucial because it will have to consider all factors, both internal and external to an organization (AAKER 1995, pg 30). One of the frameworks upon which an evaluation would be done by companies and more so in relation to the GE Company is the SWOT analysis. This helps in establishing the distinctive competence of a company and its environment with regard to its objectives. An organization would evaluate its strengths and/or weaknesses and make its strategic plans and objectives considering the available threats and opportunities (RONEY 2003, pg 44). Immelt upon realizing the company’s strengths focused on building on them bearing in mind the market share and opportunities that was there in. More focus was given to the customer service to enable the company venture successfully in the international markets where the need to serve the customers according to their preferences was essential. In a brief analysis of the company’s strategies regarding the use of the SWOT analysis, these four important factors aspects are considered: Strengths; the GE company derives its strengths over its competitors based on a variety of its products and services. Strength is usually integral to a business or company structure. Based on its resource base, the company has been able to reach a lot of clients expanding its consumer base. They have thence diversified their products to be able to serve the different segments of their markets appropriately. The other strength the company has exploited and has always led to its success is its leadership management. Through its ranks it has been able to develop and give rise to managers with deep business acumen and leadership skills. Studying the GE case revealed that most successful companies were able to poach their top managers from the GE Company. Strong management and leadership background often results into successful accomplishment of companies objectives. Opportunities; Opportunities are determined by the external environment of a company. Based on the company’s resources and strengths, it should be able to determine the available opportunities existing in the markets, which are in line with its objectives and extensively exploit them. Upon realization of the effects of improvement in technology on GE’s future growth, Immelt laid emphasis on the need to speed up the diffusion of new technologies within the company and the turning of the of the corporate R & D centre into an intellectual hothouse. To capitalize on the opportunities created by this environment, he introduced imagination breakthrough projects that on a projected basis ware able to bring in more revenues to the company. These Breakthrough projects included: Evaluation hybrid locomotive; this was an energy saving locomotive project that would use energy lost in braking to be stored in batteries. Smart grid; this was a project also geared towards supporting energy needs Sodium batteries; This project was to enable large scale electricity storage Weaknesses; weakness in a company evaluation considers the internal environments of the company. It looks at the organization structure as a whole and its strategies put in place in fending off its competitors. A notable weakness in the GE Company was in its organizational structure. Regarding the nature of the operations that were brought in by Immelt, it was required that the top level management had to be in touch with the middle level management and the on goings in their different areas of jurisdictions, something that wasn’t in practice before. Unless these weaknesses are realized and ironed out appropriately, and without involvement of the different stakeholders involved, they could impact negatively on the organization giving their competitors could undue advantage. Threats; threats to an organization are analyzed considering the external environments of the organization. Most of the threats are brought about by the action of competitors and that of the changing economical and political environments. GE as a company has been able to manage its threats decisively and these have contributed to their numerous successes. It has done this through its several acquisitions of rival outlets and mergence of their products with of rival companies. To successively manage business threats, a company has to engage its customers more often and has to strive to remain economically and politically relevant. Considering the emerging requirements of the 21st century business environment where companies have shifted from command and control management style to more flexible relationships involving strategic alliances, outsourcing, partnering, joint ventures and marketing agreements, businesses and companies are deemed to be more relevant and compliant when they incorporate these in their strategies (KEILLO & WILKINSON 2011, pg 54). GE as a company has ventured much into outsourcing and has entered into several marketing agreements and in line with its objectives, has remained competitive over the decades it has existed. The business environment of the 21st century has become more volatile with changes in technology, more global competition, and growth of IT, shifts in customer expectations with delayering and more horizontal structures, and has made most managers rethink their old ways (WILKINSON & KANNAN 2013, pg 42). A brief evaluation of GE reveals that its performances and strategic goals have been geared towards newer inventions of technology and innovations, with an integral focus on customer satisfaction. With this the business, moving forward would be able to gain more success in its operations and maintain its position as one of the most admirable companies. The organization changes brought in by the new CEO were numerous and changed the whole cycle of leadership with different performance targets. The subdivisions introduced by Welsh underwent reorganization over the years and were made into smaller broad based sectors. One of the challenges experienced by these organizational changes and new strategic plans was the need to reconcile the GE’s initial obsession with profitability and cost control with that of encouraging the innovation to propel growth. Since this did not get the absolute support it needed from business heads because of the performance metric system, the Imagination breakthroughs initiatives were introduced to ensure projects that needed cross division cooperation were accorded the prerequisite attention and financial backing. Conclusion and Recommendations Strategic management involves decision making in very dynamic and competitive environments, and this often requires models or particular frameworks upon which managers can make these decisions. The major objective of strategic management in most organizations is to enable them to effectively maintain a competitive advantage over their competitors in the market, majorly through combining the efforts of their various functional units into a concerted one in order to make their performances superior (HILL & JONES 2012, pg 11). It assists the organization in determining their relative positions in their respective markets and finding ways to improve on it. It is more about preparing for the future and finding ways to remain relevant and active in the market with an effective competitive advantage. In the formulation of these strategic plans, managers should ensure that they are sustainable in the market. This involves production of items or products that are unique and that cannot be easily copied by other outlets. It would also involve carrying out of different activities from the competitors or carrying out similar activities but in different sustainable ways (HITT, IRELAND & HOSKISSON 2005, pg 34). The following constitute the recommendation for the above case. Considering the success over the years and the need for sustainable and increased growth of the GE Company, and the constantly changing competition landscape, more flexible systems are required with an elimination of strategic boundaries. Organizations should focus more importantly to new technologies, the increasing demand and use of Information technology and on their core competencies and capabilities. For organizations to prosper, they need to adapt to the ever changing nature of competition. This would involve development of new technologies, participation in the emerging global markets and to integrally develop and maintain flexibility in their strategic management, developing long-term visions that helps balance the short term results with the long-term needs (CHOO, C. W., & BONTIS2002, pg 102) Due to the changing nature of the flexibility and variations in organizations, more focus should be given in the utilization of the employees strengths. To achieve targeted goals, especially to achieve better performances in the market, the employees of the different functional units need to be adequately motivated. Focus should shift from the top level management to the actual people performing the organizational tasks. In flexibility concerns, organizations should try and adopt the practice of organization learning. Employees should be given an opportunity to change the way they interact and carry out their normal organizational activities. This could be done by the introduction of new management methods, tools, ideas and activities that will enable people to freely and convincingly change their attitudes and the manner in which they conduct their activities (HORRIGAN, B 2010. Pg89) Organizations should also try and integrate in their systems optimum structures that would it able to adapt or control the prevailing environments. Organizations of the future should have structures in them that would enable them to cope with the complex, ever changing and turbulent environments. Fluidity should also be encouraged throughout the organizations across all the functional units. The organization as a whole should be able to perform better than each of the separate units (RONEY, C. W 2003, pg 44) The organization, in line with the emerging trends in the business environment and that it stays competitive, should involve itself in the creation of a communication department to help it meet new challenges it encounters in the market. Organizations should be able to create integrated systems that will allow information to flow freely and without bias across all the levels of the organization. With this, the goals and objectives of the organizations can easily be met and even surpassed. Some of the success factors that have been recommended for organizations to help them stay competitive and relevant include such factors as; Speed: This is measured by the rapidity of how organizations respond to customers and how fast they do change their strategies in case of market trend changes. Integration: This factor help in establishing organizations that pulls their different units and tasks together as they are needed. Organizations should put more focus on the accomplishment of business processes rather than putting its focus on completing specialized business tasks. Innovation: Organizations should place emphasis on innovation and creativity in order to stay competitive. Flexibility: organizations should also strive in creating flexible business structures and environments. Employees should be multiskilled, able to learn new skills and be able to shift willingly to different areas and locations of work. When these factors are taken up by organizations, then they are bound to stay competitive, and sustainable considering the ongoing business trends and changes. Reference (1998). Harvard business review on strategies for growth. Boston, Mass, Harvard Business School Press. AAKER, D. A. (1995). Developing business strategies. New York, Wiley. CHOO, C. W., & BONTIS, N. (2002). The strategic management of intellectual capital and organizational knowledge. Oxford, Oxford University Press. HILL, C. W. 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