Integrating Strategic Management and Budgeting - Case Study Example

General Electric Strategy Student’s Name: Instructor’s Name: Course Code: Date of Submission: General Electric Strategy 1.0 Introduction Business performance is a critical component in measuring success of commercial enterprise. These can be contextualized in terms of strategic performance and financial performance (Blumentritt, 2006, p.73). Hence strategy formulation is a principal ingredient in the success of an organization. According to Pollard and Hotho (2006, p.726)the current dynamic and competitive business environment implies that business organization have to put in future plans so as to enhance their competiveness, guide change and add value to clients (business performance). Strategic performance relates to how a firm executes its operational goals that encompasses acquisition of new customers, introduction of new brands and services, improving efficiencies and aligning human resources with the overall strategy among others (Blumentritt, 2006, p.73). In executing this plan, the link between human resource and the outlined strategies is critical (Gannon, Goherty and Roper, 2012, p.514) so as to achieve business goals (Massey, 1994, p.27). This report outlines General Electric company strategy and how it is linked with its human resource as a key success factor so as to ensure success. The report will narrow to the strategies initiated by immediate former chairman and CEO Mr. John Francis Welch Jr. (Jack Welch) and the current chairman and CEO Mr. Jeffrey R. Immelt. 2.0 The Company General Electric (GE) is a multinational company dealing energy, health & home, transportation & finance, building, powering, moving & curing the world through best people and the best technologies which are able to take the toughest challenges. They call these engagements as things that matter (GE, 2013a). The man who set the foundation for this multinational giant is Thomas Alva Edison who established a laboratory in Manlo Park, New Jersey so as to explore possibilities of dynamo and other electrical appliances. In 1980, Edison founded Edison General Electric Company by unifying his various business outfits. From 1878-1904, they were able to come up with wonderful products like the first central power station and first X-ray machine (GE, 2013b). In the same time line, a competitor known as Thomas-Houston Company emerged. Owing to stiff competition the two couldn’t produce complete electrical installations relying squarely on their own patents and technology. Thus, in 1982, they were forced to merge giving birth to General Electric Company. Indeed of the pioneer business offerings are still being produced up to now. These include lighting, transportation, industrial products, power transmission and medical equipment (GE, 2013c). While the company exhibits strong presence, it has not outlined clearly it vision and mission. However, for vision, the emerging theme is ‘imagination’ at work and the mission is ‘imagine, solve, build and lead’. Moreover, one of the principal focus of the firm is research and development. To attain this, the company has invested in global research and development facility. Currently, they have approximately 36, 000 technicians working in their businesses and global research centers (GE, 2013d). In a nutshell, they combine minds and machine so as to increase efficiency and minimize waste for smarter decisions. In addition, the company plays a critical role though their ventures by identify, scaling and accelerating ideas that can advance industries and improve lives. This they attain by combining capital, technical and commercial expertise, infrastructure and their global network of businesses and partners (GE, 2013e). 3.0 The Company’s Strategy and the Success of the Company’s Strategy A company’s strategy which is also referred to us as ‘long range planning’ entails outlining measures that will contribute to the attainment of the organization’s mission in the face of dynamic competitive business environment (Leon-Soriano, Munoz-Torres and Chalmeta-Rosalen, 2010, p.252). The strategic process has three facets. These include strategic formulation, strategic implementation and strategic evaluation (Pollard and Hotho, 2006, p.726). A company organizational strategy is based analysed from the perspective of internal and external organization (Mitchell, 2008, p.1). This report focuses on strategic formulation and strategic implementation in GE. There indications that GE has been able to formulate and implement it strategies effectively. Mitchell (2008, p.1) indicates that GE is ‘is both profitable and dynamic’. This has allowed them to overcome their closest competitors and become a truly global enterprise. To contextualize these discussion, Mitchell (2008, p.1) observes the following, “General Electric defies conventional wisdom about firm performance and corporate change. GE appears to be a conglomerate, when we “know” that conglomerates are unprofitable. The company actively uses acquisitions and alliances to change, when we “know” that most acquisitions and alliances fail. The company has transformed itself internally, when we “know” that firms can make only incremental changes to an existing organization. This successful company has changed radically despite the fact that we “know” people will make major changes only when their company faces failure”. The question then is what strategies they have been using so as to guarantee success. To propel their strategy so as to increase organic growth the company has formed two councils. The first is commercial council and operating council (GE, 2008). According to GE (2008), their strategy is tied on two principal factors or processes. The first is growth as a process and the second is operational excellence. The growth as process initiative/ strategy which is used to execute growth of GE adopts the growth wheel concept that has six facets which aims at attaining consistent execution. These include technology, commercial excellence, customer focus, globalization, innovation and developing growth leaders. The second approach in their strategy is operational excellence. This aims at addressing product management and the lean production concept. To attain this, they identify value gap then analyze material cost out so as to simplify it. Consequently, they establish global best cost and thus build a quality product. The first strategy is that of concentrating and developing technology and innovation. The company relies on technology and innovation so as to build speed and responsiveness. When Welch took the mantle his key concern was to make GE a high technology and technical service business. To attain the same, combined the speed and agility of a small company with a financial strength of a large one (Kippenberger, 1998, p.35). For instance, they are able to apply lean production concepts like sigma six in their production process (Kippenberger, 1998, p.36). Moreover, they are ardent at measuring their progress with customers by having strong engineering and commercial teams that allows them to tap into new growth markets. The key focus of this process is to enhance their brand value where the company is ranked fourth globally. This focus is driven by their motto ‘imagination at work’ (GE, 2008). This focus has seen the company develop masterpiece solutions like Non-Destructive Testing for testing structural integrity of infrastructure parts. The next strategy that the GE has formulated and implemented is the ‘acquisition with a difference’. Over the years, the company has entered and moved out of various businesses. Currently, the company has expanded into new ventures like media, financial service and information sector. Apart from this, GE builds strategic alliances so that they can tap and access to technology, products and markets. For instance, the company has partnered with SNECMA of France and YMS of Japan (Mitchell, 2008, p.1). In addition, this is supported by a lean and agile organization that has reduced layers of management between factory floor and the executive (Kippenberger, 1998, p.35). the layer have been reduced two from a line manger to the CEO (Mitchell, 2008, p.2; Kippenberger, 1998, p.35).This has resulted into speed, simplicity and confidence among employees which in return drives growth (Kippenberger, 1998, p.36). Internally, the company has employed various strategies as means to success. These include diversified conglomerates that allow it to operate in unrelated market. The next is the active strategic planning that involves all employees. In this context, the senior team meets with top 500 executives so as to begin planning early (Mitchell, 2008, p.2). in addition, leaders meet monthly so as to exchange ideas about building an effective team (Kippenberger, 1998, p.36).Apart from these, there is the creation of unique organizational culture that is adapted to existing trends (an organization that anticipates change). Mitchell (2008, p.2) notes that over the years the company has remodel itself by adopting measures like outsourcing of non core functions, implementing sigma six approach in early 1990s, development of high margin services in late 90s and focus in technology in 2000s. Kippenberger (1998) equally outlines this culture change that anticipates change. For instance, he notes that the strategic planning era of GE has undergone metamorphosis from need for integration in early 70s, realignment of resources in late 70s, the shakeout & creation of lean and agile organization in 80s. Lastly, the strategy of learning organization has been deeply embraced. The concept of learning organization has been conceptualized differently (Griggs and Hyland, 2003, p.179). However, the pointer is that it leads to research and development which can then be transferred to local contexts. Moreover, it is this ability to learn that will enhance the capacity of the existing local human capital (Blackman and Henderson, 2005, p.43). For instance, Senge (1993 cited in) conceptualizes it as “organizations where people continually expand their capacity to create results they truly desire, where new and expansive patterns of thinking are nurtured” (Jain and Mutula, 2008, p.10). Lee (2004, p.23 & 24) notes that the learning capability of GE is necessitated by presence of a visionary CEO who encourages learning with meaning, spread of the word and transcending of bureaucracy. The success of these strategies is attainment of differentiation, reduction in costs, innovation and global dominance. Mitchell (2008, p.2) summarizes these achievements by stating that GE’s external and internal strategy “creates market power, including strong positions with consumers and bargaining power over suppliers………. The company builds large businesses with cost and quality advantage over their competitors and can move quickly than other firms to take advantage of emerging technologies and markets”. 4.0 Nexus between the Company’s Strategy and Human Resource Function Integration of HR functions with the business strategy is pivotal to the attainment of the same. This integration moves HR function from “being reactive, prescriptive and administrative to being proactive, descriptive and executive” (Budhwar, 2000, p.141). The nexus between HR and GE’s strategy is best explained by participative strategic planning that seeks to create change. Clarification and explication of company vision, strategy and strategic targets (Kohtamaki et al., 2012, p.162). In the reigns of Jack, he developed what was known as work out that focused on tapping ideas irrespective of where they came from. This was done of town-hall meetings. This ensured that strengthening of the company was not left to managers, but to people on the factory floors (Kippenberger, 1998, p.36). Immelt’s focus of creating the link between the strategy and HR is through Cultural Revolution so as to improve customer service, generate cash growth and make the employees essential part of the business. The key role of employees is to transcend beyond call of duty so as to build strategic partnership that is customer-centric for sustaining growth instead of raising prices to boost the bottom line (Stanford, 2004, p.10). In this regard GE shares its best people, skills, resources and concepts with its customers so as to build strategic partnership. The key to this approach of seeing employees as the epicenter for growth is research and development. This allows the company to nip any problem at the early stage before it causes major disruption (Stanford, 2004, p.11). 5.0 Conclusion and Recommendation The aim of the report was to outline the GE’s strategy. The report focused majorly on the era of Jack and Immelt. The report outlined key strategies that have been employed by the company as involving the following: research and development based on technology and innovation, cultural change, strategic partnership & acquisition, agile organization and a learning organization. These have resulted into a success that allows them to create market power, including strong positions with consumers and bargaining power over suppliers. For GE to maintain this strong show at global arena, the report recommends the following. The first is constant review of external and internal environment so as to inform formulation of strategies. Secondly, is formulation of well known vision and mission so as to guide strategy formulation. Apart from the two, the company is on right track and should strengthen the existing strategies. References Blackman, D. & Henderson, S. (2005). Why learning organisations do not transform. The Learning Organisation, 12 (1): 42-56. Blumentritt, T. (2006). Integrating strategic management and budgeting. Journal of Business Strategy, 27 (6): 73-79. Budhwar, P. S. (2000). Evaluating levels of strategic integration and devolvement of human resource management in the UK. Personnel Review, 29 (2): 141-161. Pollard, D. & Hotho, S. (2006). Crises, scenarios and the strategic management process. Management Decision, 44 (6): 721-736. Gannon, J. M., Doherty, L. & Roper, A. (2012). The role of strategic groups in understanding strategic human resource management. Personnel Review. 41 (4): 513-546. GE (2008). We are a high-performance company. Available at: http://www.ge.com/ar2007/ltr_highperf.jsp. 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