Business Case Study: General Electric
1. What are the goals and objectives of General Electric? How well has the company performed? Show your analysis and interpretation.
General Electric was notorious for pushing the envelope in its businesses under the reigns of Jack Welch and Reg Jones, before him. Jones started it off with his push toward strategic business units in the 1970s. Then Mr. Welch took charge, under considerable doubt of his capacities surprisingly, and molded the company into the #1, #2 or get out entity that it has become.
The company has done amazingly well in the last twenty years, thanks mainly to this underlying motivating force. High stock prices derived from top-caliber operating margins and seemingly unending revenue streams. A lot of the credit for these incredible numbers can be attributed to the stretch goals Welch put into play during his tenure as CEO. Stretch goals made all employees push the bar out as far as possible, adding an extra layer of productivity awareness on top of the normal goals that were demanded to be met. While many companies might feel their employees are striving to reach for the stars, only a few like General Electric actually verbalize this mission, and thus make it possible.
2. What are the nature and characteristics of businesses/industries that they are in? What is the business selection strategy? What businesses are they entering or exiting? Are they related or unrelated?
General Electric is the epitome of a holding company. It enters any arenas that it can dominate the market and requires the respective staffs to get there. Its holdings are so diverse that including an exhaustive list here would take many more pages than the assignment requires.
Instead, it is easier to categorize the types of businesses General Electric deals in be taking a quote from Jack Welch himself. His “businesses are global, not companies” remark demonstrates the type of mentality required in running a successful holding company. In essence, he is saying that the linchpin to success is to make sure that each business General Electric operates should manage and expand on its own, without the clouded vision of a huge corporate influence.
Another identifying factor in General Electric industry decisions comes from the company’s commitment to seeking weak markets as a “buying opportunity rather than a problem.” With the vast financial resources at its disposal, General Electric is able to capitalize on downturns and come out on top in the short run, if not immediately.
3. What are the unique resources they have developed to create a competitive advantage? Are they general or specific?
General Electric’s cash supply is, without question, an important reason why the company is able to continue growing and operating at such a strong pace. Any opportunity that managers see to act on is a possibility with this vast resource. Obviously, this a general resource; one that cannot be challenged but by a handful of companies.
More importantly, General Electric’s integration model allows them to bring new business into the fold within 100 days. This general resource belies a huge competitive advantage. While it can be duplicated in theory, it would be next to impossible to mimic in practice due to the extensive historical knowledge General Electric has built up over the years.
4. How does the corporate office contribute or create value for its business units?
If I had to isolate the best value-creating abilities the corporate office offers its business units, there would be three. First, the idea that General Electric is “deeply committed to developing its people” cannot be taken lightly. This type of attitude leads to an organization that constantly improves its operating efficiencies since each employee is growing, in the parameter of the job he or she is performing, at all times.
A related issue that leads to optimal contribution has to be the way General Electric utilizes its Crotonville facility. By starting to make people work together on real issues instead of fictitious cases, General Electric takes training to the next level. In short, the staff improves their abilities while fine-tuning the operating process at the same time.
The last major contribution is equally as hard to quantify, but is just as important. Executives insistence on getting rid of Type 4 managers, who were not really living the General Electric way despite hitting all the numbers, provides an actionable plan of frequently maintaining the corporate culture the company desires.
5. What kinds of structure and systems has General Electric set up to manage its business units? How well do they work?
Before Mr. Welch took over, the company used sectors and strategic business units to instill the holding company structure necessary for survival. Unfortunately, this alone was not enough to keep the financials moving along in the right direction. So, in the 1980s General Electric began to tweak various systems in order to improve these results.
For starters, the compensation package was overhauled as a way to tie employees to their work. In my estimation, the use of more behavior-based compensation helped avoid the fostering of Type 4 managers. Also, the addition of 360 degree feedback made everyone accountable for their actions. When combined with the stretch goal emphasis discussed earlier, GE saw immediate results.
Another early change brought on by Welch was the inclusion of the work-out process. Despite the high turnout in the program, it seemed to be a bit unwieldy to me since managers were probably afraid to say no during these sessions (as evidenced by the one manager who only said no to 8 out of 108 suggestions).
6. Has the company created and sustained its corporate competitive advantage? Explain the sources of sustainability for General Electric.
Without a doubt, General Electric has solidified its competitive advantage over the past two decades with all of the efforts it has undertaken. The challenge for it, though, as a holding company, will be if the strategies it has used can carry forward. Personally, I see three strong areas of competence that will make this possible.
The mind shift toward an inverted pyramid of products leading to big service dollars discussed in the case is probably the most integral for General Electric. As we have seen all semester, the big money in this age comes not from the products that are produced, but from all of the add-ons that can be milked from them.
Next, the company’s use of Six Sigma cannot be discounted. By utilizing this type of operations management control system throughout the organization, the chances of dollars unnecessarily being lost to mistakes is severely decreased.
Finally, the evolution from Type 4 to the A-Players scientific approach, should weed out the employees who fit the worst with the company. As noted earlier, these weak links pose a strong threat to corporate culture and, consequently, General Electric’s continued dominance in the marketplace.
