Last Updated 26 Jan 2021

Analysis of the Case Using a Framework

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As GE is a truly global organization, it has significant exposure to the global economy, with 40% of revenue being generated outside their domestic market; an economic slowdown would significantly affect the company as a whole.  As a global company General Electric can often be exposed by the adverse effects of foreign currency fluctuations. The company operates in more than 100 countries worldwide including some lesser developed economies where local currency rates often fluctuate.

Following the demise of Enron, investors have come to demand new standards of disclosure from all companies. They have focused their criticism particularly on blue chips such as GE and International Business Machines. The public image of all large companies has suffered as a result of Enron. In virtually all of its global business activities, GE encounters aggressive and able competition. In many instances, the competitive climate is characterized by changing technology that requires continuing research and development, as well as customer commitments

After listing out GE's Strengths, Weaknesses, Opportunities and Threats, we can come to a conclusion that GE's main asset lies in the fact that it has been successful for very long and has a market presence. Any new business it forays into, it would have the advantage of its brand name and it need not spend money in proving its worth. However, the new business has to carefully planned and it has to be strategically aligned with the organization's goals and culture. They must not repeat the mistake of other diversified companies who siphon off losses from one business to another and destroy shareholder value in the process. It should maintain its six sigma quality across all businesses of GE and reduce waste and lower its operating costs. GE must aim at translating ideas into action across its divisions thus making the company more profitable.

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WHAT COULD BE THE POSSIBLE FUTURE STRATEGY FOR A HIGHLY DIVERSIFIED BUSINESS LIKE GE?

GE should look at mainly 5 areas while formulating its future strategy: Making new acquisitions and/ or entering into additional strategic partnerships: GE can try and build positions in new related and unrelated industries. It can also look at entering into some totally new and profitable sectors in new geographies which it is not currently exploring in its existing geographies, eg it could look at sunrise sectors such as telecom and insurance in India. It should constantly strengthen and support the position of business units in the industries where the firm already has a footing.

However, the entering into new businesses should not entail increasing the number of businesses in the existing structure. The new businesses should be opened as part of the existing structure itself, otherwise it will once again lead to the same bureaucratic structure that existed before Welch. Divesting some of the company's existing businesses This can be done keeping in mind the following three points 1. The attractiveness of each industry represented in the business portfolio 2. Each industry's attractiveness relative to others 3. The attractiveness of all the industries as a group.

To some extent, GE has already done this, however, it is still being accused of holding on to non profitable businesses and covering that up with its profitable financial services organization. The company should do a similar holistic analysis for the geographies in which it operates as well. Investing the accumulated cash into R;D and marketing GE is a cash rich company. It can afford to spend on R;D not only for its existing businesses but also to enter new industries. It can also afford to support new and existing businesses with advertising and marketing activities.

Continuously improve its image amongst its suppliers, customers and other interest groups In the face of various issues in the external environment, GE's financial reporting systems are coming under fire. GE should immediately understand that this is not a one off incident, and that shareholders as well as customers are very soon going to demand greater and greater levels of transparency, specially when it comes to financial issues. Hence GE should be proactive in this regard and comply with financial standards such as the GAAP.

Another thing GE could do to improve its image could be to actively enter the area of Corporate Social Responsibility. Most importantly, identification of a core competence and a set of structures, systems and processes that will survive beyond the next CEO Right now, with every successive CEO, the systems and processes at GE are overhauled. This has been working well in the past, because it probably enabled GE to cope up with the rapidly changing environment.

Because GE has been so greatly affected by the personalities of its successive CEO's, perhaps that is why from the case, there is no single striking core competence. However, each CEO should learn from his predecessors, and instead of writing the rules from scratch, he should adopt his best practices and build upon his legacy. This will enable GE to have a strong culture and world class processes.

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