Decision Making in General Electric
Managerial decision making and capital budgeting is critical in business. Companies usually based their decisions, when engaging in business transactions, from the incremental costs or the costs that they have to deal with if the firm will accept the new business transaction. Incremental costs too determine if the firm will have to make the product or buy from a supplier.
A company, such as General Electric, which sells different products will have products profitable than the other that is why they must determine the contribution margin of each product, the facilities and the product demand ("Capital Budgeting and Managerial Decisions," 1999). General Electric (GE) is one of the largest and influential multinational manufacturers of electrical equipments, lighting products, and household appliances. By 2005, its employees more than 300, 000 with more than $160 billion sales in 2006 ("General Electric (GE)," 2005).
During the third quarter of 1998, the earnings per share of GE increased by 5% or $0. 69 compared from $0. 60 during the third quarter in 1997 primarily due to the company’s $17 billion share repurchase program which began in 1994. The revenues and the acquisitions increased by 10% due to the continuous growth in globalization and product services ("Management's Discussion and Analysis of Results of Operations and Financial Condition," 2008). One of the major programs behind the success of GE is the application of Six Sigma, a statistical level developed by Motorola for minimizing costs associated with poor quality.
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GE CEO Jack Welch initiated the use of Six Sigma in the firm which relatively decreased errors in the supply chain saving the company with $2 billion in 1999. It has also encouraged for new product and services developments which save the firm large amount of money (Frahm, 2006). Also, Jack Welch is successful in analyzing business through efficient decision making based from the firm’s experience and by borrowing ideas from other companies who had survived various uncertainties (Roberto, 2002).
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