Strategic Management
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Executive Summary
The relationship between the organization and its environment is complex and hard to understand. This report seeks to provide strategic recommendations for General Electrics (GE) management by examining its internal and external environment. In addition, GEs critical success factors and strategies were investigated.
This report focuses on 3 of GEs businesses: GE Aircraft Engines, GE Medical Systems and GE lighting, evaluating their performance in the industry. By assessing their environment-strategy-capability, potential flaws were identified and recommendations were suggested for improvement.
It is recommended that GE should incorporate sourcing and acquisitions. In conjunction, Blue Ocean Strategy is recommended to enable GE to achieve greater altitude of excellence.
Finally, GE must learn to apply the suitable and appropriate strategy to the respective businesses. With this in mind, GE will thus be able to perform better, achieving superior revenues.
Introduction
General Electric (GE), established in 1878 by Thomas Edison, is one of the worlds leading diversified industrial company. From aircraft engines to power generation, and financial services to medical imaging to plastics, GE is dedicated to be the leading solution provider in terms of its products and services.
Strategic management is a continuous, iterative process aimed at keeping organizations as a whole appropriately matched to its environment (Certo and Peter, 1990). Being a for-profit organization, GE will have to identify and resolve problems that will impede the growth of the company. Furthermore, in highly diversified organizations like GE, strategies should constantly be reviewed so as to seek necessary changes to progress efficiently and effectively (Beckhard and Pritchard, 1992).
This report seeks to analyze GEs macro-environment and micro-industry, as well as its critical success factors and the strategies adopted. With this, alternate strategies will be recommended, enabling GE to perform better, thus leading the organization to greater heights of excellence.
Environment Analysis of GE
E: External Environment
T: Task Environment
Figure 1 – Adapted: Daft, 2004, p.137
Figure 1 shows the sectors influencing GE, indicating each sector has an impact on GE. GEs external environment is the broad conditions and trends affecting GE indirectly. Its task environment is the specific external elements that GE faces in operating, affecting it directly. Environmental influences and their impact on GEs business can be used to provide opportunities and make contingency plans for threats when preparing business and strategic plans (Kottler & Schlesinger, 1991; Byars, 1991)
External Environment Analysis
An organizations environment is composed of those institutions or forces that are outside the organization and potentially affect the organizations performance (Robbins, 2001). GEs environment refers to the external factors that influence its functioning and performance (Narayanan and Nath, 1993). The external environment consists of five major elements: technological, economic, legal-political, socio-cultural and international (David, 1987; Hall, 1996).
Technological
The technological element reflects current knowledge about production of products or services (Bartol, Tein, Matthews and Martin, 2002). While GE has sophisticated operating system, E-business has been considered as a long-term challenge. Furthermore, GE challenged to stay on the leading edge of investing in R&D, especially with Japanese as one of its challenger forcing it. To remain its competitiveness, GE must understand current technology developments affecting their ability to offer desirable products and services (Bartol et al, 2002).
Economic
The economic element involves systems of wealth production, distribution and consumption (Bartol et al, 2002). While a disheartened economy will generally affect most organizations performance, it offers opportunities for some (Thompson, 2002). The recession of the US economy under Welchs leadership as well as the collapsed of Mexican Peso provided GE with acquisition opportunities, where it invested more than $21 billion in major purchases. In addition, the Asian crisis also offers buying opportunities. Nonetheless, GE struggled to build its #1 or #2 positions in a recessionary environment, where it freed up more than $11 billion of capital by selling 200 businesses.
Legal-Political
The legal-political element refers to legal and governmental systems within which an organization functions (Bartol et al, 2002). In GE, globalization brings about political uncertainties.
Socio-Cultural
The socio-cultural element involves attitudes, values, norms, beliefs, behaviours, and associated demographic tends typical of a region (Bartol et al, 2002). In terms of socio-cultural issues, GE became the benchmark for hundreds of company. With is strong culture and key assets, GE is at the frontier of management practice.
International
The international element includes changes in countries other than the organizations home country with potential to influence the organization (Bartol et al, 2002). Endeavoring into Europe and Asia, GEs products and services are spread throughout the world through acquisition, joint ventures and mergers.
Industry Analysis
The five forces framework (barriers to entry, threat of substitutes, competitive rivalry and bargaining power of buyers and suppliers) helps to identify the sources of competition in the industry as a business has to comprehend the dynamics of its industry and markets to compete effectively (Porter, 1980). By understanding the nature of each force, GE is able to gain insights and formulate appropriate strategies (Thurlby, 1998). As GE is a highly diversified organization, this report focuses on 3 of GEs major businesses Ð- Aircraft Engines, Medical Systems and Lighting.
Figure 2 – Adapted from: Porter, M., 1980, pp.137-145.
Porters Five Forces
Barrier