“Present a current critical strategic analysis of ONE Business Unit

within General Electric”

Submitted for Summative Essay 2

At:
The University of South Wales

Strategic Analysis; Tools and Techniques- ST4S38

By:
Lidya Rezene Elias
(An MBA Student, ID: 74108202)

Date: 8/19/2019
Introduction
General Electric Company (GE) is one of the leading and most diversified industrial Corporation
and financial services arrangement in the world. The company deals with extensive range of
products and services including aircraft engines, oil and gas production equipment’s, household
appliance medical imaging and also financing industrial products. The following report will
cover the resource audit, value system of the company (GE), given that resource scarcity is
challenging business in today business environment. Manufacturers consider resource
inadequacy as a serious supply chain risk to their business thus need to consider new business
models to respond appropriately to the risk posed by the scarcity of the resources.
The company operates through eight segments. GE Capital, power and water, aviation, oil and
gas, healthcare, appliances and lighting, energy management and transportation. Even though the
cooperate general business layout and strategical position is considered the main purpose of this
paper is to strategically analyze and criticize the General Electric (GE) as a multi-divisional
company, focusing especially on its Power Business Unity. The power and water business
segment covers power plant products and services, including design, installation, operation and
maintenance services.
This report also covers Product/Service Portfolio (BCG Matrix), Potential Future Strategic
Growth (Identification of Options and Evaluation of Options) of GE With its different business
units, there by investors could compare and contrast the performance of each SBUs to invest in
one SBU or products. BCG matrix is employed to regulate the desirability of the GE-Power and
assists on determining its future prospect on the global market. This paper is written sourcing
different market news, company sources also by analyzing various articles and studies which
provides in depth understanding of the company’s strategy, market and business background.
(Paley, 1999)
Structure
The papers comprises six parts. The first part introduces the company and the purpose of the
report, followed by the brief discussion of the strategic position of the company which is referred
in the second part. While the third part inspect and analyze the resources and value systems of
the GE by concentrating on power segment specifically, the fourth chapter illustrates evaluation
of the product/portfolio mix and the BCG Matrix within the SBU. Finally the last part studies
and analysis the crucial ways of strategic growth of the company on sustaining the position and
which is followed by the conclusion and recommendation of the author.
Strategic Position of the company
General electric company is involved in various sectors comprising operations mainly in power
and hydro generation, but also expanding into aviation, transportation and healthcare services
along with attaining capital procurements in diverse sets of industries. Thus the long held
position and presence of GE in numerous highly advanced industries enriched the company’s
ability to conquer, sustain and also easily transfer from one industry to another. The company
has prospered on establishing major degree of core competence in terms of market alliance, thus
easily infiltrate newer market promptly through knowledge based strategic and management
tools grasped in previously operating markets (Geenergyfinancialservices.com, 2016).
GE’s repositioning towards technology and industry has played an important role in protecting
GE’s revenue and earnings base. The energy industry is being transformed by the set
technological and macroeconomic forces consequently more power consumption to extend
electricity access across the globe. The company under power division, has succeeded in global
market recognition by converging technological based products and services with the current
economic factors
The company has employed two main strategies in order to uphold its position in the global
market. The minimized reliance upon financial services despite GE approaching to assets and
capital management capabilities of large banks can be outlined as the primary strategy engaged
by GE. The secondary strategy ought to be towards divergence of activities onto newer domains
pertaining the market demand that are evaluated to make huge profits in the future like Artificial
intelligence, Solar energy and supersonic aviation. In general the GE strategy is based on higher
financial investments on product innovation, more prominence upon marginal enlargement and
finally optimum apportionment of financial and nonfinancial resources (Ocasio and Joseph,
2008).
During the extended advancement of the company prominent CEOs should be mentioned along
the way. Given that Jack welch appointed as the CEO of General Electric in 1981, who
emphasized on the expansion of the company through diversifying activities from its initial
business of electricity, power and lightning into other domain sectors such as financial services,
automation, aviation and medical apparatus (The Economist. 2016).  During his time, the
strategic tools and management approach focused providing products that are simple in nature
but with multi functionality. His decision making tactic was influential, establishing smooth
working environment by bringing in concepts of beneficial conflicts in functioning of operation
and production managers (Waid, Clark and Ackoff, 1956).

In addition to that, Welch discouraged the establishment of bureaucratic process and was able to
implement management reforms that are emphasized upon cultivating the quantum of openness,
linearity in decision making and adopting of creative environment. Further Jack Welch altered
the procedure of attaining annual and quarterly financial targets from the purview of line
managers onto the accounts controller. The high amount of paper work comprised in the
budgetary process were substituted through use of five page standard play book that illustrates
the shortcoming and functional issues faced by the company(Financial Times. 2016).

In context of the global financial crisis of 2008, GE managed to maintain triple A credit rating
for the reason that the company repositioned itself towards new technology and industry. Over
all GEs portfolio was well balanced and presents strong foundation and strategic resources, thus
proves by the resilience of its consolidated earnings (Sikora and Ferris, 2014). The intent of this
study emphasizes on the power division of the GE, the following parts presents precise strategy,
resource and value audit system with its present and future product BCG Matrix (Bucifal, 2009).

Resource Audit and Value System

This part explores the company’s capacity that are employed to establish its distinctive strategic
tools and competencies, to sustain its strategic position or remain competitive in the global
market. There by using the resource audit and value chain model, these competences are
explored (Wengert, 1964).

Resource Audit

It is designed to provide the company a comprehensive action plan to reduce the cost or to
achieve the cost effective manner by taking into account the resource efficiency of the resources
inside the company specifically under power division. Its main task is to identify and look at all
the resources and being able to interact to discover the best combinations for the most
economically viable solution in reducing production and service costs.

Physical Resources

The world needs more power to extend electricity across the globe, this requires developing new
energy supplies along with building and upgrading grid infrastructure. So the company is
adjusting the demand by smarter combination of energy supplies sources deliver higher output
from existing assets (Springer, 1973)
.

Three key elements are explored to satisfy the customer’s demand, the first one is a digital
centralized generation pillar, relying on a mix of fossil fuel and renewable sources, while the
second one is a digital grid, connecting generation and consumption, and the last one is the
digital consumption pillar. And for these reasons GE with in the power division remains to be the
most competitive and conquering power producer around the globe always looking better ways
of effectively using the energy resource to produce reliable power.
Technological Resources

Increasing sets of investments in the fundamental technology sector like artificial intelligence,
solar energy and improving consumption patterns along with distributed generation and storage
capacity (Wilson, 1994). There by focusing on Research and Development, they get to launch
new products for instance 10 gas turbines are expected to be launched with in this decade which
is a potential value making GE the only company competent than other companies in this
segment. GE power employs full array of advanced power generation and energy delivery
technologies by working collectively with customers to drives growth and progress. In this era
the company is investing in processing technology such as additive manufacturing, aspires to use
new lightweight materials for turbines reducing design and production cost and also diminish the
cycle times of complex system.

Financial Resources
GE has operations in over 170 countries, through this diversification. The company believes that
through extenuating alleviating risks from sectors providing low growth rates onto investments
that process high growth rate can improvise the overall financial performance along with
efficiency, thus it aims toward ensuring the coordination among the company different sets of
financing operating along with investing activities is complementary to each other. The strategy
employed in the company continues to center on de risking the balance sheet and diminish the
company’s assets to become smaller, more focused business (Mintzberg, 1994).
GE with in the power division there were some challenges caused by the secular and cyclical
market pressures in 2018 leading to profit and cash pressures from legacy contracts. They plan
2019 to be a year of change by achieving ways to align the cost structure with the new market
reality, also needed to eliminate abut few headquarter layers to mend accountability and cost
structures in underlying business.
Human Resources
The diversification of GE makes the development of managers more complex than other
companies. As a result GE has developed unique techniques of handling the procurement of
managers. One is the slate system, where positions can only be filled from the approved among
those on the approved slate. The slate is approved by the human resources staff. Thus, highly
qualified human resource stuff spends several weeks on preparing report in single executive.
While the process compromises interviews with subordinates, peers, bosses and customers of GE
to get a composite picture of the executive. A business head cannot just select his own vice
president unless the individual is among those on the official slate list for this position (Zhu,
2000).

Another aspect of GE is the use of training program. The company conducts a training program
for managers that provides strategic management concepts and techniques that is run by its own
internal executive program. This helps in interfacing the engineers with the complex strategic
planning of GE. It is very high marks for GE as it is the place where they learn importance of
strategic planning and execution.
Intellectual capital
It has been said that no company has gone global more aggressively than GE, due its business
unit system where division managers acted like small business owners, notably to be familiar
with their customer wants and needs (Kenny, 2012). The company allows shared core
competencies comprises like shared knowledge, patents resources and skilled labor that are
common in different GE business.
GE value activities show that GE’s robust R and D capabilities have enabled the company in
developing more efficient, innovative and differentiating products (GE, 2013). Intensified
research and development describe the company’s actions to ensure the production of innovative
products which meet current customer demands as it seeks to maintain a competitive edge over
others in the industry (Hurbert, 2007). The acceptability of this strategy is that the initial
investment of this kind of option could be high but profitable in the long run, which could reduce
the associated financial risks over all.

Value chain and value Network

The value chain approach describes the activities with in and around organization to create
competitive advantage, during the planning process, sources of sustaining a competitive
advantage can be identified. Thus the company consider these activities as economic sources and
also can act as barriers to new entrants or cause cost disadvantages to competitors.
The primary value chain activities of GE are directly involved in producing and selling the
product to targeted customers
Inbound logistics: There are various suppliers from different countries that are employed by Ge.
These inbound logistics are analyzed thoroughly by focusing in every aspect of transformation
from raw materials to finished product. These raw materials are retrieved, store the inputs and be
able to allocate these materials internally to start production.
Operations: The Company has operations in 130 countries, thus by analyzing the operational
activities raised by the arrival of the raw materials, it continues to process the raw material into
the end product. The procedures are machining, packaging, assembling and testing. There by
improving productivity maximizes the efficiency and the competitive success of GE.

Outbound logistics: By 2016 GE established an outsourcing program of warehouse and it is

more focused on supply chain by using best technologies and reduce the inventory load. While
these activity comprise the delivery process of products to the targeted customers by passing
various intermediaries. With optimal costs and time management, it maximize the customer
satisfaction and increase growth opportunities for the firm. These activities in this stage are
material handling, warehousing, and scheduling order processing, transporting and delivering it
to the destination.

Marketing and sales: GE is known for investing heavily on advertising in the past to persuade
the customers that its offering is better than competitors, Since producing high quality product at
affordable cost and distinctive features cannot create value, thus the sales agents and marketers
play an important role here. Promotional activities, pricing, channel selection, quoting and
building relations with channel members are some of the activities that are used in this stage
besides advertising to structure its marketing and sales activities.

Services: The pre-sale and post-sale services offered by the GE will play an important role in
developing customer loyalty. The modern customers consider post-sale services as important as
marketing and promotional activities.
The support activities play an important role in coordinating and facilitating the primary value
chain activities.

Technology: Technology is at the core of GE’s business system.  It also invest heavily in R&D
to develop new product and innovative solutions.

Procurement: GE procures from a very large number of suppliers from around the globe.

Infrastructure: GE has managed a large and global infrastructure that includes its physical
infrastructure as well as people and management.

HRM: HRM is also an important focus at GE. It employed 313000 people in 2017 of which
106000 people were employed in US alone.
Product Portfolio (BCG Matrix)
This analysis actually helps the company in deciding which SBU in business portfolio are
actually profitable or which are failures, which should be concentrated and which
gives competitive advantage over others.

BCG Matrix is mainly used by companies to analyze the performance of their multiple products
and for decision making. Companies with very large product portfolios like General Electric with
its different business units, investors would usually fight to invest in one BSU or products based
on this performance. While it operates in business such as power, renewable energy, aviation, oil
and gas, energy management, health care, transportation, Appliances & Lighting and capital &
financial industry. Its Oil & gas, energy management, power and renewable energy business of
the company are stars in the BCG matrix while other SBU’s of General Electric is a question
mark.

The illustration are shown in the figure below

 Once
it is known which businesses stand where in the business portfolio, it can also be identified
which businesses need investments, which needs harvesting (making money), which needs
divesting (reducing investment) and which needs to be completely taken out of the business
portfolio.

Product/Service Revenues Revenues 2018 MGR MGR

2017
GE Power 13,058 27,300 24.% 22%
GE Renewable 4,501 9,533 8.3% 4%
Energy
GE Oil and Gas 6,110 22,859 11.3% 33%
GE Aviation 13,336 30,566 24.6% 13%
GE Health Care 8,990 19,784 16.6% 4%
GE 2,110 3,898 4% 1%
Transportation
Energy 5,957 1,723 11% 11%
Connection and
Lightning
Industrial 54,063 115,000
Revenues
Even though, there is a gradually increasing market share, especially in aviation and power
segments, allowing the author to make cash stars of the Product Portfolio Matrix. It is clear that
there is a lot of work to do. In 2018, weak execution and markets in Power were partially offset
by strength in Aviation and Healthcare. Several charges related to Power were taken and
finalized a $15 billion capital shortfall with their regulators related to the company’s run-off
insurance business. There was made major changes to GE’s strategy, portfolio, leadership, and
board.

Analysis for crucial future direction for strategic Growth

General Electric is global digital industrial company, transforming industry with software-
defined machines and solutions that are connected, responsive and predictive. With products and
services ranging from aircraft engines, power generation and oil and gas production equipment to
medical imaging, financing and industrial products, GE the company serves customers in over
180 countries and employ approximately 313,000 people worldwide. Since it was established in
1892, the company have developed or acquired new technologies and services that have
considerably broadened and changed the scope of the activities.
Global Growth Organization and Global Operations are well recognized to serve local market
and GE business needs more efficiently. Going forward, the center will be smaller and primarily
focused on strategy, capital allocation, research, talent, and governance. In 2018, the company
reduced headquarters spend by over $400 million, and de-layering at both Corporate and the
company’s businesses to improve accountability and visibility across the teams. GE has a long
legacy of operating rigor, leadership development, and innovation, but their recent performance
has exposed some gaps. They have managed on getting “back to basics” by focusing on three
main things:
Put their customer at the center. Customers in China, the Middle East, Europe, and the United
States, it’s is clear that they value is not always aligned with GE’s own metrics for success. For
example, when asked about quality internally, cost of quality is an issue, which measures the
issues rather than how the customer experiences the company. The company is working on
shifting their lens back to the customer and work backward to improve what matters to them. If
this can be done successfully, GE growth and performance will follow. GE can’t win unless the
targeted customers win.
Manage for operational performance first. This means not just setting ambitious targets, but
also making sure the company has clear, achievable paths to get there. With detailed analyzing
and evaluation of reviews the business leaders looked at detailed operational metrics and
processes so that the company not just focus on how much but rather choose what to do with
how.
Set fewer, more impactful priorities. GE has ambition like no most companies with in the
industry, but there must be a shift to focus their attention on the things that matter most so the
company can move the furthest. At the company level, there need to be to the two priorities
outlined:

 Improve the company’s financial position and

 Strengthen the company’s businesses, starting with Power.

Thus, the company will operate in a similar fashion in each of the businesses.

Recommendations and Conclusions

To emerge as a dominant player in the market and to become digital industrial, GE has started
integrating its businesses and has installed 200K machines globally connecting varied functions
like Sourcing, processing, engineering, and other commercial functions. While for customers it
has developed more than 100 industrial apps to support its businesses across different industries.
Acquiring companies or partnering with them helped the company in using their technology &
expertise to be competitively ahead in the market.
The power division has begun an exciting digital journey, one that will bring a deep
transformation of the entire value chain. A set of macroeconomic and technological forces have
catalyzed this transformation, creating new challenges but also new opportunities for the
industry.
The convergence of digital and physical technologies now brings this within reach. To map the
digital future of energy, the macroeconomic and technological drivers that will reshape the
industry need to be understood. As emerging markets tend to be less energy efficient than
advanced economies, their growing weight initially tends to make global growth more energy
intensive. In order to sustain their rapid growth, emerging markets will need to invest in their
power generation infrastructure.
This transformation will need high coordination among stakeholders. Energy providers will join
a new breed of digital industrial companies, by investing in new technologies and finding new
ways to provide tailored solutions to customers.
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