Case Study Analysis | Course Paper

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GE Case Study Analysis

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1.0 Introduction

General Electric (GE) is widely considered as one of the most successful companies from the

20th century. It financial success coupled with its global footprint was largely unparalleled in

the 20th Century. This paper critically evaluates GE’s competencies and how they contributed

to its success. It also outlines its strategic options while also comparing and contrasting

management approaches used by Jack Welch and Jeff Immelt.

2.0 GE’s Core Competences and Capabilities and Role Corporation’s Success

The success of GE was predicated on a wide range of capabilities and macro-environmental

factors. Exceptional leadership was one of GE’s greatest strengths. The creation of an

effective performance management system, effective strategic planning approaches, focussed

financial control techniques, and exceptional human resource management strategies were

foundational to the success of GE. This section uses SWOT matrix to critically evaluate GE’s

capabilities and how they enabled the company to effectively exploit opportunities in the

market. SWOT model is one of the resource-based view theories of the organization that

advices on alignment between organizational capabilities and opportunities in the market

(Johnson et al., 2011; CIMA, 2008).

2.1 SWOT Analysis

The concept of SWOT (Strengths Weaknesses Opportunity and Threats) has been broadly

used amongst scholars of strategic management ranging from Ansoff (1965) to Porter (2008).

According to Helms and Nixon (2010), it is in the listing of desirable and undesirable internal

and external factors through the SWOT framework that an organization is able to understand

its strengths and how it can leverage to exploit opportunities in the marketplace. At the same

time, the SWOT framework enables an organization to have visibility into its weaknesses and

how such weaknesses expose it to threats in the marketplace (Helms and Nixon, 2010). Thus,

it becomes possible to mitigate against threats in the marketplace while being able to exploit

existing opportunities. The SWOT matrix provides an ideal model for understanding GE’s

core competencies and how the company leveraged them for its success.

2.1.1 GE’s Strengths

The era of Jack Welch was marked with the development of considerable competencies that

enabled and sustained GE’s competitiveness. These competencies were wide ranging from

operational excellence to exceptional innovation. An organization’s strengths underlie its

ability to expand and compete in the market (Mishna et al., 2004; Porter, 2008).

Worldwide brand awareness: GE was a global brand with that was widely recognised and

respected across the key markets around the world. The company’s products and services

were known for their quality and uniqueness. At the same time, GE was consistently being

ranked as the most valuable company in the world. It is this global brand recognition that

gave GE its competitive advantage over its smaller and less know rivals across several

markets.

Quality Products and Services: In addition to being a globally recognised brand, GE

products and services met the highest standards possible. The company’s met the

requirements of customers across both the private sector and the government. Majority of the

commercial airliners across both Boeing and Airbus use GE engines. At the same time, a

significant proportion of electricity generators around the world use GE turbines. In essence,

GE did establish itself as a market leader across industries it operated. This enabled the

company to entrench its position as the most reliable supplier.

Diversification: GE was highly diversified with leading products and services across

multiple industries and sectors. At the time, GE had business units in media, finance, energy,

avionics, appliances and automotives. Some of these units were complimentary in the sense

that innovations in one division could be used to develop products in another division.

Similarly, innovations developed for other markets were also occasionally applicable in other

markets. The diversification also allowed GE to extract more value from its customers by

selling products across several divisions to the same customer. It also made it possible for GE

minimise risks associated with operating in one sector. For instance, events such as 9/11

bombing of New York significantly affected the aviation industry. However, GE was able to

remain profitable regardless of the event negatively affected the industry.

Innovation: GE invested up to 6 per cent of revenue in research and new product

development. Its ability to produce exceptional products across different industries was

largely attributed to heavy investment in research and innovation and strategic acquisitions.

In particular, environmentally focussed innovation was also another element that significantly

enhanced GE’s competitiveness. The ability to create environmentally friendly technologies

in terms of reduced energy consumption and less emission significantly enhanced the demand

for GE’s products. In addition, GE opted for acquisition in areas where it did not have

adequate competencies such as in water and biotech. Adaptation of technologies to local

markets was another example of innovation that enhanced the relevance of GE’s products to

specific markets.

2.1.2 Weaknesses

GE also had several fundamental weaknesses emanating from its operational process and

chose strategic approaches.

Performance management system: during the era Jack Welch, GE’s performance

management system was its core strength. Performance was benchmarked on results with

high expectations set for managers and employees at all levels. High performance was highly

rewarded. As such managers had their objectives and goals set on achieving results for the

short to medium term at best. Consequently, it became a challenge to incentivise for long

term performance. Managers were not incentivised to pursue projects that could yield

excellent performance beyond the medium term. This meant that there was less focus on

innovation for future product development.