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Structure of the Case
ing what Immelt should do with the cash generated from the sale of GE Capital.
The history of General Electric can be traced to 1883 and Charles Coffin who formed present-day
General Electric through a merger in 1892. Under Coffin, GE began to sell electrical products that
increased demand for its core generator business creating a portfolio of businesses that continues to
define GE today. Coffin was succeeded by Owen Young who formed GE Credit Corporation in 1932,
making into segments that were easier to manage. Fred Borch, GE’s next leader, redefined marketing
by designing products around customer needs, leading GE into new areas. Borch also divested GE’s
computer unit to Honeywell, a move that highlighted the management skills of Reginald Jones who
succeeded Borch as leader of GE. Under these successor leaders of GE, the firm’s income and revenues,
as well as the number of products GE made, grew significantly.
GE’s balance sheet. Some of these acquisitions are being undone by Immelt. For example, his first major
divestiture was in 2004, when he sold GE’s insurance business for $6.8 billion. Immelt also sold GE
plastics in 2007 and NBC Universal in 2003. Meanwhile, Immelt also acquired Enron Wind for $400 mil-
lion in 2002 and the energy business of France’s Alstom in 2014. The largest acquisition in GE’s history
General Electric after GE Capital
TEACHING NOTE
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REv: MAY 19, 2015
Teaching Note — General Electric after GE Capital
at $13.5 billion, it signaled a shift of GE to be a more international company. Immelt has also focused on
“reverse innovation” to provide technical solutions in unmet markets, as well as the Industrial Internet
to improve firm operations. However, the environment Immelt faced has been tumultuous, including
the 2008 financial crisis, the 9/11 terrorist attacks, hurricanes, and tsunamis.
Suggested Questions
AnAlysis: Focus on ExtErnAl And/or intErnAl EnvironmEnts
1. Jeff Immelt became CEO and chairman of GE on September 7, 2001. Analyze GE’s external
environment since 2001 using PESTEL and discuss the effects these changes have had on GE. Is
Immelt responsible for GE’s poor performance?
FormulAtion: Focus on BusinEss, corporAtE,
And/or GloBAl strAtEGy
2. What is GE’s current level of diversification? Historically, has GE become more or less
diversified? Why has GE been moving in this direction?
3. Evaluate Mr. Immelt as a strategic leader.
4. Evaluate the evolution of GE’s corporate strategy from Welch to Immelt.
implEmEntAtion: Focus on rEcommEndAtions
And How to ExEcutE tHEm
5. Advanced: Where should Immelt invest the cash generated from the sale of GE Capital?
Teaching Note —General Electric after GE Capital
Suggested Answers
AnAlysis: Focus on ExtErnAl And/or intErnAl EnvironmEnts
1. Jeff Immelt became CEO and chairman of GE on September 7, 2001. Analyze GE’s external
environment since 2001 using PESTEL and discuss the effects these changes have had on GE. Is
Immelt responsible for GE’s poor performance?
During Immelt’s leadership of GE a series of external environmental events have created significant
challenges. This question leads students to consider how much control senior management has over
firm performance under conditions of environmental uncertainty.
sociocultural—While not mentioned specifically in the case, sociocultural attitudes toward the envi-
ronment and affordable health care clearly influenced Immelt’s decisions to move into wind energy.
Additionally, international demographic trends point to a growing need for health care in developing
economies reflecting GE’s development of less expensive ultrasound machines.
technological—Students will be tempted to list GE’s own innovations under this heading, which
provides an opportunity to remind them of the proper framing of a PESTEL analysis. However, the
focus of PESTEL is on external environmental forces that have an impact on industries and the firms
legal—Legal issues are not directly covered in the case. However, students likely will be famil-
iar with the Homeland Security Act and other legislation passed in the wake of 9/11, as well as the
Sarbanes-Oxley legislation in 2002 and regulatory changes following the 2008 financial crisis, such as
the Dodd-Frank Act that changed the legal environment for firms. GE’s health care division is also
being effected by the 2010 Affordable Care Act.
Teaching Note — General Electric after GE Capital
of McGraw-Hill Education.
In considering whether Immelt is responsible for GE’s recent poor performance, the significant
drops in GE’s stock price correlate with the 2008 global financial crisis (see Case Exhibit 1B). This also
underscores the impact of external events on firms. Still, GE’s recovery has lagged the overall market,
and it is unrealistic to continue to blame an event over five years in the past for GE’s problems when
the overall market has recovered. This highlights the need for additional changes at GE.
Following a discussion of the different PESTEL elements and Immelt’s responsibility, an interesting
debate to host in class is whether Immelt has selected the best trends on which to stake GE’s future.
Students will likely have varying opinions, but challenge them to examine why they agree or disagree
with Immelt’s selections and to support their viewpoint with research data.
FormulAtion: Focus on BusinEss, corporAtE,
And/or GloBAl strAtEGy
2. What is GE’s current level of diversification? Historically, has GE been becoming more or less
diversified? Why has GE been moving in this direction?
NOTE: GE’s changing product and geographic scope is provided in Case Exhibits 2A and 2B.
Historically, GE became more diversified under successive chairmen and CEOs leading GE into new
businesses. This continued with some divestment (computer business to Honeywell) until Jack Welch
who significantly reorganized GE and increased the role of GE Capital to be 45 percent of GE by 2001.
While the changes under Immelt have decreased the amount of unrelated diversification of GE, the
firm remains a highly diversified company with no single sector dominating its business activities.
Still, under Immelt GE has focused more on capital intensive industries that benefit from financial
economies (e.g., internal capital market). This reflects Immelt being under market pressure to reshape
the corporate portfolio in order to increase GE’s value and share price. Overall, GE is best considered
“unrelated” versus related:
3. Evaluate Mr. Immelt as a strategic leader.
As a strategic leader, Immelt appears to be functioning at the fourth level (“effective leader”). Immelt
is outlining a vision and mission to guide GE toward superior performance. However, only time will
tell whether he leaves a lasting positive impact on the organization—the hallmark of Level-5 leadership.
Teaching Note —General Electric after GE Capital
5
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent
of McGraw-Hill Education.
With respect to executive roles, Immelt displays multiple strategic leader roles. Interpersonally,
Immelt serves as the figurehead for GE, but his and GE’s long-term performace depends on his being
a leader.
Informationally, he is the acting spokesperson to shape public opinion, as well as the lead dissemina-
tor of information inside the organization. Additionally, Immelt needs to continue to monitor progress
in light of ongoing changes in the internal and external environments.
From a decisional perspective, Immelt can be shown to act as an entrepreneur who develops new
strategic initatives and allocates resources through corporate restructuring to achieve his strategic
goals.
4. Evaluate the evolution of GE’s corporate strategy from Welch to Immelt.
As the only firm remaining in the list that made up the original 1896 Dow Jones Industrial Average,
General Electric provides an example of the importance of corporate strategy and under Welch and
Immelt, GE’s strategy change significantly.
Corporate strategy focuses on where to compete along three dimensions: industry value chain,
range of products and services, and geography.
At the end of the discussion, it is likely useful to outline how corporate strategy evolves through
a process of variation, selection, and retention growth (see Exhibit TN-1). Under Welch, GE Capital
became a focus, expanding into the largest segment of GE with a clear emphasis on its. The 2008 finan-
cial crisis demonstrated the risk of both selling and financing its products (Note: This also contributed
to GM’s bankruptcy), and Immelt has selected to divest GE Capital to enable additional variation into
new businesses or growth of existing businesses.
Teaching Note — General Electric after GE Capital
implEmEntAtion: Focus on rEcommEndAtions
And How to ExEcutE tHEm
5. Where should Immelt invest the cash generated from the sale of GE Capital?
This question is at the crux of what Immelt will do next. Based on the prior question, the choice is
further acquisitions or investing in existing businesses for growth. GE is still working through its larg-
Looking at Case Exhibit 2A, the likely candidates are where GE already has a presence, or Power &
Water, Oil & Gas, Aviation, or Healthcare. In addition to its internal capabilities, GE needs to consider
external conditions. While the global economy has resumed growing there are multiple concerns that
could derail that growth. For example, China’s growth is slowing, Europe continues to deal with Greek
debt, and there are multiple conflicts including Syria/Iraq, Ukraine, and the potential for conflict relat-
ing to Chinese expansion in the South China Sea. Less risk would relate to investing in things people
need every day regardless of economic conditions. This suggests that GE may select its Power &Water,
Oil & Gas, or Healthcare divisions for growth. Here is a quick summary of the likelihood of investment
in GE’s largest divisions:
• Power&Water: TheAlstomacquisitionin2014already involvesthePowerand Waterdivision,
making additional investment there in the short-term less likely.
Additional Resources
1. http://www.economist.com/blogs/multimedia/2010/09/vijay_govindarajan_innovation (9:54).
2. http://video.nytimes.com/video/2008/04/11/business/1194817108542/immelt-on-g-e-earnings-
Teaching Note —General Electric after GE Capital
3. GE Capital 2008: http://video.nytimes.com/video/2008/09/25/business/1194822628400/immelt-
4. GE Capital 2015:
• https://www.youtube.com/watch?v=eJRIZv81UWM (3:03) “GE’s Immelt gets the memo.”
Discussion on CNBC of Immelt’s decision to divest GE Capital in 2015. It also discusses questions of
5. https://www.youtube.com/watch?v=xQ0z1-e2avI (13:41) “GE CEO Immelt doesn’t get why
6. http://www.economist.com/news/business/21605916-it-has-taken-ges-boss-jeffrey-immelt-13-
years-escape-legacy-his-predecessor-jack. A 2014 Economist article discussing challenges faced
Teaching Note — General Electric after GE Capital
ExHIBIT TN-1 Evolution of Corporate Strategy through variation, Selection, and Retention
Variation Selection Retention
