Wednesday, November 18, 2015

GE’s Growth Strategy: The Immelt Initiative

Following the devastating impact of the financial crisis, GE is moving forward with a revitalized strategy.  

The company has begun retracting focus from the financial unit “and focusing on fields where G.E. believes it has a competitive advantage[1]. According to Jeffrey Immelt, chairman and CEO, this strategy involves utilizing “costs and complexities” that dissuade competition. These will be geared towards the manufacturing of heavy-duty, technologically-based products (i.e. jet engines, solar panels, etc.). Immelt’s broad objective is to “drive change and develop people”[2] as a means of promoting fiscal growth and company development.

The GE case is a prime example of the importance of analyzing Porter’s competitive forces and focusing on the forces relevant to a firm’s productivity and profit. The article highlights GE’s approach to three aspects of Porter’s forces: rivalry among competing sellers, firms offering substitute products, and potential of new entrants. As previously stated, GE is attempting to reduce rivalry by offering products that have such a high cost of production no company is willing to provide substitutes.

Regarding the focus on potential of new entrants, Jeffrey Immelt is concerned with the constant shift of the global economy and the growing emerging market. The potential of new entrants is a serious concern for major firms. The threat they may or may not pose on the existing market dynamic is occasionally in flux. For instance, in the Chinese market, GE’s success is determined by the strength, or weakness, of the Chinese competitors.

Immelt appears to be an intelligent, charismatic leader with boundless ideas. That being said, his ideas may be a bit too boundless. He may need to narrow his focus and be wiser with company resources. It concerns me that, following the recession, Immelt continued to invest heavily. This type of spending could be detrimental and appears a bit risky. However, as discussed in class, company’s, like people, are creatures of habit.

[1] Lohr, G.E. Goes With What It Knows: Making Stuff, The New York Times, Dec. 4, 2010

[2] Lohr, G.E. Goes With What It Knows: Making Stuff

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