Wednesday, November 18, 2015

GE's Strategies: Successes and Failures

General Electric (GE) has often been considered as one of the largest and most successful firms in the United States. One of the main reasons for its success is its ability to strategize according to its distinctive capabilities. Jeffrey Immelt, the current CEO, has developed a growth strategy based on five key elements that align with the competitive advantage of the company. The five elements are technical leadership, services acceleration, commercial excellence, globalization, and growth platforms (Bartlett). The strong alliance between GE’s competitive advantage and strategy has created a coherence premium, which strengthened the company’s competitive advantage, strategic investment, efficiencies of scale, and strategy and decision alignment (Leinwand).

One of the key drivers that Immelt focused on is technical leadership. GE has identified Research and Development (R&D) as one of the biggest advantages it has over its competitors. Under Immelt’s leadership, GE has invested billions of dollars in building new research facilities as well as investing in long-term research projects (Bartlett). With strong financials, GE is able to invest in R&D on a larger scale compared to its competitors. With state-of-the-art facilities, GE can produce efficiencies of scale, growing its research capabilities and developing a wide array of R&D projects. Additionally, strategic long-term investments in R&D projects will strengthen the company’s competitive advantage in technological excellence.

Another element of growth that has shown significant results is investment in growth platforms. One of the major items on Immelt’s growth strategy agenda is rebalancing GE’s portfolio. Immelt has pushed for several major acquisitions to better position GE in different industries. After identifying Hispanic broadcasting as an unstoppable trend, GE acquired Telemundo and used its strong management and programing expertise to transform the company (Bartlett). After GE’s acquisition, Telemundo’s advertising market and revenue grew significantly (Bartlett). With Telemundo, GE was able to align its strategy (to grow new business platforms based on unstoppable trends) with its decision to acquire Telemundo. GE then utilizes its strong discipline and methodological approach to explore the marketplace opportunity.

Although GE has been extremely successful, the company has also taken on several risks. In Seven Ways to Fail Big, Paul Carroll and Chunka Mui detailed risky strategies that can cause a company to fail, and GE has taken several of those risks.

When GE acquired Amersham, a British life sciences and medical diagnostic company, it potentially fell into the trap of synergy mirage (Bartlett). The organizational compatibility between Amersham and GE was difficult assess (Bartlett). The potential culture clash of a highly innovative environment and disciplined management was a major concern for many.

Another dangerous acquisition was Vivendi-Universal Entertainment. The NBC franchise was focused on broadcast television, while Universal was based in the film industry. Although these two industries may seem similar, it could potentially be a pseudo-adjacency.  There are many nuances in film distribution that might be different from that of television.

The biggest risk and failure that GE had faced was faulty financial engineering. During Jack Welch’s era, he had greatly boosted GE Capital and its investments; however, during the financial crisis, GE Capital caused disastrous ramifications on the company. Immelt had admitted that GE was “seduced by GE Capital’s financial promise (Lohr),” and this temptation has led GE astray from its core competencies. To this day, GE is still recovering from the financial disaster.

In the past decade and half, GE has had many successes and failures. However, looking forward, Immelt has taken a more conservative approach and focus on the core competencies and competitive advantages of GE (Lohr). I believe with this strategy coupled with Immelt’s key elements of growth, GE will continue to maintain its coherence premium that will further establish its longstanding reputation and success.

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