Competitive Strategy and Inovation

Question: Identify GE's Core Competences and Capabilities. Answer: History of the GE: General Electric Company is an international organization operates in infrastructure sector and financial sector. Companys water and power segment offers steam, gas, combined cycle system and aero derivative turbines, controls, generators and related services. Oil gas segment of this organization provides subsea drilling, turbines, surface and production system, compressors, reactors, turbo expanders, reactors and auxiliary equipments. Its energy management segment offers lighting and power panel, electrical distribution and control products and energy, circuit breakers, inspection, engineering, mechanical and inspection services: motors, control and drives technologies, software, plant automation, software, and embedded computing system. This companys aviation segment offers turboprop, jet engine and turbo shaft engines, replacement parts: maintenance, repairing and overhaul services. Its healthcare segment provides medical imaging, medical diagnostic and patient monitoring service s: disease research, remote diagnostic, drug discovery services. Its Transportation segment offers freight and passenger locomotives, marine and stationery power, railway signalling, communication system, mining equipment; drive motorized system; and information technology centre. Home and business solution of this company manufactures products of lighting and home appliances. Its GE capital segment offers lease and commercial loan, financial problem, fleet management, credit cards, financial programmes and other financial services. GE was founded in the year 1892. Its headquarter is in Fairfield, Connecticut. (General Electric, 2016) About GE: GE came in existence on April 15, 1892 in New York. Its a major competitor of many industries worldwide. Currently, this company is operating under following business segments: Technology infrastructure, GE capital, Home Business solution and Energy infrastructure. GE is employing 3,01,000 full time employees, generated 147.3 billion in total revenues and has approximately 5,61,000 shareholders. (General Electric,2016) GEs Core Competencies and capabilities and their effectiveness: Core competency is a companys unique ability that acquired by its founders, employers and that cant be easily imitated. It gives a competitive advantages to company, creates and delivers value to its customer in specified field. (Drejer, 2002) In recent years, GEs brand value came out at number 4 in dollar terms. GEs this position remains unchanged since 2001. It is a big questions that how it can remain unchanged even when CEO missing the bus of earnings, capital infusion from Buffett, cutting dividend etc. There are so many key aspects which make is possible. People only look at GEs positioning from US and UK economies and their stock market. And think that GE dont deserve to be on top ranks. But people dont notice that GE earns more than 60% revenue from outside North American market. GEs reach, product, presence in emerging market and high end markets make its brand valuable. (Ahlstrom and Bruton, 2009) Even with diversifying into new markets it has re organized into 4 business units to itself. These new units are: GE technology Infrastructure, NBC universal, GE infrastructure and GE capital. These units are focusing on infrastructure in all markets. It is estimated that in next decade, infrastructure project will be of worth $40 trillion. These themes give the message that the business portfolio of this organization is being committed towards sustainable competitiveness, high growth and high margin market. The core competency study starts the process and strategy action by considering the strength of a company; in this case, GEs core competencies are technological innovation and capital financing. The core competencies help an organization in long run and make it competitive in the market by provide its product in less price then competitor. And launch new products which are not expected by competitors, core competency is achieved by an organization through technology used, enhanced production skills, empowered employees etc. Core competency makes a benefit to the consumer and its very difficult for competitors to intimate. Organization works on its core competency continuously. (Prahalad and Hamel, 1990) The four elements of the potential of an organization for generating sustained and constant competitive advantages, according to Barneys VRIN concept are valuable, rare, imperfectly imitable and non substitutability. (Barney, Wright, Ketchen, 2001). It is applicable when its clear for the organization that competitive advantages can be achieved from those strategies which are efficient and effective, it is valuable and technology and resources used by organization are not readily available to any other competitors in the industry. Competitor cant substitute these resources. (Peteraf, 1993) To identify GEs core competence before 2012, I am using Mckinsey 7S framework. It is made of 3 hard and strong elements that are Structure, System, and Strategy while the others are Shared values, style, staff and skills. The hard elements can be defined easily and can easily influence by management. The soft elements are less tangible, affected by culture and slightly difficult to describe. These 7s are interconnected to each other that if we make a change in one, it affects the other. The first step of McKinsey strategy is to design, develop, maintain and build competitive and better advantages over competitors. The structure is well organized that describes who reports to whom. The organization system is well defined about the daily activities, procedure, employees work etc. The core value is shared value of an organization as an evidence of corporate culture and work culture. The leadership style is accepted and the employees, their capabilities and skills are evaluated because they makeup the company staff. Playing these shared values at the model in the centre puts emphasise on the critical elements and the need of these values. The companys structure, system, strategy, skills, style and staff are part of an organization as it stands out. (Peters and waterman, 1982) McKinsey 7s theory helps a firm to do well; all the elements need to be reinforced to help in identifying and aligning performance. To know the companys core competence, the questions have been answered: what is company strategy? How is company organized and divided? How effective and efficient is the leadership? What positions are needed to be filling? On what factors employees skills are monitoring and evaluated? (Peters and Waterman, 1982) Swot analysis will be of important help. SWOT stands for strength, weakness, opportunity and threat. SWOT compares the ratio and trend with rivalry companies in similar industry for identifying the companys situation. (Simmonds, 1981) From the GEs last performance, its clear that General Electric concentrated on building its base and expands trading activities by reducing market capitalization and makes a concentration on its core business that includes heavy investments on its financial and industrial services. It also acquired a series of new related companies to expand its market and enter into new 1. This strategy of acquisition helps it to increase its profitability and scale up its business operations. Though the actual result was not as good as expected for the entire period considering the investment made, but there were positive signs of generally improving revenue. General Electric: Performance Indicators, 2001 and 2011: The net income of GE in 2011 is relatively same as the year 2001 which can be a negative impact in normal circumstances of stunted growth but in this case the market was slashed by 50% and still GE maintained the result, its actually a great achievement. Between the years 2006-2009, the average return on GE capital was continuously decreasing from 19.6% to 11.6%. Net earnings were also decreased from 20.7 billion to 11 billion while total assets increased from 697.3 to 781.8 in this period. (Porter, 1996) Growth Strategy: If General electric wants to increase its performance level, it must implement growth strategy. This strategy will expand all profitable units of GE; portfolios of functions and customer are grouping together with innovations in technologies for improving the general performance. Many factors are there which help a business to grow up, these factors include taking advantage of opportunities, use of all resources, identify the competitive advantages and use it against competitors and increase market share. Business growth is majorly of 2 types: Internal growth and external growth. (Kumar, 2012) The internal growth strategy refers to the make a growth internally in an organization. It is basically financed internally by using back profits instead of asking to shareholders for contribution or paying out dividend. The major disadvantage of this strategy is that it takes time to organize for such financing because of many formalities involving with it meanwhile competitor can also start working on same technology or product. The advantage of this strategy is that it is really a very good manner of raising capital and maintaining a good position because company need not to pay in future to anyone. External growth strategy refers to make a growth by raising the funds from outside. This approach depends on external factors for financing to fund for the expansion of GE. But this can negatively impact GE as the result of it will be in deteriorated gearing position. In the years 2002-2012, GE was in a embarrassing situation (Admas,1999). The target of growth strategy is profit maximisation, its turnover, its investment, distribution network improvement etc. In this environment where competition is in peak, all the firms are trying to expand and grow.(Freedman, 2013) According to growth strategy an organization need to be stake out of position and establish itself as a less vulnerable for launching an attack on competitors. To establish a position GE has to maintain a former relationship with its customer, rebranding of its product, product differentiation, technological changes etc. Growth needs investment of funds, technical and human resources, innovative skill and desire to grow up in an organization. An ideal direction for growth of GE is maximising cash inflow and minimizing cash outflow. (Lewis And McKone, 2015) The balance scorecards help an organization to turn its strategy into a performance target that provides a framework for the adopted strategy to be implemented. They include customer, financial, learning, growth and business process. The need of scorecard balance is to balance the corporate non financial and financial performance to evaluate it and analysis long and short run performance. (Adams, 1999) The financial perspective evaluates and analyzes this strategys profitability. It helps in reduction of cost in relation to cost of sales and sales, operating income and competitors. Aggressive acquisition and expansion strategy: Acquisition is a key of growth of an organization as it takes advantages of synergy: making 2+2=5. Expansion of a business through acquisition is cheaper, quicker and less risky in comparison of other methods of expansion strategy. Further, acquisition provides instant economies of scale and easier financing. (Hubbard, 1999) Merging with another business is a mutual agreement where 2 businesses come together to form a new and single business. Acquisition happens when a company acquire controlling power of another. If a company buy 50% of other companys share then only it can acquire controlling power. (Anderson, Havila and Nilsson, 2012) This strategy will help GE to be a competitive player in the market. GE can use its power and substantial size to diversify itself both in geography and product, to vertically integrate, buy out competition etc. Ultimately, this strategy can give GE an increasing competitive edge in the market where it will compete through the capabilities and acquisition of resources. This strategy will help GE to not only diversify the market but also to be a good player in the market. Basically, GE can use this strategy to buy other market players and its competitors to improve integrity, improve functionality and improve market access. The companys philosophy and management also permit company to adopt this strategy. By adopting this strategy, company will be able to eliminate the threats in the market. This strategy suggest company to acquire more resources and capabilities to be successful, company just have to be focused through its effort for be successful and powerful. (Swaim, 2011) Both of these studies are quite good and both will help GE to raise its capital and expand its business. But aggressive acquisition and expansion strategy is better than growth strategy as company can expand itself in a cheaper rate and by acquiring more resources and capabilities company can be a better player in the industries where it is performing. Compare management approach of Jeff Immelts and Jack Welchs: Jack Welch is an American chemical engineer, businessman and author. He was the CEO of GE from 1981 to 2001. MR. Jack raised companys value by 4000% during his tenure. Mr. Jack joined GE in 1960. Earlier he worked as a chemical engineer at salary of $10,500. In 1968, Welch got promotion as Vice president of GE and head of their plastic division. Jeff Immelt is a Business executive of America. He is the chairman and CEO of GE. He has elected as general Electrics CEO in 2000. He replaced Mr. Jack. Previously, he was the head of medical system division of General Electric. The goal of this comparison of these two leaders is to generate knowledge that how well an effective leader runs a business and what is their key factor of success. The point is who is the effective leader? Why? (Hellriegel and slocum, 2008) As a matter of fact, no doubt, jack Welch always had a good dedication to GE even more then Jeff Immelt during 1981 to 2001. Regarding management approach and leadership, its quite difficult to evaluate who is better. Its very difficult for anybody to compare such legends, but I can make a comparison now as leadership is changing time to time. It is quite difficult to judge any of them because of technology, time, resources etc. (Conaty and Charan , 2011) Welch always believed in magical numbers and asserted that he is the more successful manager in the world than anybody else while Mr Immelt always emphasised on renewal and innovation. Welch was a great strategist in the world; he helped GE in recovering and growing up even in much of difficulties. And Immelt invested in Research and development with substantial development. Welch was really a great hunter of opportunities and also a great manager of risks and threat while Immelt improved everything Welch had. As a successful story of BM, application of Six Sigma in GE was expanded over the world for quality control as the most valuable lesson. Above it, Welch was a strict taskmaster at GE. Immelt works on long term goal rather than a short one. Immelt proved himself as a very effective leader by helping GE in 2001 to overcome the hardship, when terrorist attack were a harbinger of bad time to come for GE. Welch developed a system of ranking for employees in these three categories: The top 20%, who performed outstanding were stars, the middle 70%, who performed average were crucial majority and bottom 10%, whose performance was underscore were eliminated. Through this policy, Welch was able to separate his employees according to their performance and place them according to that. By it, Welch was sure that the stars of GE would be able to achieve their goals even in crucial situations. Welch leadership definition concentrates on speed, downsizing, self confidence and downsizing that helped him in leading GE growth on right way. Immelt is also using the same leadership style but with some innovation and transformation from 2001 to till now. Under it, Immelt focuses on importance of alignment, time management, trust, understanding people and personal responsibility. Welch always followed a ruthless and stern style; it was reproved more when he took a decision of eliminating 10% of employees who underperformed at any time, without even giving them a chance to improve. Immelt also followed this rule but at a limited level. In respect of running business effectively, Welch outperformed Immelt as he led GE as one of the biggest company in whole world till 2001. In respect of leadership, Immelt outperformed as he is much supported by many politicians and other people including Former President Obama. Welch is a good strategist who had a great self awareness in managing staff and operation at GE. He knows very well that how to control each and everything around him. Immelt is also a nice planner and a god innovator and transformer also. Vuca: A leader must have the abilities to change, innovate and transform themselves and the company because moving is most important (Masese, 2012). Volatility describes an organizations nature, changes etc. Uncertainty describes lack of predictability, surprise, sudden happenings etc. Complexity describes about issues faces by a company, forces, confusion in an organization etc. Ambiguity describes about confusion, cause and effect in an organization. GE played an important role in developing this model. VUCA stands for Volatility, uncertainty, complexity and ambiguity). Leadership strategy and management approach is a key factor of GEs success. GE is using VUCA to enhance its profitability and growth. (Mack, Khare, Kramer and Burgatz, 2015) Both of them have their own style. They strategy and attitude they reflect is similar at some places and different in others. Mr. Jack has had an awesome impact on General Electric over his time as CEO. Jeffery is continuously looking through his own practices, this success. Conclusion: Thus it can be concluded that both of the legends are good. But as Jeffery is doing work with innovation and according to VUCA and he has some rulebooks of Jack also, his management approach is most impressive. Jack is performing very well at GE and keeps working for its more success. References: Accounting Business, March pp 16 19. Adams, R. (1999),Performance Indicators for Sustainable Development. Ahlstrom D. 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