In what ways has Jeff Immelt redirected the strategy of GE?
Strategic direction is defined as an organization’s roadmap. It assists an organization to know what its objectives are, how to accomplish them and which resources are required to achieve the same. For strategic direction to be successful, an organisation must envision the future, come up with a strategic direction and tactics to implement the organization’s objectives (Grant2016). Jeff Immelt redirected the strategy of GE by using these three pillars.
Envisioning the Future
Vision is timeless and based on what an organization would like to do. It has to be specific and progress towards it measurable. It gives a definition of whom the company serves, what it provides and what separates it from other organizations providing similar products and services (McCain 2014). When Jeff Immelt takes over GE, he sets a new vision for the company. He outlines his vision as wanting GE to be a, “connected industrial company, which stood at the intersection of the physical and digital worlds and blended the best elements of speed, scale and flexibility.” To work towards the achievement of this vision, Jeff Immelt made a number of adjustments to the company’s portfolio in 2015 (Barney 2014). One of the major achievements was to fully acquire Alstom’s power equipment and grid business. GE also divested a major section of GE Capital. Immelt’s vision for General Electric is to make it technology based, focused on the customer and growth oriented. Many structural changes have to be made in order to achieve this. Part of the changes include re establishing performance appraisal, changing marketing strategies and upgrading technology with the purpose of aligning the company’s processes and systems to the new strategy.
Strategy – Industry and Market
Strategy links an organization’s vision with its current reality. It looks at how a company can achieve its vision while considering marketing conditions, competition and other external factors. Jeff Immelt looks at the industry and market in which GE is operating. The previous leader, Welch, had managed to steer the company to great financial performance steered by optimism, confidence and growth (Wheelen & Hunger 2017). The 21st century however comes with its own challenges hence Immelt has to come up with new strategies that will ensure GE operates successfully in the new market conditions. Immelt reconfigures the portfolio of GE so that the company can operate more competitively in the current environment. This is done by exiting slow growth businesses and reallocating resources to those that had strong growth prospects.
Immelt’s aim was to create growth platforms either through getting into new business or growing already existing ones. The areas that GE invested in were healthcare, energy, broadcast and technology. In healthcare, the company was leader in diagnostic imaging and through Immelt; they acquired Amersham and Abbot Diagnostics hence expanding product range and increasing geographical presence. Immelt also led GE to grow its energy section by developing alternative energy and acquiring companies like Enron’s wind energy section, goal gasification business of Chevron and solar energy products production through Astro Power acquisition. Immelt also ensures that the company’s broadcast and entertainment section is grown by acquisition of Telemundo and this enables the company to get into the Spanish market (Rothaermel 2015). The acquisition of Vivendi also sees GE get into the industry of films and theme parks. As part of the GE growth initiatives, Immelt led the company to diversify into security systems production, water treatment and aerospace. This gave the company advantage of penetrating into different markets hence establishing a wider customer base.
Jeff Immelt also refocuses competitive advantage of GE around technological innovation and customer service. Immelt sees technology as being a major driver of growth for the company. He therefore places an emphasis on research and development so that the company can speed up uptake of new technologies. The research and development centre in Niskayuna is upgraded and new global research centers are constructed. Bt 2015 there are over 37000 technologists working in different GE research centers across the world. Immelt enabled GE to change its focus to long term projects hence leading to advanced technologies that gave the company competitive advantage in areas like energy conversion, nanotechnology and molecular imaging (Gamble & Thompson 2014). Some of the inventions GE came up with were the evolution hybrid locomotive, smart grid and sodium batteries. This assisted the company to gain competitive advantage in various industries.
Customer service was greatly emphasized by Immelt. He constantly focused the employees on the value of spending time with customers, building healthy relationships and ensuring their problems were sorted on time (Bryce 2017). The emphasis was also on ensuring that whatever products were manufactured by the company created the most value for customers.
Tactics – Resources and capabilities
Tactics involve looking at the capabilities and resources of a company and ensuring they will drive the strategy achievement. Tactics work with current organizational structure. Immelt looks at the resources and capabilities of GE and changes strategies accordingly (Mordern 2016). The resources and capabilities that he lays an emphasis on are:
Financial resources – Immelt reduces the loan exposure of GE Capital and increases liquidity. The risk profile is also improved. This leads to redefining of the company as a supplier of specialist financial service with a focus on mid-market lending. Immelt also ensures that the financial resources of the company are used to diversify and innovate new products, which leads to the company gaining a competitive advantage.
Physical assets – Immelt ensures that the company lets go of any assets that are causing it not to perform and acquiring assets in companies, which will lead GE to the next level in terms of growth (Stead & Stead 2013). This enables the company to grow as is acquires stakes in companies which have potential. Immelt ensures that the company invests in the necessary infrastructure.
Human resources – Immelt ensures that performance goals of its human resources are reoriented towards the company’s revenue growth. This ensures that human resource strategies are aligned to the strategic goals that have been set.
Intangible resources – Under Immelt’s tenure, he acquires some organizations and patents some innovations. The company gains competitive advantage through this (Nahavandi 2016). He also grows the brand and ensures that there is good will towards customers and other stakeholders.
Structural-cultural resources – Part of Immelt’s strategy was to adjust the company’s corporate culture. He wanted to instill a commercial culture and came up with various initiatives to do this. An example was the program known as, was “At the Customer, For the Customer,” which applied six sigma, in customer relations activities, tracked the satisfaction of customers and their attitudes (Bergh et al 2014). This helped the company to improve through feedback and to come up with products that satisfied customer needs. Immelt also created a system and values that demonstrated that GE was more valuable as a single entity that many separate businesses.
Strategy Alignment to the Requirements of the 21st Century Business Environment
Jeff Immelt has ensured that the strategies of GE are aligned to the 21ST century business environment. The 21ST century has come with a myriad of challenges for businesses. It has led to the collapse of industries, exposure of poor business models, bankruptcy of large organizations and the questioning of corporate credibility. To bring stability to GE in these conditions, Immelt viewed the portfolio diversification as a source of stability for the business. He therefore emphasized the merits of having a portfolio as it smoothed volatility (Foss & Harlberg 2014). Top line growth would drive bottom-line returns despite the volatile external environment.
The following is the PESTLE analysis as pertains to GE and an analysis of how the company aligned itself to adapt to the turbulence in the external environment:
Political – Political factors determine how a government is able to influence certain industries. Tax and duties can be imposed hence affecting the generation of revenue. GE is affected by the political scene due to various taxes imposed on goods and raw materials. To ensure good relations Immelt ensures that there is an integrated approach in working directly with different governments to meet the needs of countries that have hosted GE (Rees & Smith 2017). This was implemented through the company to country strategy. This made it easier for GE to penetrate different markets without facing too many obstacles.
Economic- Economic factors determine how an economy performs and this has a direct impact on various businesses. They also affect the purchasing power of consumers. Some economic factors are inflation rates, interest, foreign exchange and economic growth patterns (Gans & Ryall 2017). To counter economic factors, Immelt ensured that GE invested in countries where GDP growth would be high. The financial crisis if 2008-2009 was also a major threat to GE Capital’s position in the American market hence it sought equity injection. Immelt reconfigured the business portfolio and focussed on the company’s competitive advantage so that the company would not be affected by the turbulent economy. In 2015 most of GE Capital was sold so that the main company would remain stable.
Social – Social factors look at cultural trends, demographics and the dynamics of a population. Immelt looked at the industry trend before making various strategic decisions at GE. The company looked at the demographics of the world where the aging population created opportunities for goods and services required for healthcare (Jenkins 7 Williamson 2015). This led to Immelt greatly investing in research and development so that innovative products and solutions in healthcare would be discovered. The growth in population across the world also offered demand for many other services offered by GE, for example entertainment.
Technological –Technological factors are related to innovations which affect operations of an industry or company. Immelt focussed on technological innovation so that the company would gain an even greater competitive advantage. The company invested greatly in technological infrastructure that led to enhancement of its products and services hence giving it competitive advantage.
Legal – Legal factors can be internal and external. Laws affect businesses in different countries. Safety standards, labour laws, and consumer laws also affect the operation of a company. Immelt ensures that the company meets all legal obligations in the countries, which they are operating in. He ensures that employees work under safe conditions and that all the branches of GE adhere to these policies and procedures.
Environmental – The surrounding environment determines environmental factors. Immelt identifies the global warming challenges, water scarcity and conservation as issues that GE must look at (David & David 2017). Technological and innovative responses are implemented by GE to deal with this.
Strategy Alignment to GE’s resources & capabilities
It is important that organizations align their people, processes and technology to the organizational strategy (Foss & Knudsen 2013). Immelt ensured that the company strategy was aligned by ensuring that the following there areas were covered:
Establishment of Shareholder Value
When Immelt took his position, he explains to shareholders that the role of the CEO is not to take care of stocks but to carry out activities that will create value hence lead to the rising of stocks. This enabled the shareholders to have confidence that the company was being steered into the right direction (Karadag 2015). It is important to have all stakeholders on board whenever a strategy is being implemented. Immelt ensured that he had all the key stakeholders on board and this enabled successful strategy implementation.
Core Competencies Used by GE
Immelt ensured that in managing resources and capabilities, the company used its core competencies to ensure successful strategy implementation (Ruff 2015). Core competencies enable companies to deliver value to their customers. A core competency, which is hard for competitors to copy, is a strong one. Immelt identified the key internal strengths of GE and through this invested in capabilities valued by their customers. The following are the core competencies that Immelt used in GE:
Innovation – Innovation leads to competitive edge in an industry. Companies should not stop innovating. Immelt invested in many research and development centers across the globe so that GE would remain competitive in its business (Farzin et al 2014). This led to the discovery of many products and services, which greatly added value to GE customers. Innovation kept the company successful over the years.
Quality – Quality simply means reliability and performance. When a company makes quality its core competence, it automatically enjoys customer loyalty. Quality was key for Immelt. He ensured that Six Sigma principles were applied to GE. Total quality management was applied and there was emphasis on customer care. Through getting customer feedback, the company was able to tailor its products and services to the needs of its customers.
Customer Service – Businesses that focus on provision of exceptional customer service usually have competitive edge. Efficiency and effectiveness is a core competence that enabled Immelt to achieve customer service strategic goals (Dudin & Frolova 2015). There was a focus on giving customer value through the products that were being manufactured by GE hence ensuring the customer grew its market share and enjoyed customer loyalty.
Flexibility – Successful companies are able to stay competitive. Immelt ensured that despite uncertain external environment, GE remained flexible and came up with strategies which enabled it to survive tough market conditions. Through diversifying the portfolio and off loading businesses, which were not successful, GE was able to maintain a competitive position in the market.
Successful Value Delivery
Immelt ensured that there was effective value delivery at GE through:
Customer Value –The process excellence of GE was used to enhance customer value and drive growth. Quality became the focus and this led to excellence in processes hence customers benefited from this. The positive effect led to customer growth and retention for GE.
Innovation – Innovation led to value, as there was constant improvement to products and discovery of new ones. This led to variety for customers.
Leadership in Technology –Immelt ensured that technology was key in GE. There was a focus on better technology for the whole company hence leading to process improvement and better quality products and services for the company.
Commercial Excellence – Immelt ensured that GE became one of the excellent companies in the various industries that they served. Due to this, the company was often used as a case study example and became a brand name. Customers associate GE with excellent products.
Globalization-Immelt ensured that GE focused on gaining full entry into markets that had GDP growth, which was high and constant. Due to this, the company was able to enter into many markets and succeed on the same. This led to word wide growth and the company benefiting from economies of scale. Due to this, customers get value as products can be priced competitively.
Growth Leadership – Immelt ensured that there was growth in terms of leadership for the company. The company structure was changed for the better and this led to efficiency in various departments. Due to this, the customers and shareholders receive value as the company is steered to growth by competent leaders and workers.
Organisational Changes Brought about by GE Strategy
Jeff Immelt’s strategy brought about a number of changes to the organisation. There was a change in organizational structure. Between 2002 and 2008, Immelt made a number of management changes. He reorganised different divisions into broader sectors. This reduced the number of sectors, which were reporting to Immelt from twelve to five and then further increased them to nine. Immelt wanted to enhance the management talent in GE and ensured that employees accepted the change process and embraced growth personally. Managers were trained to become growth leaders at GE. Immelt carried out benchmarking to find out the management characteristics of various companies hence identifying various traits that he wanted his managers to have. He therefore focused on external factors, imagination and creativity, decisiveness and clear thinking ability, inclusiveness and deep business knowledge. During the annual performance reviews, these traits were looked at. Career planning was also introduced and this led to employee retention.
Innovation was another change, which occurred in GE. Immelt came up with an initiative known as The Imagination Breakthrough Initiative, which ensured innovated projects received the needed attention. Funding decisions were placed with Immelt and his management team to reduce bureaucracy and ensure the company focused on innovation. This helped the company to realize its goal of being a customer driven company.
Changes also occurred in marketing and sales. Immelt upgraded the department by first creating a position for Chief Marketing Officer. He also initiated a marketing seminar, put up a leadership program and ensuring that each of GE’s businesses appointed a Vice President level head of marketing. A commercial council was also developed that was in charge of developing new ideas for the business. Six Sigma was also implemented in sales and marketing and this was used in tracking customer satisfaction.
GE will be able to succeed in strategy implementation though few challenges may be faced. One of the challenges that may be faced is decision making. Some decisions may not be agreed to by everyone hence may take time in implementing. Another issue can be lack of resources. There might be a shortage in resources, which may prevent effective strategy implementation. Entry barriers may also be an issue in some countries hence preventing GE from achieving its strategy.
Alternative Strategies to be considered by GE
GE can consider standardization instead of localization. The company should standardize its processes but used a localized approach in selling, depending on the market where it is operating. The company should therefore try to find a balance between company policy and localized customer needs. GE tailoring its products and services to various markets will enable the company to gain wider market share in its global markets.
GE should consider having electronic distribution channels. There is widespread use of internet and social media and this can be used by the company in enhancing its marketing strategies. The company can do online sales and ship products worldwide hence ensuring it can satisfy customers from all over the world, even where it is yet to establish branches.
The company should also adopt sustainability when sourcing for raw materials. The inputs used in manufucturing should have the capability of being up cycled or recycled. This will lead to a reduction in costs and lead to production efficiency in the company.
Barney, J.B., 2014. Gaining and sustaining competitive advantage. Pearson Higher Ed.
Bergh, D.D., Connelly, B.L., Ketchen, D.J. and Shannon, L.M., 2014. Signalling theory and equilibrium in strategic management research: An assessment and a research agenda. Journal of Management Studies, 51(8), pp.1334-1360.
Bryce, H.J., 2017. Financial and strategic management for nonprofit organizations. Walter de Gruyter GmbH & Co KG.
David, F.R. and David, F.R., 2017. Strategic management: A competitive advantage approach. Pearson.
Dudin, M.N. and Frolova, E., 2015. The balanced scorecard as a basis for strategic company management in the context of the world economy transformation.
Farzin, M.R., Kahreh, M.S., Hesan, M. and Khalouei, A., 2014. A survey of critical success factors for strategic knowledge management implementation: Applications for Service Sector. Procedia-Social and Behavioral Sciences, 109, pp.595-599.
Foss, N.J. and Hallberg, N.L., 2014. How symmetrical assumptions advance strategic management research. Strategic Management Journal, 35(6), pp.903-913.
Foss, N.J. and Knudsen, C. eds., 2013. Towards a competence theory of the firm (Vol. 2). Routledge.
Gamble, J.E. and Thompson, A.A., 2014. Essentials of strategic management. Irwin Mcgraw-Hill.
Gans, J. and Ryall, M.D., 2017. Value capture theory: A strategic management review. Strategic Management Journal, 38(1), pp.17-41.
Grant, R.M., 2016. Contemporary Strategy Analysis Text Only. John Wiley & Sons.
Jenkins, W. and Williamson, D., 2015. Strategic management and business analysis. Routledge.
Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A strategic management approach. Emerging Markets Journal, 5(1), p.26.
McCain, R.A., 2014. Game theory: A nontechnical introduction to the analysis of strategy. World Scientific Publishing Co Inc.
Morden, T., 2016. Principles of strategic management. Routledge.
Nahavandi, A., 2016. The Art and Science of Leadership -Global Edition. Pearson.
Rees, G. and Smith, P. eds., 2017. Strategic human resource management: An international perspective. Sage.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Ruff, F., 2015. The advanced role of corporate foresight in innovation and strategic management—Reflections on practical experiences from the automotive industry. Technological Forecasting and Social Change, 101, pp.37-48.
Stead, J.G. and Stead, W.E., 2013. Sustainable strategic management. ME Sharpe.
Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. pearson.