Case Study Description of General Electric's Corporate Strategy
For many years, GE has been held up as the exception to two arguments: (1) that related diversification strategies outperform unrelated diversification strategies, and (2) that conglomerates are no longer a viable organizational form in an era of outsourcing, focus, and shareholder value maximization. Whereas many formerly diversified firms have become narrower and more focused with their corporate strategies, GE continues to buy and sell businesses and operates an extremely complex set of businesses. This case provides a vehicle for examining the strategic rationale behind GE's corporate strategy and complex diversification. The core arguments for and against unrelated diversification can be linked to the GE strategy.
Swot Analysis of "General Electric's Corporate Strategy" written by Andrew Inkpen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Diversification Ge facing as an external strategic factors. Some of the topics covered in General Electric's Corporate Strategy case study are - Strategic Management Strategies, and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the General Electric's Corporate Strategy casestudy better are - – increasing household debt because of falling income levels, geopolitical disruptions, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, there is backlash against globalization, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China,
competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, etc
Introduction to SWOT Analysis of General Electric's Corporate Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in General Electric's Corporate Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Diversification Ge, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Diversification Ge operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of General Electric's Corporate Strategy can be done for the following purposes –
1. Strategic planning using facts provided in General Electric's Corporate Strategy case study
2. Improving business portfolio management of Diversification Ge
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Diversification Ge
Strengths General Electric's Corporate Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Diversification Ge in General Electric's Corporate Strategy Harvard Business Review case study are -
Diverse revenue streams
– Diversification Ge is present in almost all the verticals within the industry. This has provided firm in General Electric's Corporate Strategy case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High brand equity
– Diversification Ge has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Diversification Ge to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Diversification Ge in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Diversification Ge has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in General Electric's Corporate Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Diversification Ge in the sector have low bargaining power. General Electric's Corporate Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Diversification Ge to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Leadership & Managing People industry
– General Electric's Corporate Strategy firm has clearly differentiated products in the market place. This has enabled Diversification Ge to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Diversification Ge to invest into research and development (R&D) and innovation.
Ability to lead change in Leadership & Managing People field
– Diversification Ge is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Diversification Ge in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Diversification Ge has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study General Electric's Corporate Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the General Electric's Corporate Strategy Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– Diversification Ge has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in General Electric's Corporate Strategy Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High switching costs
– The high switching costs that Diversification Ge has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Innovation driven organization
– Diversification Ge is one of the most innovative firm in sector. Manager in General Electric's Corporate Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses General Electric's Corporate Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of General Electric's Corporate Strategy are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study General Electric's Corporate Strategy, it seems that the employees of Diversification Ge don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Low market penetration in new markets
– Outside its home market of Diversification Ge, firm in the HBR case study General Electric's Corporate Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Diversification Ge supply chain. Even after few cautionary changes mentioned in the HBR case study - General Electric's Corporate Strategy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Diversification Ge vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Diversification Ge has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the General Electric's Corporate Strategy HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Diversification Ge has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Diversification Ge has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow decision making process
– As mentioned earlier in the report, Diversification Ge has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Diversification Ge even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Capital Spending Reduction
– Even during the low interest decade, Diversification Ge has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study General Electric's Corporate Strategy, is just above the industry average. Diversification Ge needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
No frontier risks strategy
– After analyzing the HBR case study General Electric's Corporate Strategy, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to strategic competitive environment developments
– As General Electric's Corporate Strategy HBR case study mentions - Diversification Ge takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities General Electric's Corporate Strategy | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study General Electric's Corporate Strategy are -
Creating value in data economy
– The success of analytics program of Diversification Ge has opened avenues for new revenue streams for the organization in the industry. This can help Diversification Ge to build a more holistic ecosystem as suggested in the General Electric's Corporate Strategy case study. Diversification Ge can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Diversification Ge can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Diversification Ge has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Diversification Ge to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Diversification Ge can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, General Electric's Corporate Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Diversification Ge can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Diversification Ge in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Diversification Ge can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Diversification Ge can use these opportunities to build new business models that can help the communities that Diversification Ge operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Diversification Ge to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Diversification Ge to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Diversification Ge has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study General Electric's Corporate Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Diversification Ge to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Diversification Ge to increase its market reach. Diversification Ge will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Diversification Ge is facing challenges because of the dominance of functional experts in the organization. General Electric's Corporate Strategy case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats General Electric's Corporate Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study General Electric's Corporate Strategy are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study General Electric's Corporate Strategy, Diversification Ge may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Shortening product life cycle
– it is one of the major threat that Diversification Ge is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Diversification Ge in the Leadership & Managing People sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Diversification Ge with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Diversification Ge
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Diversification Ge.
Consumer confidence and its impact on Diversification Ge demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Diversification Ge in the Leadership & Managing People industry. The Leadership & Managing People industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High dependence on third party suppliers
– Diversification Ge high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Diversification Ge can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Diversification Ge.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Diversification Ge will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Diversification Ge needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Weighted SWOT Analysis of General Electric's Corporate Strategy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study General Electric's Corporate Strategy needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study General Electric's Corporate Strategy is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study General Electric's Corporate Strategy is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of General Electric's Corporate Strategy is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Diversification Ge needs to make to build a sustainable competitive advantage.
