GE's Strategic Transformation under Immelt

This assignment examines General Electric (GE)'s strategic transformation under former CEO Jeff Immelt. It requires an analysis of the company's position after Immelt took over, performance indicators during his tenure, and the impact of these changes on GE's share price. The assignment encourages students to evaluate the effectiveness of GE's strategies and consider the challenges faced during this period of change.

Running head: COMPETITIVE STRATEGY AND INNOVATION
Competitive Strategy and Innovation
Name of Student
Name of University
Author Note

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Table of contents
Introduction................................................................................................................................2
1. Redirecting the strategy adopted by Immelt..........................................................................2
2. Aligning strategies.................................................................................................................4
a) Requirements of 21st-century business...............................................................................5
b. Resources and capabilities..................................................................................................6
3. Organisational changes made necessary for the new strategy...............................................7
4. Alternative strategies..............................................................................................................9
Conclusion................................................................................................................................10
Reference..................................................................................................................................11
Appendices...............................................................................................................................13
Appendix 1...........................................................................................................................13
Appendix 2...........................................................................................................................13
Appendix 3...........................................................................................................................14

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Introduction
To succeed at a global stage, it is necessary for companies to rely on two very
important aspects. These aspects are developing a competitive strategy and focusing on
innovation. To maintain dominance in business it is necessary that every manager formulate
strategies that help in analysing the market. The assignment highlights the situation that exists
in General Electric (GE) and the manner in which the new manager has tackled the situation.
General Electric is an American multinational company that is situated in New York.
The great Thomas Edison established the company in 1892. Some of the famous products of
the company include aircraft engines, electrical distribution and energy, gas and oil (Ge.com
2018).
The assignment highlights the new strategies that were adopted by the company under
its new manager. The aligning of the company with the strategies of the 21st century is also
described in the assignment. The changes made by the manager keeping in mind the
capabilities and resources possessed by GE are highlighted in the assignment.
1. Redirecting the strategy adopted by Immelt
GE is one of the most reputed companies in the world. Hence, being a leader of such a
company can be a challenging factor for any individual. In the case of Jeff Immelt, the
challenge was more as the person had taken over the responsibilities of the company from
Jack Welch. Hence, to stamp his authority, the new manager made certain declarations such
as creating a long-term transformational strategy for the betterment of the company. The
bombing of the World Trade Centre in 2001 was the main reason behind the adoption of such
a strategy. According to Hill, Jones and Schilling (2014), this strategy involves the
transformation of managerial strategies as important components of recent business

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developments. This strategy requires the co-operation and support of the employees as well
as the managers. The changes are undertaken in the organisation help in enhancing the
productivity.
The adoption of the transformational change in GE included changing the business
portfolio. Jeff Immelt directed the performance goals towards maintaining goals related to the
revenue of organisations. Such a decision was made after New York had suffered a financial
crisis owing to the disaster. Hence, innovation of products was the focus of Jeff Immelt. This
can help in satisfying the customers and help in the growth of the company. Jack Welch had
been considered as the best manager ever to lead the organisation. Hence, post the period of
Welch, Immelt suggested changes made in the organisational structure and culture. Despite
the huge changes, the biggest strategic move was made in April 2015. It was decided that the
capital of the company would be sold for the betterment of the company for a long-term
future. However, despite such drastic changes the sale performance of the company
continuously lagged behind. Some of the changes that were made by Immelt are analysed.
After analysing the case study, it is seen that the company failed to meet its sales
target despite the changes made. Immelt had promised to reach global success after taking
over GE. Immelt had targeted the increase in sales, Return on Capital and earnings. However,
the stock of the company along with the factors failed to see any type of improvement.
Between the years of 2001 to 2014, GE reached a new low with the sales of the company.
This proved to be unforeseen from the Immelt’s point of view. The approach to maximise the
shareholder value also failed due to the insecurity of finances in the company. Immelt wanted
to focus on identifying the sources of profit that GE used to earn its revenue. In the words of
Spulber (2017), the manner in which GE makes a profit can help the company to mitigate any
challenges. It was seen that the profit resulted from the implementation of cost reduction
policy. This implies that the company discarded the invaluable assets of the company. Thus,

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Immelt managed to identify four factors that led to the poor economic growth of the
company.
The four factors are:
Demography: A higher population tempts people to purchase items that are of high
importance on a daily basis (Eden and Ackermann 2013). The positive factor for GE is that it
manufactures products that can be easily used on an everyday basis. Hence, people working
in mines and factories are inclined to purchase the electronic equipment sold by the company.
Infrastructure: With the current infrastructure, GE can invest in the development of
energy sources. The company can involve itself in the production of oil and gas, which may
help the company to reach its sales target (Paley 2017).
Emerging markets: This factor can be credited to Immelt as he managed to identify
the developing countries capable of adding value to ensure the proper growth of GE. This is
particularly important if the company is trying to establish itself outside the USA. Countries
such as Australia, India and Russia are targeted due to their high GDP growth.
Environment: According to Galavan, Murray and Markides (2018), this is considered
as the most important threat to any business organisation. Immelt has identified basic factors
such as global warming and loss of natural resources as problems in the business
environment.
2. Aligning strategies
According to Johnston and Bate (2013), organisations need to ensure that the
strategies they select are aligned with its tactics and culture. It is necessary to identify the
factors that govern a business organisation. This includes both internal as well as external
sources. For example, understanding the factors that pose a threat to the environment need to

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be considered as it is an important factor. Similarly, the changes made by Immelt need to
align with the business activities that exist in the 21st century. According to La Piana (2014),
every organisation needs to focus on three important aspects while formulating strategies.
These include competition, technology and innovation.
a) Requirements of 21st-century business
Immelt identified that technology is one of the major factors that giver the business
organisations in the 21st century. This indicates the fact that Immelt managed to increase the
budget set for the research and development (R&D) team. The transformation started with the
updates that were made initially in Japan. The technical development was important for
Immelt for aligning the business organisations and hoping for a future success. Immelt had
over 37,000 technologies across the country. The research focused on identifying
programmes that had fewer, bigger and long-term prospects. According to Carlopio (2014),
the biggest development that GE made in its innovation tactics is beneficial for the healthcare
industries. This strategy led GE to increase its revenue of about $17.8 million in 2008. This
was done by ensuring that the short-term as well long-term borrowings were reduced.
To gain the satisfaction of the customers it is important that value is given to the time
of the customers (Weatherall 2013). Immelt stressed the importance of building relationships
with the customers for attaining their loyalty. During his early days, Immelt focused on
strategies that were required to make the customers satisfied. This led to the increase of the
company’s revenue. Hence, the various functional areas of the company also had a huge
responsibility. For example, it became the duty of the marketing managers to hire talented
executives and conduct an in-depth analysis of the market. The manager took the needs of the
customers into consideration (Grant 2014). GE aimed to adopt the bundling method to sell its
products.

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b. Resources and capabilities
Immelt focused on maintaining the rate of growth that the organisation can have for
analysing the resources and capabilities. As stated by Farkas (2016), the goal of every
manager is to address the growth of the organisation. In the case of GE, Immelt focused on
organic growth for maintaining the organisational goals. It was seen that due to the organic
growth strategy, the overall growth rate of GE was about 8% per year. This is an important
improvement in the growth rate of the company as under Welch, the rate was only 5%. This
also improved the earning of the company. Immelt stated that the increased revenue could
help GE to grow at a faster rate. Ivanaj et al. (2015) observed that to survive in the competing
market it is necessary to expand the business to new horizons. Thus, a SWOT analysis of the
company can be provided to understand its resources and capabilities.
Strength
 Strong R&D
 Strong brand
 Diversity of products
Weakness
 Excess dependence on suppliers
 Weak performance in Asia
 Underdeveloped oil and gas
department
Opportunities
 Growth in technical aspects
 Growth in renewable resources
 Developing markets
Threat
 Strong competition in the market
 Disruption of online digital
technologies
 Lack of consistency in the oil and gas
department
Table: SWOT analysis of GE
(Source: Created by author)

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3. Organisational changes made necessary for the new strategy
In order to succeed, it is necessary that an organisation instigate changes in its policies
and functions. The acceptance of the new changes in GE is considered as an achievement for
the managers. For GE, the culture and structure define the success of the organisation.
However, due to the advent of changes made, the organisation underwent massive changes
for its development. This included changes in the structure as well as culture. Apart from this,
the leadership also underwent changes in GE. The fact that GE provided promotions to
employees to be a leader was changed with the advent of Immelt. The internal promotion was
a manner by which employees could be motivated and encouraged to perform efficiently
(Johnson et al. 2013). Even the performance management system featured quantitative targets
that provided focus and accountability to exist in a cohesive manner. The growth of the
company was mainly due to the strategic initiatives that were undertaken by Immelt. The
highlight of the company is that Immelt has initiated all factors such as reduction in overhead
cost, improvement in productivity and the adoption of six-sigma. These initiatives help in
maintaining the performance management of the company.
Nieves and Haller (2014) stated that the internal talent decides the growth rate of an
organisation. The shift that was undertaken in the strategic priorities implemented the
management system in GE. The growth of the company helped in the proper development of
internal talent that are highly essential for an organisation to grow. However, only the
manager does not undertake a growth of an organisation, the support of the employees also
plays a big role in the growth and development of an organisation. Afuah (2018) stated that
the adoption of a benchmarking strategy could be used to improve the quality of products
manufactured. Hence, Immelt even managed to focus his attention on the benchmarking
strategies after analysing about 15 companies from the US and the world. This made a
massive difference in understanding the revenue required in the company.

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One of the major changes brought about by Immelt is the change in the organisational
structure. This was mainly because of the fact that the modern world needed updated
equipment and technologies that were not available during the time of Welch. The chief
contribution of Welch was the fact that he had divided the sectors into small divisions to have
a concise business method. The plan and approach of Immelt were different. Immelt wanted
to organise cross-business integration and in the process managed to disorganise the sectors.
He was of the view that it is necessary for the sectors to unite and work together for the
betterment of the organisation and attains its goals. Such tactics helped in reducing the
number of business sectors. This also resulted in the unity of the company, thereby, ensuring
a steady increase in the growth rate of the company. The years 2002, 2005 and 2008, had
seen the number of business sectors of GE reduce from 12 to 5.
After the reorganisation of the sectors, it was increased to 9. Immelt focused more on
the profitability and the cost control method to drive the goals of the organisation. Innovation
was another tactic that was implemented by Immelt. Twomey (2012) opined that innovative
tactics in large projects often leads to the increased chances of risks. The opportunities for the
growth of business require the cooperation of the employees. Immelt managed to update the
strategies used for marketing that was adopted by the company. This type of development
was needed for the proper transferring of business. This means the transaction required to
move from R&D to the technologies. Hence, it is necessary to maintain changes that are
necessary to align the changed strategies. Thus, it can be said that the success of the strategies
is mainly due to the united effort that is put in by the managers as well as the employees of
GE.

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4. Alternative strategies
Grant (2016) stated that it is important to have a contingency plan to mitigate
situations in which the original plan fails. The contingency plan needs to be based on the
factors that may affect an organisational growth. These factors may be the risk factor as well
the internal or external factor. Hence, it can be said that the contingency plans made may
prove as a reimbursement for the mistakes done at the initial stages of planning (Porter 2018).
In GE, the strategies of Immelt proved to have a positive as well as a negative impact on the
organisation. The initial planning that Immelt had made could not be executed due to the
stunted growth rate of the organisation. Moreover, GE had been going through a transition
phrase that required rapid changes.
The method of innovation and customer orientation involved the collaboration
between employees as well as customers. This was carried on to ensure that a matrix based
performance management system was adopted in GE. Maritan and Lee (2017) stated that
benchmarking is required to understand the performance appraisal system that is adopted in
the organisations operating in the United States. The case study provides evidence that after
the recruitment of Immelt as the manager of GE, the organisational performance of GE has
been on a steady decline. Thus, it can be said that Immelt has not made himself a worthy
leader due to the poor results suffered by the company.
The analysis shows that the profit arising in the different sectors of GE have been
constantly on the decline. As is evident from the case study, the profit earned by GE through
a power and water supply in 2010 is $5.80 billion. However, four years later the profit drops
to $5.35 billion. Hence, it can be said any contingency solution needs to be made in the
marketing department of GE to arrest the decline in profit in the company. According to
Chevalier-Roignant and Trigeorgis (2015), to ensure that the profit of the organisation is

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continuously on the rise, it is necessary that the GE maintain a comprehensive yet effective
marketing plan. This can help in an effective understanding of the business.
One way to do this by choosing a proper method that results in the choice of sectors
for maintaining profit. However, Immelt managed to develop a contingency solution by
reducing the investments in the sectors that had a low growth rate. One such area was the
domestic appliance of the company that did not complement the remaining products that GE
manufactured. One bonus point of this is that The US Financial Regulation view GE as one
of the most important financial institutions. This justifies the changes that were implemented
in the financial department of the organisation (Di Stefano, Peteraf and Verona 2014).
Conclusion
Hence, conclusion can be made that the change in the managerial system in GE has
not been as effective as it seemed to be. This may be because of the entire organisational
transition phrase that the organisation has undergone. It has helped in degrading the
reputation of the company and has had a huge impact on the sales. Apart from this, the
changes in the organisational culture that Immelt implemented in the organisation contributed
to the poor performance of the employees. Hence, the successes of the organisation after the
reduction of costs and promoting a benchmarking strategy have resulted in negligible success
owing to the rate of failure in the organisation. In this regard, a recommendation can be
provided that may prove to be effective e for the company. GE should consider
internationalising the business for maintaining their cost-effective strategy. However, it needs
to be kept in mind that the target countries have a rich economy that can be exploited.

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Reference
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integration of dynamic capabilities research. The Academy of Management
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Weatherall, A., 2013. Computer Integrated Manufacturing: a total company competitive
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Appendices
Appendix 1
Company position after Immelt took over
(Source: Ge.com 2017)
Appendix 2
GE performance indicator
(Source: Ge.com 2017)

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Appendix 3
GE share price
(Source: Ge.com 2017)