Impact of Global Economics on GE's Manufacturing Strategies

This project delves into General Electric's (GE) strategic shift in manufacturing, analyzing the factors that led to the relocation of production from China back to the United States. The assignment examines the influence of global economic conditions, including rising wage rates in China, increased labor productivity in the USA, and the impact of oil prices on shipping costs. It explores leadership qualities, communication styles, and the importance of innovation and ethical considerations in business operations. The project also covers problem-solving processes, the significance of diversity in the workplace, and the application of democratic leadership styles. Additionally, it investigates the reasons behind organizations moving production bases, the effects on employment in both the host and home countries, and how GE adapted its strategy, specifically in its Geo spring water heater production. The analysis highlights the shift in GE's approach, the types of products affected, and the broader implications for global manufacturing strategies.

Portfolio Assignment: Seeing the Big Picture
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1. Global economy acts as one of the critical context to various business organization in
terms of expanded market size, increased demand, competition, various taste and
preference by the consumers, different prices operating etc. A business organization
being exposed to such varied market scenario often ends up having dismal in
executing in its function (Shamir, Arthur & House, 2018). For example a Japan based
firm producing video game is trying to expand its global presence in a country like
India but experiences lower market penetration due to untapped demand that leads to
lower scale of operation and profit as well.
Leaders play quite important role in operational supremacy of any organization. There
exists few important dimensions regarding effective leadership that consolidates the
success of any business operation. They are:
Honesty and Integrity: Ad important cornerstone these qualities in a leader create
immense impact on the employees or team members. More the leaders are honest
better is the chance that employees are prone to conducting ethical behaviour, speak
truth and work diligently (McCleskey, 2014).
Self Awareness: A leadership is effective when the leader knows the locus of his own
strength and weaknesses and can communicate them to the members of the team
transparently. This makes his very much approachable to the mass and well connected
increasing credibility and trust. The leader keeps room open for others opinion,
feedback and executes a decision taken collectively.
Vision: A leader having clear and stronger vision about the functioning of the firm can do
wonder for the business itself through setting up goals, objectives and strategies effectively.
Courage: The leadership should be boldly executed with clarity and soundness of mind,
knowledge regarding market scenario and global shifts in day to day life. Courage gives
confidence that allows them to take risk or make difficult decisions.
Communication: Leadership is effective when it reflects greater communication as it acts as
important source of inspiration, motivation and persuasion (DuBois, Koch, Hanlon, Nyatuga
& Kerr, 2015).
Team Spirit: An effective leadership will always contain factors that will lead to building
strong team and bond within that through experiences.
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Management style refers to kinds of ways adopted by managers to achieve any goal within
business organization through planning, organizing or prioritizing. Management styles can
be of various types like autocratic, democratic, laissez faire reflecting different ways of the
managers in different organizational situation to handle the business functions. Management
style and leadership are more or less same as any manager can turn out to be good leader for
his team, employees and motivate them to work productive and efficient (Boies, Fiset & Gill,
2015).
2. A leader within any business organization that further operates on global economy
require lot more flexibility, approachability to reach to mass and motivate them to
work more. The following kind of communication styles are best for leaders to reach
out to the mass:
Promoting Communication Style: This is appropriate to use while introducing new
ideas, employees or recognizing members and evoke enthusiasm in employees.
Analyzing Communication Style: This is important to be used when the leader
needs to give explanation lying behind decisions, actions like sales goals, rules of
compliance. Orientation towards facts is important here.
Supporting Communication Style: When the leader have to minimize disagreement,
listen carefully, understand the employees’ need then this kind of communication
helps building positive vibe.
Controlling Communication Style: Urgent situation which lack time in taking
decisions or executing action call for such communication styles where leader takes
the full control and keep lesser room for misinterpretation or delay in task
3. While effectiveness deals with efficiency of the leaders in business outcome and
ethics is concerned with moral values implied on business operations; innovation
refers to level of creativity and creative thinking applied in designing the business
plan (Wunsch-Vincent, Lanvin & Dutta, 2015). Innovative leaders don’t only have
huge ideas, imagination or visionaries but also have the capability to actually
materialize those dreams in reality through motivating the people around. This is
possible only when the leaders are following these important principles mentioned
below:
 Leaders and managers need to be blended with the organization as its soul
 Infuse the innovation and creative thinking within everyone around and
amplify them
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 They need to be able to turn the impossible into possibility and distort
reality continuously
 They need to be positive, optimistic and energetic
 They need to build a culture infused with curiosity, learning and growing
 They need to build an atmosphere of trust, belief, fraternity and honesty
through acknowledging the good works and showing empathy
 They need to promote empowerment of each and every employees
 They need to embrace risk with courage and plans to support such ventures
 They need to demonstrate the celebrating attitude of bith the success as
well as failure.
4. No business operation in the world are free of problems hence it is very important for
any organization to keep ready the methods that it will resort to in moments of crisis
to solve particular problems.
Problem solving process includes stepwise movement through defining the problem at
the very beginning, then describing the factors causing the problems followed by
brainstorming of the situation that gives rise to potential solutions which are further
decided upon and monitored (Al Shobaki, Amuna & Naser, 2017). Following these
simple steps can bring effective solution to any problem generally occurring to any
organization.
No solution can actually end the problem unless it is executed and for that decision
making plays important role. An organization can make decision in very simple way
following the steps in order.
 Defining the problem
 Identifying the factors causing limitations
 Developing the potential alternatives
 Analyzing the alternatives
 Selecting the useful and appropriate alternative
 Implementing the decision
 Establishing control and evaluating the result
5. Any business has diversity at its core because no two resources or human are similar
and in terms of talent, thinking, execution, approach, planning, communication,
presence of risk diverse nature of the business operation is quite common
phenomenon (Benson, 2018). But this diversity has lot more potential for any
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business as it leads to more benefits for the firm, better problem solving, improved
decision making and creative solutions or ideas to be applied on projects. This helps a
lot in reaching to larger market through product development. Diversity promotes
more innovation in a business through a diverse team that acts as pool of effective
ideas. A firm spreading globally can grow effectively in global marketplace if its
employs diverse workforce. This enhances the understanding of market demographic,
communication, strategy devising benefitting the firms sale (Sahebjamnia, Torabi &
Mansouri, 2015). Thus diversity plays important role through localization of any
business. Diversity makes the organizations more adaptable, to the cultural and
technological changing backdrop. It is important to note that mismanagement of
diversity can lead to some negative impact as well.
6. Organizational effectiveness depends greatly on type of the leadership followed
within a business organization and such qualities of the leaders and subsequent action
determine the success or failure of the business goals to greater extent (Adjei 2015).
One of the most contributing style of leadership is democratic leadership where even
though the leader has the authority of final say but he rigorously engages all the
members of the team into the decision making process. The employees under him are
entitled to think, share their thoughts, provide feedback on ideas, be transparent, be
creative and most importantly participative in every project quite actively. This is
beneficial in terms of evoking lot more confidence, usefulness of the employees that
make them feel highly satisfied with the job and consequently they contribute more
through enhanced productivity (Osagie, Wesselink, Blok, Lans & Mulder, 2016). This
kind of leadership promotes delegation of responsibilities, empowering team members
and decision making in a group.
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7. Why organizations move?
The basic reason behind moving organization or its production base to different nation is to
attain the benefit differential cost. Moving a production or manufacturing to low cost
locations leads to greater profit captured by the firm as the total cost of production lowers and
the firm anyhow manages to attain same quality of goods that they sale in higher prices and
earn more revenue.
The low cost scenarios in new location actually stem from the fact that wage rates are
quite lower there in compared to its host nations. This allures the firm to shift to new
areas where cost of production is low due to lesser wage rate per hour without
compromising with the quality of the labor. One More reason of moving production to
a third world nation by a firm operating in first world nation is to reserve the energy
resources and maintain environmental standard in their production process.
8. What happens with the organization in America?
When an organization shifts its production or manufacturing process to other
countries the employment at the host country falls steeply. The firm get its products
finished from some distant locations mostly in other nations and get them shipped
back to its origin native land where it was designed. Then it goes for selling them
within home market and earn revenue but incur lower costs which gives rise to higher
profit margin and accumulated capital to be further invested. Now in host country like
America faces job loss and unemployment in its labor market due to shifting of
manufacturing to other location like China. There are more labor supply with falling
demand of them. This makes the labor very much competitive and efficient as a result
the labor productivity in America goes up over time and the gap in labor cost actually
abridges.
9. Does it change GE strategy?
The GE in its project of producing Geo spring water heater chooses China as its
manufacturing location. It has recognized how over the years between 2000 to 2012
the wage rate in China has lowered and the labor productivity also deteriorated. On
the other hand the price of crude oil has been rising that makes the shipping of final
goods back to America quite costly. America’s labor market scenario allows it to
mitigate its labor cost gap and thus the global difference of labor productivity actually
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shortens in America with increasing labor productivity. The situation has definitely
called for a change in the strategy of GE which has planned to bring back
manufacturing of the heaters to Louisville and Kentucky shifting from China and
make a set up with team of newly recruited engineers, staffs and workers. For ease of
manufacturing some redesigning had to be done in order to eliminate poor designs
and also ensure smooth assembly of the parts.
10. What kind of production they do?
GE or General Electric is America based Multinational company with its headquarter in
Boston. It was founded in 1892 and till 2018 it became worldwide service provider as a
famous public company within USA. The firm operates into the sectors like aviation, power,
digital, health care, renewable energy, venture capital, additive manufacturing, finance, oil,
gas, transportation and lighting. It provides services related to the sectors through products
like aircraft engines, electric motors, financial services, energy, wind turbines, electrical
distribution, software, equipments, weapons, electric appliances like spring water heater etc,
11. What kind of product to move?
GE operates into multiple of sectors related to oil, gas, energy, water, electric etc. It also
involves intricate manufacturing of various electrical appliances. These kind of
productions require skilled labor and vocational knowledge about such process. Labor
cost in USA is very high as compared to developing economies like India, China,
Pakistan etc. There labors are available at much lower wage rate and they posses required
skill. So initially it seemed cost effective to move manufacturing production of such
goods to these low cost areas and capture higher profit margin. Again there are few goods
whose manufacturing turns out detrimental to the environmental standards causing hazard
and pollution. This often increases pollution tax and as a whole increased cost of
production in USA. To avoid these situations, production base are moved.
12. What globe strategy does company change ? and how to change the strategy?
The company initially resorted to offshore relocation of manufacturing processes and
outsourcing of the labor services for its own cost benefit. But over time rising labor cost in
developing nations actually led to a situation where cost of labors become more or less equal
in China and USA. Rather this process required shipping of goods through ships which
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further entailed higher energy cost. So the firm resorted to global strategic changes which
included shifting back the manufacturing to its native places from developing nations.
13. What effect does they impact? (good or bad)
Bringing back the production base and manufacturing in native places leads to
redesigning of plans for ease of assembling parts. As a result cost of materials falls by
25% and time of assembling the products gets reduced to 2 hours in Louisville than
10 hours in China. This led to reduction in the labor requirement, cost of production
fell and quality of it eventually grew. The price of the product in USA could be
reduced 20% to that of the ones being manufactured form China. Initially it took 5
weeks for the products to reach retail stores in USA but now it take hardly a week and
thus it helps in consolidating management of inventory. No wonder the lower price in
the market pushed the demand up and created growing market place for it.
14. How to continue to sale worldwide?
The firm has expanded its labor force to 3700 teamed up with 500 new designers,
engineers the lower cost of the products leads to lower price which is very appealing
to the global market. With proper pricing strategy the firm can capture bigger markets
in developing nations in Asia, Africa.
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