General Electric Company
On April 22, 2009, Jeff Immelt was preparing for his eight General Electric Company meeting of shareholders since he became CEO. He had taken over from his predecessor Jack Welch who had been labeled as one of the most successful CEOs of his time. The stock price was trading as little as $12 from lows of $6 six weeks earlier below $53 from which the share was trading at the end of Welch tenure. The situation was made worse with the decision to slash the dividend of the stakeholders which had not happened before since 1938. Immelt was faced with the first challenge on the fourth day after resuming office when the attack on the twins tower happened thus affecting the business environment of the General Electric company. A month later after this, the Enron collapsed thus precipitating the confidence crisis over the corporate governance and the morality of the executives on financial reporting. . The Tyco International, which had modeled itself on General Electric, was involved in a scandal that further added insult on the conglomerate model of business. This led to the suspicion of financial report manipulation in General Electric. In March 2002, Bill Gross who was the manager of IPCO Fund Management group criticized General Electric as a financial company which had the support of the industrial business of general Electrics. Further problems emerged in September 2002 when the information of the generous pack that the company had given as a retirement benefit had leaked the press.
Immelt had also disappointed the shareholders when he had promised them that shred would earn $0.53 but it earned $0.44 which was short of his promise. Due to all these happenings, Immelt was forced to take up action to shore the balance sheet of General Electric. He also gave contradiction information that General Electric did not require capital from outside but three weeks later he made an agreement with Warren Buffet involving $3 billion that would make Buffet earn 10 percent of the dividend issued. This made the confidence of the investor to wane further.
Most people knew General Electric as a company that made light bulbs and jet engines but it had appeared that the company was more of a financial institution that disused itself in an industrial conglomerate. The investors considered this as a threat to the survival of the company. The company was also downgraded by Standard and Poor’s from AAA to AA=. This further injured the reputation of the company.
The general meeting of Immelt and the CFO, Keith Sherrin addressed the shareholder in a the meting on key strategic issues; namely, commitment to organic growth, creating of new opportunities of business through matching the capabilities of General Electric to the to the emerging opportunities in conservation of the environment, healthcare and infrastructure, and lastly developing the leadership needed for the prosper of General Electric Company in the new future. They also emphasized on the financial challenges and economic crisis. Some of the key changes that were to be made were to include the reduction of the role of the financial service in the future, the increase of the government role, the lower wealth levels and growing emphasis of trust and reputation.
The CEO identified five themes for the General Electric Company on how it would get through and recover from its crisis. First it was to build a strong business from it major four ventures of energy infrastructure, technology infrastructure NBC universal and GE capital that would be the foundation of growth of the company and the cash generators of the future. The principal change in the GE Capital would be to shrink some of the products line and focus on increasing the links of building between the other business of GE and GE Capital.
To achieve this, GE had to do a market analysis since it was trending in a market that already had player. Also, the competition from the firms in the financial sector determines the attractiveness of the business. This is mostly determined by the development in the sector, diversity and the existence of the entry barriers. However, these would be influenced by the number of competitors, brands, products, weakness and strengths, strategies, share of the market tat the company would command.
For GE to capture the market and ensure that it has a large share of t. it had to create barriers that would deter its competitors from takings it share of the market. This would mean that it had to ensure that the loyalty of it customers that it had were enhanced and to involve them in the process of reinventing themselves as GE. The company should take advantage of economies of scale to offer affordable prices that would discourage new entrants from getting into the market with it. This would ensure that it has access to the best technical standards, access to the raw materials and it should increase the cost of entry to make it more challenging for the new players to take advantage of the situation that the comp; any was facing. The company should also take advantage of its reputation as a successful company that served the needs of the customers.
The GE capital should also take into consideration the presence of the substitute products that would divert its customer from its products. This would mean that the company should show its commitment in addressing the concerns of the existing customers and as well reach out to the prospective customers who would be interest with what GE Capital had to offer. The GE capital could also find innovative ways of differentiating its product so that it would capture the attention of the customers thus increasing their sales potential. This would mean that the company would have to restructure its pricing and improve its quality as compared to other players in the finance sector. Tis would win the current customers and from their satisfaction they would reach out to other on behalf of the company. The company should therefore ensure that it is in a capacity to cope with the substitute product that would pose a challenge to GE Capital.
For the GE Capital to gain ground against its competitor and other substitute products, the company should ensure that it has increased its bargaining power from it suppliers. This is because if the bargaining power is high then it is going to increase the market profitability of by imposing their requirements in terms of the quality, service and price. The company should carefully choose its clients in order to avoid a situation of dependence. This would ensure that the company has more time and resources to concentrate on the customers. The company, GE Capital, should try and ensure that the bargaining power is inversely proportional to that of their suppliers.
Looking at the key themes that Immelt had identified, GE should build it business and ensure that new entrant do not disrupt the market to ensure that it maximizes on what it will have built. This is because the company was going into a high potential industry of renewable energies, cable and avionic, water, healthcare, technology infrastructure, oil and gas. Therefore, GE Capital would ensure that it meets the needs that would arise from these ventures and lockout the new entrants from coming into the business.
On the second theme of innovation in investment, services and globalization, the company should ensure that the company develops products and services that are superior and affordable to those of the substitutes or the incoming players. This would ensure that GE Capital remains relevant and that it grows its sales portfolio. GE should ensure that the service and technical support that it offers to its customers would be important source of growth of the company.
GE should also be in a position itself in the current themes which are important in the emerging opportunities. It should ensure that it invests candidly in research and development and ensure that it customizes itself to take advantage of the change of law and the emergence of new trends. For instance, the company should ensure that t is in the front run of offering financial services to the clients who would want to venture into renewable energies but do not have the funds. This would mean that GE Capital is a supplement to the bigger GE Company and thus work to improve the experience of its customers. This creates opportunity to both the customer, GE Capital and GE as a whole.
The management Process
To achieve these set strategies, GE should establish the business process management that will help d it. The process should produce lower costs, motivated employees, higher revenues and happier customers. The business process management is important especially in the world today since it helps the company to agilely respond to the challenges that come through their way. It would give the company more control on the operational process and ensure better utilization of the technology available in the entire business in order to be more responsive and help in meeting the goals.
The business process that the company will develop will help it in creating value through improved performance, growth, better productivity, and better customer service. Tis will help the company be more agile in the following ways. First, it will increase the level of productivity of the company since it is de3couple the resources. It will increase the speed of the delivery of the services and goods to the customer. This will ensure efficiency to the customer. This is because speed and agility are key factors in the modern business environment
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