- General Electric’s Management Systems and Performance
- Nature of GE’s Corporate Portfolio under Welch and Immelt
- Superior Results from GE’s Portfolio Mix
- The Collapse in GE’s Financial Performance during 2016-2018
- Recommendations for GE’s Recovery to High Performance
- Recommended Business Strategies on Diversification
General Electric’s Management Systems and Performance
General Electric (GE) is an international company producing an array of machinery and providing a variety of services. Excellent examples of General Electric’s products encompass industrial diamonds, jet engines, electrical equipment, and lighting goods, to mention a few. Besides, the firm offers various services such as installation, engineering, and repair of electrical appliances. Despite the wide range of activities GE is engaged in, the company faces stiff competition, both inbound and outbound.
The corporation has affiliates in different industries, such as telecommunications and banking. Examples of these companies include the NBC television network and General Electric Capital Services. The company handles export and import within the United States and foreign countries (Wise, 2020). Consequently, General Electric has acquired a significant global market in the financial, manufacturing, and broadcasting industries, and its competent affiliate companies continue contributing to its growth and market expansion.
The financial statements encompass the consolidation of the partner firms directly or indirectly controlled by the General Electric company. The corporation controls its associates, holding at least 20% to 50% of the shares (Buckley et al., 2019). The critical managerial point to note is that dealings between member companies and General Electric are eliminated from the financial transactions to avoid repeating the latter and double taxation instances. Furthermore, the financial statements observe the generally accepted accounting principles under the mainframe of management auditing.
The latter is characterized by assumptions and rough estimates of relative transactions as well as disclosures. In this case, the negotiations do not represent the actual account that significantly affects the results of profitability and identification of losses (Schmidt et al., 2018). In a different spectrum, sales are recorded after the customer receives or consumes the product or service, a condition that adheres to the generally accepted accounting principles.
General Electric earns directly from selling its products and services. However, the company also receives extra income from licensing, royalties, marketable securities, bank deposits, and customer financing. In 1999, the corporation generated revenue of $65 million from the transfer of licenses of Consumer Electronics (Amina, 2018). Furthermore, the organization collected an extra income from NBC of at least $388 million in 1999 (Amina, 2018). It also gained a significant amount of revenue from financial services. In 2000, the firm generated approximately $16.461 million from written premiums (Amina, 2018).
Primarily, the enterprise made a significant amount of income from the licensing, royalties, and provision of financial services. Consequently, the diversification of production and provision of services is a factor that profoundly contributes to the increase in business profitability and market acquisition. However, the company incurred extra costs in research and development to enhance the implementation of strategic management decisions. In 2000, the enterprise incurred $2,193 million and an increase from the 1999 expenditure of $1,930 million for research and development (Amina, 2018). Ideally, General Electric intensified its research and development activities to boost the generation of income through strategic management.
General Electric faces a significant challenge from the principles developed by the Financial Standard Board. One of the tenets is impartiality and accuracy, which establishes that companies must observe the recording of accurate financial information with fairness (Yelesh, 2018). However, the organization profoundly utilizes estimates and assumptions based on the subjective contribution of the management.
An excellent example is an approach to identifying losses from the financial bill. The oversight determines the losses through opinion and historical experiences to justify the rough estimate of small-balance receivables as losses (Yelesh, 2018). Furthermore, the administration uses confiscation to estimate the larger loans based on familiarity with problematic accounts. The subjective response to the assessment of the losses is a factor that poses a significant challenge to the Financial Standards Board, mainly because of the lack of impartiality.
The management decision approach is a phenomenon that significantly affected General Electric’s financial statements’ credibility by the Securities and Exchange Commission. Over the decades, the corporation optimized the administration’s decisions based on historical experiences. The elevated assumptions in the determination of profits and losses fostered the incurrence of unbalanced financial statements. An excellent example entails the GEC’s insurance accounting policy for the premium returns.
According to General Electric’s monetary policy, on a short-term basis, the insurance premiums are reported as revenue already earned and rough estimates of the incurred expenses. In this case, the company’s financial statements project the profitability based on the approximations of earnings from premiums. The program regarding the short-term insurance quality contradicts records of sales and purchases after the actual transactions. The policy’s contrast poses a significant challenge in the financial statements, mainly because of the accuracy in balancing the incurred profit and loss (Berthelot et al., 2019). Securities and Exchange Commission handles cases such as the lack of impartiality and precision by imposing fines and the condition of hiring external auditors.
One of the factors that significantly affect the quality of earnings in General Electric is the increasing cost of pensions and healthcare-based benefits. The General Accepted Accounting Principles (GAAP) advocate for the Employee Retirement Income Security Act (ERISA). The main objective of ERISA entails ensuring that companies observe the minimum wage pay for the workers and their pensions. General Electric developed a pension plan that provides benefits to the employees based on their status.
The total number of workers covered by the program as of 2000 was 485,000 (Amina, 2018). Nevertheless, the market expansion of the company demanded an increase in the number of employees. Pension and healthcare-based benefits are factors that contribute to the issue of General Electric’s profits, mainly because of the sustained rise in the payoffs.
The income tax provision is another factor that significantly affects General Electric’s quality of revenue. The firm files tax returns as a consolidated entity based on the policy from the US federal income tax return. In 2000, the organization incurred an expense worth $1.095 million for income tax returns (Amina, 2018). Furthermore, the establishment also filed a tax return for US non-jurisdictions worth $1.399 million (Amina, 2018). In essence, the enterprise incurs a significant amount of profits and revenue while filing income tax returns. Consequently, the wage tax provision is a factor that significantly affects General Electric’s quality of earnings.
Overall, General Electric firm is highly reputable for the manufacturing, production, and provision of financial services across the globe, mainly because of the contribution of its partner companies. The purchase of affiliate associations in different industries, such as telecommunication and the financial sectors, significantly contributes to the pool of revenue generation. Besides, the companies’ acquisitions and mergers boosted General Electric’s capacity for global market possession as a reputable brand. The association must focus on the implementation of effective financial and accounting policies. In this case, the business management establishes a shield from financial-related discrepancies while reporting annual financial statements.
Nature of GE’s Corporate Portfolio under Welch and Immelt
The different CEOs of General Electric established dynamic business portfolios for the company based on the key objectives. According to Filos (2019), Welch implemented policies that were geared toward the development of competent management strategies and the acquisition of affiliate companies. In this case, General Electric’s global leadership emerged from the incorporation of strategic management and market acquisition and provided superior results.
During Immelt’s tenure as the CEO, the organization maintained its reputation as a service-based than a manufacturing association. An excellent example of the impact of strategic administration encompasses the optimal utilization of the director’s approach to boost the competence level through the supply chain.
GE Saudi Arabia’s portfolio of deliverables varies dramatically, which means that it cannot apply a single approach to management; both inventory and timelines for sourcing raw materials, necessary utilities from the suppliers (and suppliers’ suppliers), and delivering them to the customers (and customers’ customers) are different in each class of commodity service. For instance, in 2012, GE had a partnership with the Mubadala Development Company called Mubadala GE Capital; the two firms each staked $4 billion in equity for a venture that sought to augment and optimize investment via GE Capital’s already existing global market with a focus on Turkey, Africa, Asia, and the Middle East (Frefer et al., 2017). This was a project in which GE’s role in the endeavor would be managed over a period of several years.
GE’s efforts in the transportation industry both in Saudi Arabia and the Middle East demand daily and weekly input and management. For instance, at the close of the 2011 fiscal year, the firm had over 2000 aircraft engines working in and around Saudi Arabia (Onono, 2018). Both skilled aeronautic engineers and hardware products for the association operating these engines are needed in real-time. With all these factors considered, GE’s supply management combines the agile supply chain management framework and the continuous flow model.
Superior Results from GE’s Portfolio Mix
Although General Electric’s portfolio gave superior results, the administration focused on restructuring it mainly because of the evolving global business marketplace. Various seasons foster different conditions for strategic management. An excellent example entails the period Immelt succeeded Welch in 2001, and the company experienced a crisis from the 9/11 bombing attacks in New York, America.
According to Liu et al. (2017), to achieve sustainability in the provision, especially when services constitute a significant portion of what is being provided, a singular approach to both management and supply chain orientation must be avoided. The scholars, who propose that a sustainable service supply chain management (SCM) strategy be taken by companies providing support, anchor their argument on the view that changes in demand for relief cannot be projected with surgical accuracy over the long term, adding that it is incumbent upon the administrative organs of such firms to ensure that flexibility is an integral element of the capacity-building effort.
The Collapse in GE’s Financial Performance during 2016-2018
General Electric’s performance is no longer superior because of the incumbent global issues such as the financial crisis that caused the company’s significant depletion. According to research, the organization incurred major losses during the 2008 financial crisis due to the market acquisition technique that led to the dissolution of some affiliate associations (Amina, 2018). It is a condition that contributes to the firm’s pool of debt and sale of assets to recover profits on the balance sheets.
Another factor leading to General Electric’s poor performance involves technological advancements hence intensifying the level of competition in the automobile industry (Usyor et al., 2021). An excellent example of a company highly competing with GE is Tesla, which focuses on electric car manufacturing (Amina, 2018). The integration of technological resources with the manufacturing process is an initiative that offers a competitive advantage and a challenge to the company’s growth, mainly because it’s capital intensive.
General Electric experienced a significant financial downfall between 2016 and 2018 due to the changes in the company’s portfolio and strategic management. One of the initiatives implemented in 2017 encompassed the slashing of the dividends by half, from 24 cents to 12 cents (Didia & Ateke, 2017). It is an approach that led to the profound fall of the stock market value due to the investors’ lack of confidence in the company. Further, the organization laid off thousands of employees in 2018, which negatively affected its competence in the stock market in addition to the 3.5% fall in 2017 (Amina, 2018). The collapse in the financial performance in 2018 fostered a change in the management. In this case, Lawrence Culp replaced John Flannery as the CEO and the chairman of the board. Culp focused on the implementation of policies that spearheaded the stabilization of General Electric’s financial performance.
Recommendations for GE’s Recovery to High Performance
GE needs to refocus its strategic management to boost financial performance and product competence in the global marketplace. Grant (2016) argues that strategic management plays a significant role in a company. The first role entails the establishment of consistent and long-term goals and objectives. Consistency fosters the projection of the organization’s growth curve and confidence among the stakeholders towards boosting the level of investment. The second role enshrines the understanding of the competitive environment. Technological advancement fostered the evolution of the global business marketplace hence facilitating expertise. The baseline competence involves product divergence to elevate the consumer service experience and the value for the money.
In a different spectrum, strategy administration cultivates the gearing for effective implementation. It is important to determine approaches that enhance the development of products with adept features. Grant (2016) postulates that integrating the main roles of strategic management in a company’s processes boosts its efficiency level. It is important that the GE executive redefines its strategic governance initiative to elevate its market position and acquisition in the evolving global village.
Apart from redefining GE’s strategy leadership, it is essential that the company establishes initiatives that alter the organization’s structure and systems. The key managerial approach in GE is hierarchical, which significantly influences the flow and coordination of undertakings. The intensification in business competence regards the improvement in the delivery system. Therefore, changing the culture enhances the flow of operations with minimal delays caused by the necessity for approval from the decision-making team. In this case, all employees become accountable for the independent resolutions during the activities while boosting diversity in the workplace (Kulapov et al., 2019). The prominent value in the marketplace is the consumer service experience. As a result, empowering the workers with the skills and knowledge in decision-making enhances their confidence while interacting with clients hence creating a competitive advantage.
Recommended Business Strategies on Diversification
One of the competencies of General Electric entails the acquisition of ideal affiliate companies to boost its efficacy. An excellent example is the nature of the business of GE Saudi Arabia. GE Saudi Arabia provides both energy and healthcare products and services for virtually every sector and industry in the nation; from oil corporations such as ARAMCO, institutions of learning such as King Fahd University of Petroleum and Minerals to financial giants such as Mubadala Development Company, GE Saudi Arabia’s customer profile is extremely complex (Kaisler, 2020). Understandably, the business must offer services and products to each customer in volumes and via channels best suited to the consumer, which is why it uses an agile supply chain configuration.
Agility in the supply chain is the capacity to re-calibrate plans and operations with changes in the market and in tandem with fluctuations in the desire and needs of the customer (Al-Hakim et al., 2017). The scale of demand and supply volatility for GE Saudi Arabia is very large, not because of market forces but the extreme diversity in the customer pool, which necessitates many operations, planning, execution, and stewardship conditions for the company. Notably, the oversight mechanisms for logistics networks are defined entirely by the orientation of the supply chain. In this case, I would recommend that the company invest in the healthcare sector in America. It is one of the institutions that foster the business competence of GE Saudi Arabia mainly because of the demand for technological tools.
General Electric is a company mainly associated with service rather than manufacturing globally. Over the decades, technological advancement spearheaded social media networks such as Twitter, Facebook, WhatsApp, Instagram, and YouTube. A significant percentage of the global population interacts via different channels. In this case, it is crucial for General Electric to exploit the niche market within the social media networks for significant business acquisition. The strategic management of the organization’s trade entails integrating the emphatic product features with the dynamic niche forum variables. As a result, GE should focus on adding technological assets to active social media network accounts. Intensifying the accessibility of the company’s commodity fosters an aspect that enlightens internet users about the products and the vital information.
I recommend the acquisition of affiliate associations in different industries, such as telecommunication and the financial sectors, to significantly contribute to the pool of revenue generation. Moreover, the purchase of the consortium boosted General Electric’s capacity for global market acquisition as a reputable brand while diversifying its activities. The firm must focus on the implementation of effective financial and accounting policies. In this case, the institution’s management establishes a shield from financial-related discrepancies while reporting annual financial statements.
Consequently, General Electric is an international company facing a significant challenge in the marketplace mainly because of its ineffective strategic regulation initiative. The administration’s decision approach is a phenomenon that significantly affected General Electric’s financial statements’ credibility by the Securities and Exchange Commission. It is important that the corporation exploits the incumbent opportunity under the spectrum of sustainability and boosting customer service experience as a competence strategy.
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