The Fail of General Electric Company

Introduction

General Electric (GE) is a US-based conglomerate company headquartered in Boston. Henry Lawrence Culp Jr. is the Chairman and Chief Executive Officer of this company. The main products of GE are electrical distribution, finance, healthcare, gas, software, water, wind turbines, etc. GE is a large-size company that has 283,000 employees serving worldwide, and it is listed in Fortune 500 (GE Power).

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GE was set up in 1892 as it started manufacturing light bulbs, x-ray machines, electric locomotive, and electric stove. The company achieved its financial objectives by developing vacuum technology that enabled the invention of radar systems and microwaves (Owles). The downfall of General Electric’s business began after the financial crisis of 2008, which was a wake-up call for its management. The company mainly invested in different businesses to achieve the goals of profitability and sustainability, but the situation reversed after the crisis as companies moved to cost-saving and efficiency-focused strategies. Another significant reason was the failure of its power unit which was not fixed quickly (Colvin).

Problem Description

The main issue faced by GE was the failure of its mega projects, including its power unit. GE experienced significant challenges of the financial crisis in different business sectors as it operates in various industries. The stock price of GE declined to $6.74 per share after peaking at $30.83 in 2017 due to the crisis in the financial service industry (Abell et al. 3). The leading cause of the failure was the poor management of its highly diversified investment portfolio. The top management of GE was aware of this critical situation and made changes in its leadership to control the situation. However, its business problems intensified, which harmed its financial health.

Company Analysis

The company analysis of GE is carried out by presenting the SWOT Analysis, which summarizes its internal and external environment.

SWOT Analysis

The main strength of GE is its research and development program in the healthcare segment. It enables the company to introduce innovative and advanced technology products to fulfill changing market demands. It also has a strong brand reputation in the global market due to its achievements in the renewable energy sector. Another major strength of GE is its diverse product portfolio that is important for managing various business risks. The main weakness of GE is its poor performance in the oil and gas market (Kissinger). The company mainly depends on its suppliers who dominate the market and command significant bargaining power over companies.

The emergence of digital technology in the transportation industry is an opportunity for GE to increase its market share in the global market. There are growth opportunities in the renewable energy industry, which can improve the financial health of GE. The rapid adoption of innovative solutions and advanced technologies in developing countries is also a possible opportunity for GE to increase its earnings. The main threat to GE’s business is intense competition in different market segments due to the availability of substitutes. The changing market dynamics of the online digital technology market are a significant threat to GE (Kissinger). The oil and gas industry is unstable, which also has a direct impact on the business of GE.

Strategic Analysis

The mission of GE is to invent the future industrial era and to move, cure, power, and build the world. The primary objective of GE is to focus on infrastructure leadership, simplification culture, and innovation (GE Power). GE explores changing market trends and responds to them quickly. The research and development department of the company is specialized in finding innovative solutions for the future. The management of GE takes vital decisions to address the problems by developing practical solutions.

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The primary strategy of GE is to change its leadership, which seems to be weak for ensuring its long-term stability. The productivity, efficiency, and profitability of GE depend on its effective management policies and strategies. GE is also transforming its portfolio that best suits its internal and external business environments. It will lower capital requirements to align the company’s growth with industrial earnings (General Electric Company). Another key strategy of GE is to invest in innovation, which is the need for its future growth. The rapid adoption of technology is the key to success in the 21st century. Therefore, GE emphasizes investing in new technologies to achieve its long-term goals and objectives.

Problems

The strategy of GE is consistent with its business objective which is to develop innovative solutions by adopting new changes in its structure. However, it was difficult for the management to bring a considerable change in the structure without making any plan. GE became the most diversified corporation in the world due to its involvement in different industries and sectors (Owles). Therefore, it faced global challenges and issues that had a direct impact on its profitability and credibility.

GE faced the issue of inconsistency due to its strategy of acquiring new businesses. Those acquisitions did not match with its business and corporate-level strategies. The company continued this strategy without understanding the different risks in various industries. GE did not focus on its specializations and strengths and also ignored business needs in specific markets (Bacharach). It was a major problem that hindered GE’s progress and ability to work on its long-term projects.

Analysis

The overall analysis of GE shows that its mission and goals were aligned with its activities. However, the management ignored various business and investment risks, market trends, and financial crises that impacted companies globally. The economic downturn in emerging and developing countries was also the principal reason for GE’s failure in different markets. The leadership did not pay attention to its strengths and weaknesses, which is vital to gain a competitive advantage. Therefore, it can be stated that the top management of the company was responsible for failing to deal with the changes in market trends.

The productivity and efficiency of GE are the primary responsibilities of the upper management who failed to assess and control emerging market risks. Although the financial crisis was the main reason for the beginning of its business slowdown, the management of GE did not respond intelligently and timely to tackle the situation. The investment plans of the company should also consider business and market risks to reduce the chances of a financial loss in the future. The long-term strategies should have been aligned with the objectives and mission of GE rather than merely focusing on profitability and sustainability.

Cultural Analysis

The organizational culture of GE is customer-centric and focuses on simplification which suits its nature of work and business environment. The corporate approach is to link customer preferences and needs with new technologies and provide innovative solutions. GE also organizes its human resource development program to adopt changes that can improve its relationships with customers in the future (Thompson). Empowerment and inspiration are also included in the list of priorities followed by General Electric’s management.

It is discussed earlier that GE failed due to the incapability of the management to handle external pressures along with the financial crisis. Although the company changed its leadership structure and tried to control the situation, the failure did not relate to its culture. The company’s cultural practices proved to be successful for many decades before the financial crisis. However, the reasons for its problems were significant changes in the external business environment and the management’s inability to make strategies swiftly when needed.

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Recommendations

The future of GE is not secured as assessed by its progress in the last two years. However, the situation can be managed by making the following recommended changes.

  • GE should place more emphasis on research and development to identify and develop products according to the new trends in the market.
  • The management should carefully plan and review its decisions before acquiring other businesses to ensure successful outcomes.
  • There should be a regular assessment of the performance of the management to address problems quickly.
  • GE should focus on the strength of its brand while entering new markets.
  • The diversified product portfolio of GE should be carefully managed that can benefit it in the long run.

Conclusion

The overall analysis in this paper indicates that GE has the potential to control its ailing condition. The internal and external factors impacted the growth of GE. However, the company’s decision-makers have taken well-informed and well-directed steps to compete in the global market. Therefore, it should manage its operations efficiently to overcome its business problems which have led to a significant decline in its share prices.

Works Cited

Abell, Charles B., el al. “Two Leaders, Two Paths: A Case Study of Comparing GE’s Two Leaderships.” Journal of Business Cases and Applications, vol. 21, no. 1, 2018, pp. 1-7.

Bacharach, Samuel. “It’s No Mystery Why GE Is Stuck.” INC. 2018, Web.

Colvin, Geoff. “What the Hell Happened at GE?” Fortune, 2018, Web.

GE Power. “Your Single Services Partner for Total Plant Needs.” General Electric Company, 2019, Web.

General Electric Company. “Our Strategy General Electric.” General Electric Company, 2019, Web.

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Kissinger, Daniel. “General Electric Company (GE) SWOT Analysis & Recommendations.” Panmore, Web.

Owles, Eric. “G.E.’s History of Innovation.” 2017. The New York Times, Web.

Thompson, Andrew. “General Electric’s (GE) Organizational Culture for Customer-Centric Simplification.” Panmore, Web.

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