Module Number

Strategic planning

Module: Critical Thinking

Critical Thinking: Case study; General Electric

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Date:

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 Introduction

This report aims to discuss a case study of a multinational and multi-business

organization's General electric. The report aims to identify those issues that are a consequence of

the decline in growth of a company. The report will address the shining era of the organization

and its well-managed management and performance management system. The management

system of general electric contributed to the growth and development of the firm. Later on,

General Electric experienced changed in its management and those changes brought financial

loss and loss of the business for the company because new management made new decisions that

did not prove favorable for the organization. By comparing the past financial statement of the

Company with current accounts books it is concluded that the company should overcome its

flaws by reconsidering its management system and reviewing its area of operations.

General electric; an exemplary organization

General electric is an exemplary organization for its management system and its

diversified area of operations, performance, offered products and services. General Electric was

a highly admired organization due to its multi-business operations and its management system.

This admiration was a gift of continuous efforts and development of almost 120 years. General

Electric has secured this admiration because of its exemplary management system and features

of praise are its constant management development, talent management approaches, and efficient

performance management system. General electric strive for leadership development and its

management system is well tied with the development of leadership. The company often depends

on its senior management because they are well trained and internally developed.

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 General Managers of general electric were never inexperienced they were often chief

executives of several companies. The management system of general electric is developed on the

basis of objectives and a quantitative performance approach. Every activity and performance of

every employee is measured and everything happens with an output metric. Performance of

employees is tied with reward here reward and punishment rule is followed and employees are

paid for their good performance and charged for their bad performance as well.

Performance of General electric at a glance

General electric is performing efficiently and it is known for its performance

management system that focuses on performance appraisal and performance review system. The

performance review system of General Electric is fairly managed and it's an ongoing process.

The inspiration and motivation of employees matter a lot for the company. It is claimed that in

the year 1976 the best employee management system was employed in General Electric that it is

famous for.

That was a legendry management system which was later replaced with Fast Works. Fast

Works system was introduced with a customer-centric approach. Few changes were made in the

performance review system as well. Before the commencement of Fast Works, there was a

culture of annual review system which was later turned into rapid communication and open

communication between bosses and their subordinates. During this period several progressive

changes were made in the management and performance management system of the firm.

Because of such outstanding approaches and a balanced performance management

system, General Electric was praised as an exemplary organization. The management system of

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this organization was followed by other firms because it was constantly securing progress and

praised as the best organization.

Portfolio of General electric and its nature

One of the major factors of organizational stability of general electric was its diversified

corporate portfolio. The diversified corporate portfolio of general electric was its key strength

that was a factor of competitive advantage for the organization. The corporate portfolio of

General Electric was restructured for exploring opportunities and securing sustainable growth.

For this purpose global trends were followed by the company. The corporate portfolio of

general electric was restructured to meet the needs of aviation. Later it extended to medical

pieces of equipment, oil and gas production, power generation and transportation. General

Electric secured tremendous growth and became a multi-operational business and fired its

unproductive manages (Buckley et al., 2019).

General Electric developed an effective and profitable portfolio mix that was bringing

superior tangible and intangible gains for the company. CEO and President of general electric

altered the composition of the organization and its corporate portfolio was restructured. In the

year 2001, spending of the organization on insurance was 15%, capital finance was 24%,

spending on infrastructure was 41% and plastic media was given 20% of whole funds. In the

year 2005, the composition of business was restructured and insurance spending was declined to

8%, capital finance was increase to 43%, infrastructure spending was decreased to 34% and

plastic media were given 15% of weight. While after few years the business composition was

divided into just two units' capital finance and infrastructure that were 25% and 75%

respectively.

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 Fig: Restructured corporate portfolio of General electric (General electric data)

Consequences of restructuring of a portfolio of general electric

Immelt served general electric for 16 years and during his services the company practiced

acquisitions and mergers with like infrastructural firms (Grant, 2005). The company was

consequently growing in size and with that tremendous growth, challenges were also directed

towards the firm. The CEO tried to restructure the capital of the firm but it was experiencing

gradual growth. The main focus of the organization was the enhancement of the values of its

assets. Many challenges were heading towards the organization due to wrings decision regarding

the expansion of operation and acquisition of other entities. Those actions of the management

brought mismanagement of cash flows, over predictions, and issues in managing accounts and

financial statements. The new portfolio mix was also proving valuable for the organization but

mismanagement of cash flows and ill management of accounts of the organization the corporate

portfolio of the organization required to be restructured. Due to incompatibility among

functions, and cross functions among cross companies the general electric needed to restructure

its portfolio (Abell et al., 2018).

Contemporary performance of General electric

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 In just a single year stock of general electric declined by 58% that reflects the poor

performance of the company. It is observed that operations of general electric are not balanced.

The company is not enabled of taking a competitive advantage and financial gains have almost

declined at a great rate. The financial statements of the organization reflect that the revenues and

profitability of the organization have been toppled. Due to some wrong and ineffective decisions

after the 2008 crisis and bad subsidiary purchases of general electric resulted in declining in

sales, revenues and reputation of the organization. The organization took wrongs decisions at the

wrong time and those wrong actions brought a bad time for the company. The financial decline

of the organization was the result of ineffective mergers and acquisitions. It was thought that

with rapid acquisition and expanded operations company will further grow in its profits but the

company failed in managing those expanded operations. Gradually the company became unable

of giving returns to its investors and currently it is lacking in meeting the expectations of its

investors even and lacking in funds to distribute dividends (Dongxuan, 2020).

Fig: fluctuation in stock values of General electric (annual report of GE)

Reasons behind the financial collapse of general electric

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 With the change of president of the organization financial performance was also changed.

The stock value of the organization was declined by a greater rate. 6.2 billion dollars of

insurance charges were also met by the firm. Due to low financial performance, the company

was unable of paying dividends to investors even the stock of the organization were also

eliminated from the 30-name index. The stock price of the organization declined by 25% and the

ratio of debt was also increasing and power generation also declined in its performance. The

entire loss and declined performance was a consequence of the change of leadership and

expansion of the board of directors. Several new members were added to the board and gradually

company started reducing its dividend value as well. Financial data of general electric is given in

the appendix (Arquitectura et al, 2015).

Identification and suggestion of possible way out to get back position

General electric was taking steps towards growth and development with an outstanding

performance management system and a better corporate portfolio. With the change of corporate

portfolio the performance and financial gains of the organization started declining. To get back

that ratio of returns and profits general electric is suggested to develop factors of competitive

advantage in its practices and operations. There must be a culture of open communication among

units of the organization. The company is also suggested to spend on research and development

and identify the needs of the market and operate to fulfil those needs competitively.

There must be freedom of selecting a board of directors to ensure unbiased decisions and

for this purpose, the chief executive officer and chairman should be given separate positions. The

company was well known for its management practices so it is suggested to restore its traditional

management practices and it should reconsider the changes in its management practices and

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performance management system should also be reviewed. To ensure better performance there

must be a culture of open communication and effective conversation among employees and

managers.

The organization should review its investments and the power generation assets investing

on Ansaldo Energia should be uplifted. The company is also suggested to review its operations

and investment and those operational units should be eliminated in which general electric is not

expert. The project "smart home for future" should be abandoned by the company because

general electric is lacking in funds and expertise to execute that project. Operations of the

organizations should be limited till their expertise.

Conclusions

There was a time when general electric was complimented as an exemplary organization

due to the effective and efficient management of Welch and Immelt. The company was

constantly upgrading its management system and the services of the firm were getting

diversified. Everything was happening in the favor of General Electric but with the restructuring

of its portfolio mix performance of the organization started declining. Gradually organization

experienced a decline in its financial gains and it ultimately collapsed. The stock of the

organization declined by 58% at once and it was the biggest and irrecoverable loss. General

Electric became unstable and it was not in position of giving profits or returns to its investors

according to their expectations.

It is concluded that to give a new successful direction to the organization it should plan

new acquisitions to and it should restructure its portfolio mix. General electric requires additional

acquisitions to secure current assets and recover the loss.

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 References

Abell, C. B., Robbins, J., & Qian, X. (2018). Two leaders, two paths: A case study of comparing

GE’s two leaderships. Journal of Business Cases and Applications, 21, 7.

https://www.aabri.com/manuscripts/182801.pdf#targetText=Under Jack Welch (1981-2001,

GE was an economic powerhouse.

Arquitectura, E. Y., Introducci, T. I., 赫晓霞, Iv, T., Teatinas, L. A. S., Conclusiones, T. V. I. I.,

Contemporáneo, P. D. E. U. S. O., Evaluaci, T. V, Ai, F., Jakubiec, J. A., Weeks, D. P. C.

C. L. E. Y. N. to K. in 20, Mu, A., Inan, T., Sierra Garriga, C., Library, P. Y., Hom, H.,

Kong, H., Castilla, N., Uzaimi, A., … Waldenström, L. (2015). Contemporary Strategy

Ana. In Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis (1oth ed.,

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%0Ahttps://hdl.handle.net/20.500.12380/245180%0Ahttp://dx.doi.org/10.1016/j.jsames.201

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mres.2014.12

Buckley, T., Hipple, K., & Sanzillo, T. (2019). General Electric Misread the Energy Transition :

A Cautionary Tale. IEEFA.Org, June, 1–22. https://ieefa.org/wp-

content/uploads/2019/06/General-Electric-Misread-the-Energy-Transition_June-2019.pdf

Dongxuan, F. (2020). Research on General Electric Organizational Structure Reform Based on

Hofstede’s Cultural Dimension Theory. 466(Items), 360–363.

https://doi.org/10.2991/assehr.k.200826.070

Grant, R. M. (2005). General Electric : Life After Jack. Financial Times, 336–353.

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Appendix

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