1

Case Teaching Note – General Electric

Case Synopsis

This case looks at the history of General Electric since the 1960s, with particular focus on the
tenure of CEOs Jack Welsh (1981-2001) and Jeffery Immelt (2001-2017), and the company’s
struggles in the post Immelt era. The case opens by detailing the main strategic challenges faced
by this large diversified enterprise in the pre-Welch era. Next, the case explores how Welch
articulated a strategy, restructured GE, and drove performance accountability and productivity
improvement programs throughout the company over his twenty-year tenure. Welch was
followed by Immelt, his hand-picked successor, who struggled to match his mentor’s
performance. The case documents how Immelt tried to move on from the Welch era while
matching Welch’s performance record. As described in the case, he ultimately failed to do this,
leaving GE in a worse state than he found it. The case closes with a discussion of the steps taken
by Immelt’s immediate successor, John Flannery, to try and deal with the excesses and errors of
the Immelt era (and perhaps the Welch era too).

Learning Objectives

The learning objectives from the text that this case addresses include the following:

Differentiate between multibusiness models based on related and unrelated

diversification
Explain the five primary ways in which diversification can increase company profitability
Discuss the conditions that lead managers to pursue related diversification versus
unrelated diversification, and explain why some companies pursue both strategies
Describe the three methods companies use to enter new industries—internal new
venturing, acquisitions, and joint ventures—and discuss the advantages and
disadvantages associated with each method
Explain the concept of organizational architecture
Articulate how strategy is implemented through the right combination of organizational
structure, controls, incentives, process, culture, and people
Discuss how effective organizational design enables a company to implement its
business-level strategy
Discuss how effective organization design enables a company to implement its corporate-
level strategy

Strategic Issues and Suggested Discussion Questions

1. What problems was General Electric struggling with during the 1960s and 1970s?

Under Ralph Cordiner

How did Reg Jones try to fix these problems?
2

2. How did Jack Welch move to fix the problems that Jones was dealing with?

Welch’s Initial Moves 1981-88

Second Act 1988-2001 – Boosting Performance

Major Strategic Initiatives 1988-2001

3. What is your assessment of Welch’s tenure?

4. What was Immelt trying to achieve at GE? What is your assessment of his tenure? What
were the positive aspects? What didn’t work and why?
5. What are the challenges now confronting Flannery? What should he do?

6. What does the GE case teach you about how to create value through corporate
diversification?