BA 5104 - Strategic Management

General Electric’s Ecomagination Strategy (Case # 2)

Back in 2004, GE’s top-management team was going through its annual strategic planning
review when the management team came to a sudden realization: six of the company’s core
businesses were deeply involved in environmental and energy-related projects. The appliance
business was exploring energy conservation. The plastics business was working on the
replacement of PCBs, once widely used in industrial compounds, which had been found to have
negative consequences for human health and the environment. The energy business was looking
into alternatives to fossil fuels, including wind, solar, and nuclear power. Other businesses were
looking at ways to reduce emissions and use energy more efficiently. What was particularly
striking was that GE had initiated almost all of these projects in response to requests from its
customers.

When these common issues surfaced across different lines of business, the group members
realized that something deeper was going on that they needed to understand. They initiated a
data-gathering effort. They made an effort to educate themselves on the science behind energy
and environmental issues, including greenhouse gas emissions. As CEO Jeff Immelt later
explained, “We went through a process of really understanding and coming to our own points of
view on the science.” Immelt himself became convinced that climate change was a technical fact.
GE executives engaged in “dreaming sessions” with customers in energy and heavy-industry
companies to try to understand their concerns and desires. What emerged was a wish list from
customers that included cleaner ways to burn coal, more efficient wastewater treatment plants,
better hydrogen fuel cells, and so on. At the same time, GE talked to government officials and
regulators to try and get a sense for where public policy might be going.

This external review led to the conclusion that energy prices would likely increase going
forward, driven by rising energy consumption in developing nations and creating demand for
energy-efficient products. The team also saw tighter environmental controls, including caps on
greenhouse gas emissions, as all but inevitable. At the same time, team members looked inside
GE. Although the company had already been working on numerous energy-efficiency and
environmental projects, the team realized there were some gaps in technological capabilities, and
there was a lack of overarching strategy.

What emerged from these efforts was a realization that GE could build strong businesses by
helping its customers to improve their energy efficiency and environmental performance. As
Immelt soon became fond of saying, “green is green.” Thus was born GE’s ecomagination
strategy.

First rolled out in 2005, the ecomagination strategy cut across businesses. Immelt tapped one of
the company’s promising young leaders to head the program. GE established targets for doubling
investments in clean technology to $1.5 billion per year by 2010 and growing annual revenues
from eco-products to $20 billion from $10 billion in 2004, twice the growth rate of its overall

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revenues. In its own operations, GE set out to cut greenhouse gas emissions per unit of output by
30% by 2008, and to cut absolute emissions by 1% by 2010 (as opposed to a forecasted increase
of 40% due to the growth of the business).

These corporate goals were broken into sub goals and handed down to the relevant businesses.
Performance against goals was reviewed on a regular basis, and the compensation of executives
was tied to their ability to meet these goals. The effort soon started to bear fruit. These included a
new generation of energy-efficient appliances, more efficient fluorescent and LED lights, a new
jet engine that burned 10% less fuel, a hybrid locomotive that burned 3% less fuel and put out
40% lower emissions than its immediate predecessor, lightweight plastics to replace the steel in
cars, and technologies for turning coal into gas in order to drive electric turbines, while stripping
most of the carbon dioxide (CO2) from the turbine exhaust.

By the end of its first 5-year plan, GE had met or exceeded most of its original goals, despite the
global financial crisis that hit in 2008. Not only did GE sell more than $20 billion worth of eco-
products in 2010, according to management, these products were also among the most profitable
in GE’s portfolio. In total, GE reported that its ecomagination portfolio included over 140
products and solutions that had generated $105 billion in revenues by 2011. One of the great
growth stories in the company has been its wind turbine business, which it bought from Enron in
2002. In that year, it sold $200 million worth of wind turbines. By 2008, this was a $6 billion
business that had installed 10,000 turbines. By 2012, GE had installed over 20,000 turbines
worldwide and was predicting a surge in orders from developing nations. Sales from Brazil alone
were forecasted to be in the range of $1 billion a year for the next decade. Looking forward, GE
plans to double clean-tech R&D to $10 billion by 2015, to grow ecomagination revenues at twice
the rate of overall revenues, to reduce its own energy intensity by 50% and its greenhouse gas
emissions by 25%, and to reduce its water used by 25%.

Case Questions (Read the case instructions below)

1. Prepare a case abstract, not more than one paragraph (250 words).

2. Where did the original impetus for GE’s Ecomagination strategy come from? What does this
tell you about strategy making?

3. To what extent did GE follow a classic SWOT model when formulating its Ecomagination
strategy? State what are the core elements of SWOT that GE had taken into consideration in
formulation, selection and evaluation of this initiative?

4. GE’s CEO Jeff Immelt often states that “green is green.” What does he mean by this? Is the
Ecomagination strategy in the best interests of GE’s stockholders?

5. By most reports, GE’s Ecomagination strategy has been successfully implemented. Why do
you think this is the case? What did GE do correctly? What are the key lessons here? Visit
the GE website and give current status and assessment of the success or otherwise of
this strategy of GE.

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 Instructions

1. Submit a soft copy of the case answers on Google Classroom (GC) before or
by the due date stated in GC.

2. Follow the submission file name format;

SM Spring 2023-Sec -Case Study #1 – Group #

3. The case questions to be answered are divided among the group members.

4. For each answer identify the individual member who had written the answer,
if this is not the case and if it is a group effort then specify it accordingly in
the submission (put a contribution sheet in the submission).

5. The case will be discussed in the class following the submission due date,
every group should be fully prepared.

6. Refer to GE Ecomagination website, if you need more back ground details,

this is a very famous initiative of GE and lot of information is available on
the net.

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