Chapter 10: Studying Mergers and Acquisitions

Chapter 10 discusses the use of mergers and acquisitions as vehicles for a company to find a new direction for it’s business or businesses. General Electric (GE) has a long history of mergers and acquisitions, as well as divestitures. Divestitures occur when a company decides to sell off a business or division. Thomas Edison formed Edison General Electric in 1890. Shortly there after, the first merger for Edison General Electric occurred when they consolidated with Thomas-Houston Electric Company to form a new company called General Electric.

GE’s history shows us that businesses continually expand and contract through mergers, acquisitions, and divestitures. In 2011, GE announced that it would spend $3.2 billion to acquire 90% of “Converteam, a company based in Massy, France, that specializes in high-efficiency electric power conversion components like motors, generators, drives and automation controls.” This acquisition will provide the needed components that “are used across a variety of industries at the core of G.E.’s industrial and energy operations, including its oil and gas initiatives, as well as solar and wind power.” GE understands that mergers and acquisition aid in helping grow and maintain their business, as well as increasing their competitive advantage of the competition.

Source here and here.

 

Chapter 9: Understanding Alliances and Cooperative Strategies

The chapter focuses on the idea of strategic alliances among companies. The importance of creating relationships with other firms enhances competitive advantage of both parties. For General Electric (GE), alliances have helped them to become a massive conglomerate.

GE’s Healthcare unit has grown into a $17 billion a year business, and is continuing to grow at an accelerated rate. The development of strategic alliances with other companies has given GE an enormous competitive advantage over their competition. In 2011, an alliance was created with Veran Medical Technologies, which is a privately held medical device company. “[T]he companies have entered into a strategic alliance to advance and co-develop navigation technologies for interventional procedures to improve the care and management of cancer patients.”

Source here.

Chapter 8: Looking at International Strategies

As we all know by now, General Electric (GE) is a global company, and their international strategy is equal to none. GE has established itself in almost every emerging market in the world from Brazil and India to China.

Developing markets are vital to the growth of GE, and they must continue to explore these new markets in order to maintain their competitive advantage. An international strategy consists of how “a firm approaches its cross-border activities and those of competitors and plans to approach them in the future.” In the chapter, the book discusses the pros and cons of international expansion. Understanding the liabilities of newness and foreignness, cost associated with governance and coordination, offsetting costs and benefits, and global economies of scale and scope are all concepts that are vital for GE to be successful in their global expansion.

GE has developed a strategy called “Company to Country” to aid in establishing itself in foreign countries. Currently, GE has administered this strategy in every emerging market in the world from Latin America to Asia. This strategy is designed to localized capabilities and develop resources in these areas.

Chapter 7: Developing Corporate Strategy

For me, this chapter was very interesting because the introduction focused on General Electric and their CEO, Jeffery Immelt. GE is multi-faceted company with many different businesses operating under the umbrella of their brand name. As a company, GE is a conglomerate, which is a “[c]orporation consisting of many companies in different businesses or industries.” The company is broken into four segments: Energy, Technology Infrastructure, Capital Finance, and Consumer & Industrial.

The question has been asked why GE builds jet engines and also offers a consumer-finance business? The answer is quite clear, diversification. In the current economic environment, GE continues to invest, grow, and make profits. The main reason why GE continues to be successful is because of an establish corporate strategy that has been both formulated and implemented effectively.

Source here.

Chapter 6: Crafting Business Strategy for Dynamic Context

In my opinion, forecasting change in a dynamic environment is a tremendous challenge for all firms. The chapter discusses how the competitive advantage of one firm can disappear seemingly overnight. Businesses need to understand that the dynamic environment that we live in today and the rate at which information travels can have devastating consequences to the life and longevity of any firm’s success. This means that both first movers and fast followers need to create a dynamic strategy for how they will adapt to changes in their business environment.

One of the ways that General Electric a dynamic strategy is by creating a “GE Global Innovation Barometer.” In these uncertain times, GE believes that this initiative will help the company to better react to issues that arise unexpectedly. Technology innovation is a key component for GE, and they feel that use of innovation will sustain them through tough economic hardship. From my research, it is becoming increasingly clear that technology innovation and global networking is the only way for large Fortune 500 companies to maintain and grow their businesses.

Source here.

Chapter 5: Creating Business Strategies

Operating a business in today’s global economy creates many obstacles for a firm to overcome. In order for a firm to maintain a competitive advantage, the business must create solid business strategy so as to create a clear and executable goals. The chapter introduces the concept of a generic strategy that helps “to reduce the effects of rivalry, including low-cost, differentiation, focused cost leadership, focused differentiation, and integrated position.” From this concept, a firm has the ability to mold their business strategy into what meet the individual requirements of their business.

So where does General Electric (GE) situate itself in the concepts of Chapter 5? According to GE, their current business strategy is “responding to the big issues and problems facing the world today, and shaping our future.” Examples of some of these big issues include: the world’s energy consumption, the discovery of new technology that creates less pollution for the environment, and the development of new medical devices that aid in extending the life a sick or disable person. GE believes that focusing on these three areas will maintain their success and growth as a business presently and into the future. While other companies may focus on the smaller picture, GE is hedging their bets on larger issues that help make their differentiators more sustainable over a longer period of time.

Source here.

Chapter 4: Exploring the External Environment: Macro and Industry Dynamics

In this chapter, the book focuses on understanding the vast spectrum of business and how companies need to comprehend their external environment in order to be successful. Firms must make an assessment of their strengths, weakness, opportunities, and threats known as a SWOT analysis. This will supply the organization with a wide variety of information from which the company can make decisions towards their external environment.

From a global perspective, GE is head-and-shoulders above most of their competitions. The book discusses globalization as the “evolution of distinct geographic product markets into a state of globally interdependence product markets.” We have to understand that the domestic market place is shrinking and that the global market place is continuing to grow at an accelerated rate. However, there are people who criticize GE’s expansion into foreign markets because they believe that jobs and tax revenues are being taken from America. Is it “un-American” to offshore so many jobs to foreign countries, as well as not pay income tax on profits? According to Jeffery Lemer of the  Financial Times, “GE… once  the poster boy for American capitalism, has now come under fire” for not paying any federal income taxes on billions of dollars in worldwide profits. In a effort to appeal to GE’s supporters, Immelt responded to the criticism in his annual letter to shareholders. He stated, “[w]e live in a tough era in which the public discourse, in general, is negative. I worry that the mood of the times prevents us from moving forward. American companies, particularly big companies, are vilified . . . we need to work together to find a better way.”

In global economy, GE must sale it’s goods and services not just domestically, but also internationally in order maintain profitability. The time has come for Americans to understand the world has to work collectively.

Source here.

Chapter 3: Examining the Internal Environment: Resources, Capabilities, and Activities

General Electric (GE) is in a very unique position based on the diversity of businesses it owns and operates. In this chapter, resources and capabilities are the dominate topics. GE resources far exceed most of it’s competitors through both breath and deep. In energy, GE invests billions of dollars in their “Ecomagination” initiative. This concept deals with finding new ways to create clean energy by investing in technology that is not fully developed. Small companies could not invest in such an idea because they do not have the financial resources to provide capital to inventors. The financial resource provides GE with tremendous competitive advantage over it’s competitors.

From a capability standpoint, GE is able to globalize it’s products and services at a much faster rate than any other competitor. Establishing relationships in both India and China has given GE the capability to exploit labor resources and utilize them to their advantage. A  truly global company understands that domestic markets will only allow the company to grow so much before it can no longer expand. CEO, Jeffery Immelt understands that the core competences for GE lies in it’s resources and capabilities. These attributes will continue to give GE a competitive advantage in the world market.

Chapter 2: Leading Strategically Through Effective Vision and Mission

In my opinion, strategic leadership is paramount for any successful organization. A chief executive officer (CEO) has an obligation to serve as the compass for the business, and their strategy dictates the company’s vision and mission towards the future. General Electric’s chairman and CEO Jeffery Immelt exemplifies the role of a leader for an organization. “Since beginning his tenure in 2001, he has worked to transform GE into a leader in essential themes tied to world development, such as emerging markets, environmental solutions, demographics and digital connections. Mr. Immelt also laid the vision for GE’s ambitious ecomagination initiative and has been named one of the “World’s Best CEOs” three times by Barron’s.”

According to Marshall Goldsmith of Bloomberg Businessweek, “[d]eveloping leaders with strategic vision and successfully implementing strategy are two critical challenges for every chief executive” to understand in order to be an effective leader. Marshall has worked with the American Productivity & Quality Center, the Center for Creative Leadership, and Duke Corporate Education to determine which companies perform the best at strategic leadership. All of these companies have three things in common: “each benchmark company used a key organizational transition to develop, articulate, and align a new leadership strategy with the strategic direction of the firm.” For General Electric, Immelt has been instrumental in guiding the company towards the future. He has maintained the organization’s vision and mission so that key stakeholders continue to invest in his ideas, as well as General Electric.

Sources here and here.

Chapter 1: Introducing Strategic Management

Hello All,

My name is Nathaniel Stewart, and I am a senior at the University of Memphis. I am taking a summer class online in Strategic Management. So far, this is a very interesting class, and I hope to learn a great deal during this five-week course. Each one of my posts will relate to a chapter in the textbook. The first chapter is “Introducing Strategic Management.” I will provide some insight into the use of this concept for General Electric.

Currently, General Electic is one of the largest Fortune 500 companies in the world and is involved in many different businesses. General Electric’s business model stretches from building jet engines to providing financial services to its customers, as well as many other business ventures. So how does General Electric keep all of these businesses running efficiently and effectively? The answer is using a strategic management philosophy.

General Electric maintains that their philosophy for strategic management lies in:

1) Sustaining operational excellence and financial discipline.

2) Creating a more valuable business portfolio.

3) Driving organic revenue growth at 2 to 3 times gross domestic product.

4) Retaining a strong corporate team with a strong culture.

5) Managing the company’s risk and reputation.

6) Building an excellent investor base.

7) Leading the board activities by strengthening Board membership.

Source here.