Strategic Analysis; Tools & Techniques - Assignment 2 PDF

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R1901D7210658

STRATEGIC ANALYSIS OF GENERAL ELECTRIC

University of South Wales

Assignment 2

Strategic Analysis; Tools and Techniques (18393)

Present a current critical strategic analysis of ONE Business Unit within General Electric 74109939 Juston Mubwandarikwa 13th September, 2020

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8Table of Contents

1.0 Introduction……………………………………………………………………………....2 2.0 Discussion…………………………………………………………………………….….2 2.1 Strategic Position of General Electric……………………………………….…...2 2.2 Identification of Strategic Business Units………………………………………...4 2.3 Evaluation or Resources and Capabilities………………………………………… 4 2.4 Value Chain Model……………………………………………………………….5 2.5 BCG Matrix and Strategic identification………………………………………….7 2.6 Future Directions for Strategic Growth…………………………………………… 8 3.0 Recommendations…………………………………………………………………….….9 4.0 Conclusion……………………………………………………………………………....10 5.0 References……………………………………………………………………………….11

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Introduction The process of strategic management involves the planning and development of processes that may aid in the achievement of the objectives and goals of a business organization. Strategic management thereby includes several processes of not only evaluating the business environment in which the organization operates but also deciphering how the threats may be prevented and the opportunities may be utilized in the most efficient manner (Wheelen et al., 2017). This is done with the help of setting appropriate goals and targets and evaluating the available strategies that may be useful in attaining those goals and objectives based on the results of the evaluation of the external and internal business environments. Another important aspect of strategic management is the process of planning the direction in which the business activities and functions will be conducted as well as how the various resources available to the organization will be allocated and utilized (Lasserre, 2017). In this regard, it may be mentioned that strategic management is one of the most essential processes that the business organizations may engage in to ensure that their goals and objectives are achieved efficiently and effectively. General Electric is recognized as one of the major American multinational organizations in the world. The company was founded in the year 1892 and specializes in several industries, as it is a conglomerate in terms of its business activities and operations (Ge.com, 2020). The specific fields in which the company specializes include power, healthcare, aviation, digital industry, renewable energy, venture capital, financing and additive manufacturing. The following sections of the research will provide a detailed analysis of the strategic business processes of the company with a particular focus upon the operations of the different strategic business units. In doing so, the strategic position of the company will be analyzed in terms of the resources and capabilities that are available to the organization as well as the position of each strategic business unit and the strategies that must be adopted for each. The key direction in which the business operations of the company must be adopted for strategic growth will also be discussed in detail.

Discussion Strategic Position of General Electric General Electric is an American multinational conglomerate that specializes in a variety of industries and running its business operations and functions in various regions across the world. The legacy of innovation at General electric follows from Thomas Alva Edison's invention of the light bulb, after which the organization has enabled the pioneering of world-

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transforming technologies, aimed towards developing the standards of living of individuals across the world (Ge.com, 2020). The main business operations and functions of the organization are conducted in primarily nine specific industries, which are individually aimed towards making technological transformations through the process of innovation and creative ideation. Nine industries in which the organization conducts its business activities and operations include material science, health, manufacturing, industrial internet, wind turbine, grid, jet engines, gas turbines and hydroelectric power (Ge.com, 2020). The mission of the organization is to facilitate a new industrial era by developing the potential to build, power, move and cure the world. The vision of the company is to improve the functioning and efficiency of the communities by exceeding their expectations in terms of innovation and development. In the increasingly competitive business environment of the present age, it is becoming increasingly essential for a business organization to develop and adopt effective and efficient strategies to enable their growth and development. Furthermore, the scope of strategic management in these business organizations also pertains to the achievement of competitive advantage in the market by obtaining a positive strategic position in the market (Ge.com, 2020). The strategic position of General Electric can be analyzed using the theory of Porter’s Generic Business strategies. According to the theory proposed by Michael E. Porter regarding the strategies that may be used by business organizations to achieve a competitive advantage in the market include those of cost leadership, differentiation, focus and differentiation focus (Islami, Mustafa and Latkovikj, 2020). The strategy used by General Electric is that of differentiation, which allows the organization to attract customers by providing them with services and products that are special and unique. The differentiation strategy used by General Electric involves the process of developing highly unique and valuable products and services for the customers with the help of innovation and creative ideation (Omsa, Abdullah and Jamali, 2017). In this regard, it may be mentioned that the resources of a highly skilled and knowledgeable workforce, as well as highly advanced technological infrastructure, are of significant importance to the business processes and operations of the company as they facilitate the process of innovation. The company focuses on the aspects of research and development to create highly differentiated products and services so that the potential customers of the organization may be targeted, captured and retained. Furthermore, the focus on capturing a large market share is also enabled by providing the products and services offered by the organization to a variety of

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market segments. For example, this strategy has been used in its segment of electric lighting in which the unique and innovative products and services of the company are offered to a large market segment of customers. The main strategic business unit, which will be analyzed further, is the oil and gas unit of General Electric. This business unit has faced a downfall in terms of revenues earned due to various factors, such as an increase in the price of oil and gas to the customers. The main functions involved in the business operations of this unit include the designing and manufacturing of drilling equipment, turbines and other auxiliary equipment used in the petrochemical and refinery industry (Bieker, Slupphaug and Johansen, 2007).

Identification of Strategic Business Units The concept of strategic business units involves the specific units of business operations that operate independently within the scope of a business organization. Conglomerates such as that of General Electric involve the operations of such strategic business units, which have different competitors, target customers and other stakeholders of their own. As has been identified in the previous section, General Electric has been identified to primarily consist of nine strategic business units, which can further be segmented into several other units. These nine industries in which the organization conducts its business activities and operations include oil and gas, health, manufacturing, industrial internet, wind turbine, lighting and capital, jet engines, gas turbines and hydroelectric power (Ge.com, 2020).

Evaluation of Resources and Capabilities The evaluation of the resources and capabilities available to a business organization is essential to plan and develop strategies for its growth and development efficiently and effectively. The resource-based view provides for a managerial framework determining the strategic resources available to a business organization as well as how they should be utilized to achieve the strategic business objectives and goals (Lin and Wu, 2014). In this regard, it may be mentioned that the strategic resources of a business organization may be segmented as being tangible or intangible in nature. The tangible resources are regarded as those resources, which are physically present the organization as assets such as inventory, cash buildings, vehicles, human resources, machinery and the like (Miller, 2019). On the other hand, the intangible resources available to a business organization are those resources, which are not physically present with the organization but are owned by them nonetheless and essential to ensure the success of their business operations, such as goodwill, brand

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recognition and identity, intellectual skills of the employees in terms of creative ideation and the like. In this regard, the resources available to the strategic business unit of General Electric under discussion, that is oil and gas may be determined with the help of the VRIO framework. The VRIO framework is a resource-based model, which helps in the identification of the strategic resources available to an organization and the degree to which they may be able to provide a competitive advantage in terms of their value, rarity, inimitability and organization (Knott, 2015). The VRIO framework as applied to the strategic business unit of oil and gas of General Electric shows the following results: Capabilities

Value

Brand Identity and Image * Goodwill * Brand reputation in terms of product * and service quality Human resources Intellectual resources in terms of innovation

and

products Technological

development resources

equipment Financial resources

Rare *

* *

*

and *

*

Inimitabilit

Organization

y * * * *

of

*

*

As can be observed from the above table, the resources and capabilities of General Electric are aligned with its strategy of differentiation. In terms of the intellectual and technological resources of the organization, the strategy of differentiation is followed by developing highly innovative and unique products and services that not only satisfy the customers but also help in developing a goodwill, positive brand identity and recognition in the market. The use of human resources and financial resources are thereby targeted towards the process of research and development, which in turn aids in the process of differentiation.

Value Chain Model The value chain is identified as a business model describing the variety of business activities and functions that are performed by a business organization to create and distribute its products and services to its customers (Koc and Bozdag, 2017). The process of value chain

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analysis thereby helps in the evaluation of how these processes of production and distribution may be enhanced in terms of efficiency. According to the value chain model developed by Michael E. Porter, the business activities of an organization may be divided into two segments, namely primary and support. The primary activities consist of the inbound logistics, operations, outbound logistics, marketing sales and service. On the other hand, the support activities include procurement, technological development, management of human resources and infrastructural development (Zamora 2016). The value chain model as applied to the operations of the strategic business unit of oil and gas of General Electric can be described as in the following section.

Primary activities: 

Inbound logistics – This involves the management of the supply chain to receive, store and supply the products and services. This further involves the retrieval of raw materials and other inputs such as steel, copper, polyethylene, etc. required to conduct the production processes of the oil and gas unit.

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Operations – This involves the conduction of business activities and functions for production and manufacture of the products and services in all the countries in which the company operates. Those relevant to this SBU include equipment used for drilling, oil refinery, oil storage, petrochemical, etc.

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Outbound logistics – This process refers to the distribution of the products and services to the customers via other intermediaries such as the refineries brokers, dealers and the like. It also involves the entities engaged in transporting and delivering the products and services to the desired destinations.

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Marketing and sales – this involves attracting the customers to buy the products and services offered by the organization by applying its differentiation strategies of innovation and creative ideation in terms of product development. In this regard, the features that are highlighted include its superior quality as compared to competitors.



Service – The pre-sale, as well as post-sale services offered by the company, include providing training regarding the usage and control of oil and gas and other support activities; these are important marketing functions performed by the company.

Support activities: 

Firm infrastructure – This involves the management of activities such as quality control, handling of legal matters regarding interest rates, operational risks, credit risks and the like in the oil and gas business unit, financing and accounting.

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Human resource management – This involves the management of the approximately 38,000 employees operating in the oil and gas business unit, in terms of recruitment, training, performance management and rewarding.

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Technology development – This involves focusing on research and development for innovation and creative ideation to achieve the differentiation strategy adopted by the company.

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Procurement – This involves the procurement of the raw materials, technological equipment, machinery and other supplies required to conduct the operations of the oil and gas business unit.

BCG Matrix and Strategy Identification The product portfolio of a business organization refers to the range of products and services offered to the customers thereby determining the growth prospects in different segments (Seifert, Tancrez and Biçer, 2016). In the case of conglomerates, the analysis of product portfolio enables the evaluation of the product and service offering in terms of the operations of the various strategic business units. This process in turn aids in the process of identifying the business units, which have further potential for growth and development. The framework of the Boston Consulting Group Matrix or the BCG matrix provides for the creation of a portfolio for the business organizations, thereby determining the strategies that should be implemented for each of the strategic business units (Mohajan, 2017). This framework as applied to the business operations of General Electric determines the potential for further growth as provided by each of the business units.

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The stars of General electric can be identified to be the strategic business units of oil and gas, renewable energy, power and energy management as they have a high rate of growth in the market as well as a high relative share in the market. Sustaining these business units may involve higher investment but they have the potential towards further growth. On the other hand, the other strategic business units of General electric including health, manufacturing, industrial internet, lighting and capital and jet engines can be regarded as question marks as per the BCG matrix. It is so because these business units have high market growth rate but comparatively low market share. These business segments also require a significant amount of investments but have the potential to access adequate returns with the help of an increase in the market share through the adoption of efficient marketing strategies, market development or further product development.

Future Directions for Strategic Growth As discussed in the previous sections the process of product analysis helps in the identification of the strategies that may be adopted in the case of the different products and services offered by a business organization for the purpose of achieving the desired objective of gaining a competitive advantage in the market. The Ansoff Matrix provides for one such strategic framework, which helps in the analysis of the potential paths for the growth of a business organization (Loredana, 2017). The four strategies available to the organizations in terms of presence in the existing markets and risks involved for the business organization

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include the strategies of market penetration, product development, market development and diversification. The strategy of market penetration involves focusing on the increase of sales of the existing products and services in the existing market (Cleberg, 2019). The product development strategy involves the introduction of new products and services in an existing market. The strategy of market development involves the entering of a new market using the existing services and products. The strategy of diversification includes the entering of a new market using new services and products (Yin, 2016). In the case of General Electric, the strategies of product development and market development may be suggested to propagate further growth. The process of product development would enable the organization to align with its strategy of differentiation by the creation of new and innovative products. The strategy of market development of the other hand would enable the organization to tap into new markets throughout the world and cater to the needs and requirements of new markets with their innovative products and services. This in turn would help General electric to not only obtain new customers but also retain them, thereby achieving greater market share.

Recommendations 

Focusing on generating greater value for the customers – The strategy of differentiation as undertaken by the organization must be implemented within its business operations and functions keeping in mind the demands and requirements of the customers (Tokar, 2020). In this regard, it may be mentioned that the company must focus on catering to the requirements of the customers, thereby generating higher value for the consumption of the products and services offered.

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Enhancement of marketing strategies – The company must also focus upon the enhancement of the marketing strategies undertaken. The incr...