Example Of Company: General Electric Company Research Paper

Internal Analysis of The General Electric Company

Business Segment: Energy Management
Industry: Electrical Equipment Manufacturing in the US
NAICS: 33531
General Overview
The General Electric Company has many business segments, some of which include Power and Water, Aviation, Oil and Gas, Appliances and Lighting, Healthcare and Energy Management. The energy management business segment is not as profitable as the other segments in General Electric. In fact, revenues from 2011, 2012 and 2013 have consistently ranked the energy management segment sixth or the seven business segments. However, the business segment designs and manufactures products that are integral in many sectors of the economy. For instance, the energy management division offers incident reporting for recording, monitoring, interpreting and actions, electronic controllers, wireless solutions, substation automation, protection and control and diagnostic products.
In the last year, General Electric orders increase significantly by 22% to clock at 31.4 billion dollars. However, the company’s equipment backlog in the same period increased from 21 billion dollars in 2013 to 250 billion dollars in 2014. The backlog was attributed to an increase in orders due to new technologies resulting in a 31% increase in the orders for equipment for gas turbines, locomotives and aircraft engines. In the same period, the orders to General Electric from growth markets increased by 34%. The various segments of the company performed differently in 2014 (McCarthy, 2014).
For instance the industrial segment increased its revenue by 3% to record 26.63 billion dollars. The transportation business increased its revenue by 10% to record 1.54 billion dollars while the oil and gas business increased its revenues by 7% to record 4.6 billion dollars. Comparatively, the energy management division performed dismally with a decrease of 1% in revenue to record 1.81 billion dollars. Overall, the earnings of the company were at 3.54 billion dollars, representing 35 cents for every share. This was an increase from the 3.19 billion dollars posted in the same period the previous year, earnings the represented 31 cents for every share (McCarthy, 2014).

Value Chain Analysis

The profit story at General Electric Company is influenced by different factors that are vital to its value chain. Figure 1-5 gives a detailed analysis of the value chain at General Electric

Primary Activities

Inbound logistics
The Energy Management Division at General Electric is involved in the design and manufacture of different electronic components in diverse sectors. Orders are placed from different markets in different parts of the world

Operations

The division has invested in extensive research and development. This has helped the division create unique and novel solutions for customer needs (Ferreira et al., n.d.).

Outbound Logistics

The division offers its clients the option of buying its products from its suppliers or lacing orders to have the products designed and manufactured in the division’s headquarters (McCarthy, 2014).

Marketing and Sales

The division depends on the networks that are developed by the other segments within General electric (Franke et al., 2007). Additionally, the division has a diversified product line and portfolio. (Ferreira et al., n.d.).

After Sales Services

The after sales service program at the division offers services for startups, risk-reducing installations and also product retirement.
Supporting services
The lifeline of the energy management division of the company is innovation and design. It is for this reason that the division uses an aggressive expansion and acquisition strategy. For instance, the division completed the acquisition of Converteam and Lineage Power Holdings, Inc. (CSIMarket. 2015).

Linkages in Value Chain

A more detailed analysis of the linkages in the value chain at Energy Management Division at General Electric is available in Figure 1-6. The major linkages are attributed to research development and its aggressive expansion and acquisition policies.

VRIO Analysis

The profits of General Electric, its brand and image are fueled by its business strategy and product innovation. The resources identified for VRIO analysis include research and development, business-level strategy, strong brand, skilled workforce and company image.

Strength of Business Unit approach

The SBU matrix for General Electric Company shows that when the market attractiveness index is considered through indicators such as market size, competitive pressure, market growth, price level and regulation and the business strength index through indicators such as a market share, customer satisfaction, product quality, financial strength, customer knowledge and cost efficient, the General Electric business unit is strong.

Suggestions

I suggest that General Electric continue with current business model. This is because it galvanizes the resources and capabilities of the company to influence its market leader status. As shown in Figure 1-7, capabilities such as research and development are complemented by resources such as company image and the strength of the brand and the blue ocean strategy to create innovative products that are uniquely branded using the blue ocean strategy. Additionally, figure 1-8 shows that the business unit is strong, and recommends more investments.

References

CSIMarket. (2015). General Electric's: Business Segments Description. Retrieved from http://csimarket.com/stocks/segments.php?code=GE
Ferreira, S., Gamertsfelder, A., Hough, C., Rothenberg, S. and Sherman, R. (n.d.). Corporate Analysis: General Electric. Retrieved from http://rebeccasherman.weebly.com/uploads/ 1/2/3/3/12338621/ge_corporate_analysis.pdf
McCarthy, E. (2014). GE profit beats estimates, shares up 4.1%. Retrieved from http://www.marketwatch.com/story/ge-profit-beats-estimates-shares-up-41-2014-10-17
CSIMarket. (2015). General Electric Company’s vs. its competitors results. Retrieved from http://csimarket.com/stocks/competition2.php?code=GE
Franke, R., Mento, A. Prumo, S. and Edlund, T. (2007). General Electric performance over a half century: Evaluation of effects of leadership and other strategic factors by quantitative case analysis, International Journal of Business, 12 (1): 137-151
Appendices
Figure 1-1 Revenues from General Electric divisions for three years
Figure 1-2 showing the different products under Energy Management Division at General Electric
The energy management division offers incident reporting for recording, monitoring, interpreting and actions, electronic controllers, wireless solutions, substation automation, protection and control and diagnostic products.
Figure 1-3 showing the financial results of General Electric against its competitors
Source: CSIMarket
Figure 1-4 showing the division of the expenditure at General Electric
General Electric relies on its operating activities to generate the company’s revenue. With regard to its resource allocation, the company invests heavily towards supporting these operating activities. In 2011, the annual expenditure was 13.1 billion dollars. This capital was invested in the categories illustrated above. The growth category entailed the development of capacity and the products of the company. This entails training the employees in leadership, developing their capacity to meet the goals of the organization and ensuring that the products meet the required specification. The productivity category entailed the purchase of new equipment and improving the processes in the company. The improvement category entailed investments in research and development facilities, environmental protection and safety for both the employees and customers.
Figure 1-5 showing the value chain analysis at General Electric
Primary Activities
Inbound logistics
The Energy Management Division at General Electric is involved in the design and manufacture of different electronic components in diverse sectors. Orders are placed from different markets in different parts of the world. Owing to this, the company needs to work with suppliers in order to handle shipment of these parts to customers in different locations. As innovation and design is a pillar in this division’s business strategy, a skilled and talented workforce who exhibit creativity and innovation are a requirement. Additionally, the division emphasizes the importance of leadership training at all levels of the division (Ferreira et al., n.d.).
Operations
The Energy Management division understands the importance of a robust competitive advantage. In this respect, the division has invested in extensive research and development. This has helped the division create unique and novel solutions for customer needs (Ferreira et al., n.d.). The division also uses the six sigma quality approach in order to ensure that their products are not just innovative, but also reflect quality.
Outbound Logistics
The division offers its clients the option of buying its products from its suppliers or lacing orders to have the products designed and manufactured in the division’s headquarters (McCarthy, 2014).
Marketing and Sales
The division depends on the networks that are developed by the other segments within General electric. Additionally, the division has a diversified product line and portfolio. This also means that its customer base is diversified in terms of needs and sectors (Ferreira et al., n.d.).
After Sales Services
The after sales service program at the division offers services for startups, risk-reducing installations and also product retirement.
Supporting services
The lifeline of the energy management division of the company is innovation and design. It is increasingly important to design innovative products that not only meet the needs of the customers, but also keeps the competition at bay. It is for this reason that the division uses an aggressive expansion and acquisition strategy. For instance, the division completed the acquisition of Converteam and Lineage Power Holdings, Inc. (CSIMarket. 2015).
Figure 1-6 showing the linkages in the value chain
Trade-offs
As the division invents new technologies and brands them into new markets through the blue ocean strategy, it becomes more decentralized.
The division also accrues high costs to hire skilled personnel, and more costs in training. The skilled personnel is also facilitated through a robust research and development department, by that contributing to the high turnover and revenue.
Coordination
The company continually invests to strengthen its brand and image. This helps the company sustain its industry leader position, by that effectively attracting more customers and skilled workforce.
Vertical integration
The organization has a strategy to consolidate its competition though its aggressive expansion and acquisition strategy. For instance, the division completed the acquisition of Converteam and Lineage Power Holdings, Inc. (CSIMarket. 2015).
VRIO Analysis
Figure 1-7 showing the VRIO analysis for General Electric Company
Research and development
Research and development is very valuable to General Electric, especially in the Energy Management Division. Through research and development, the division is able to design products that not only meet the client’s needs, but also set the company apart from its competitors. The importance of research and development is shown in the resource allocation of the company as shown in Figure 1-4 where 26% of the company’s resources are ploughed back into research and development. However, this capability cannot be described as rare as other companies have also invested heavily in research development in order to differentiate their products and also compete favorably in the market.
Strong Brand and Company Image
The continued success of the company in its industry is highly dependent on the company image and the strength of its brand. As seen in Figure 1-3, the company is at the top of the industry. A large part of this is attributable to the strength of the company and its image as a haven of quality in an industry where compromising on quality is potentially catastrophe. Through its support activities, the company invests heavily in many of its primary activities in order to sustain the image of the company and improve the strength of its brand. These two resources are rare in this industry. Knowing this, the company has exploited these two resources to venture into new markets and attract new customers.
Business-level strategy
General Electric Company has been very innovative in branding its new products. Rather than compete with other players in the market, the company has resulted to using a more effective approach, and one that requires less effort compared to taking on the competition. The innovations of the company are uniquely and innovatively branded using the blue ocean strategy. This means that rather than focusing on edging out the other competitors in the industry, General Electric focused on creating an entirely new market for its products by designing unique products for specific situations and purposes. This capability is rare and has enabled the company to diversify its market in terms of geographical zones and products.
Skilled Workforce
A skilled workforce is at the core of the company’s operations. This is a very valuable pillar of the company’s success. All the primary activities and support activities of the company rely on the skilled workforce for execution.
Strength of Business Unit
Figure 1-8 showing the SBU Matrix for General Electric Company
The SBU matrix for General Electric Company shows that when the market attractiveness index is considered through indicators such as market size, competitive pressure, market growth, price level and regulation and the business strength index through indicators such as a market share, customer satisfaction, product quality, financial strength, customer knowledge and cost efficient, the General Electric business unit is strong. As such General Electric should feel confident to invest in the business unit.