General Electric Company Digital Racing to Lead Industry 4.0 Report

Introduction

General Electric Digital has been in operation for many years, and it has gone through phases of growth and failure. The company has had various leaders, and each one of them contributed to the company either positively or negatively. In a multidivisional company, each of the divisions offers its products or services that have different prospects and different performances. This paper consists of an analysis of the General Electric Company, focusing on its various strategic issues.

Company Overview

Pat Byrne was appointed as the GE Digital (GED) CEO in July 2019. During this time, GED had the plan of making the company a standalone. However, this changed after Byrne joined the company because he convinced Culp, the former CEO, to reverse the decision¹. The company brought in several software businesses, such as the oil and gas digital team, power digital, and grid software. Adding these units helped GED become one of the largest companies dealing with industrial software, with over $1B in annual revenues. Analytics and data collection changes transformed customer offerings, delivery, and modes of production. These developments became a market opportunity for GED.

GED was among the first companies to enter the race of industrial companies going through digital transformations. GE Digital was formed in 2015, and the company transformed to become the world’s premier digital industrial company². This move would help the company provide its customers with industrial solutions for problems in the real world and grow from $6B in 2015 to above $10B by 2020. However, this did not go as planned because of the 2016 revenues added up to $3.6B, rose to $4B in 2017, and dropped to $3.9B in 2018³. Currently, the company focuses on four markets: power generation, the oil and gas industry, electric and telecommunications, and manufacturing applications. The oil and gas market also deals with adjacent markets such as chemicals and petrochemicals manufacturing.

General Electric Strategic Analysis

Brief Strategic Position of the Company

GE has continued to put effort into all segments to generate high profits and create a strong competitive advantage⁴. The company experienced a high revenue increase in the oil and gas business operation. Some areas were not performing well, but the overall performance was good. Changing technological, geopolitical, and economic scenarios have not affected the company’s performance⁵. The company’s technology and quality of products have helped it overcome the high competitive pressure.

SWOT Analysis of General Electric

Strengths

Global Market Presence

The company has been growing its technologies and services since its incorporation in 1892. This measure has helped the business grow, extending its operations to new areas. Currently, GE has transformed the industry with its many capabilities, and it has opened branches in over 180 countries and has employed over three hundred thousand people globally⁶. Its USA branch has the largest market, but other branches have a good footprint too.

Large Business Portfolio

This is a strength for the business because it operates in various fields such as oil and gas, renewable energy, energy connections and lighting, capital, transportation, healthcare, aviation, and power. Some of these areas have faced various challenges, but the business has continued to grow despite these hurdles. The company has managed to penetrate a wide market due to its business portfolio and this has contributed greatly towards its success.

Advanced Technology

The advanced technological capabilities have helped the company solve some of the world’s most significant issues. For example, GE has been on the frontline of clean energy innovation and introducing meaningful changes in transportation and aviation⁷. Advanced technology has helped the company gain a competitive advantage, which has contributed to its high growth rate.

Weaknesses

Higher Pension Related Liabilities

The pension plan deficit for General Electrics decreased in 2017 because of the rise in pension liabilities and lower discount rates, changes in salary assumptions, employer contributions, and investment performance. The company’s pension plan payments of $1.7B affected its CFOA.

Falling Revenues across the Business Segments

GE has experienced a drop in the revenues of its various business segments, such as transportation, power, and lighting. However, its performance is still strong despite the competition and the low revenues in some segments.

Opportunities

Growth through Mergers and Acquisitions

Acquisitions and mergers will help GE grow at a fast rate. The merger with Baker Hughes helped the business increase its operations because it managed to penetrate areas that it had not seen before.

Venturing in New Business Segments

The company already has several business segments that operate in various things. However, it still has the potential to venture into other areas that will increase the general revenue⁸. The business has a healthy foundation, and this is an advantage for the company, which it should use to venture into newer promising operations.

Business Expansion to Asian and Middle Eastern Markets

GE is yet to expand its operations to the Asian and Middle Eastern markets. The company should aim for more growth by increasing its operations in other countries.

Threats

Competition

Competition for GE has increased rapidly because of global technological changes. The rise of digital and new industrial norms has resulted in new competition in the market, and their aggressiveness is increasing with time.

Geopolitical Changes

Geopolitical changes have occurred throughout the globe, which has impacted the business in several ways. Some of these include; terrorism, ISIS, and lower oil prices, and have pressured the business negatively.

Higher Tax-Related Liabilities

When a business expands its operations globally, its tax liabilities increase because the tax rates vary in different countries. Some countries have recently changed their tax liabilities and rates, and this has caused the company to undergo more expenses⁹. The US has not been efficient in embracing change concerning the inclusion of trade relationships and policies with other countries. The relationships got worse during the governance of Donald Trump, and the current government has not managed to amend them.

Legal Pressures

Governments and law agencies have increased their aggressiveness towards businesses, resulting in less space for innovation. For example, companies in the aviation industry have been experiencing high pressure due to the 9/11 attacks¹⁰. The government has also increased legal pressures in the oil and gas industry, which has affected GE’s operations.

Strategic Issues of the Company

The company has faced various strategic issues, such as poor management of a highly diversified portfolio, financial failures, failed return on investment, inconsistency, and ignored business needs in specific markets¹¹. The top management at GE is aware of these issues and has tried to make changes in various departments that will help in tackling the problems. Due to these issues, the company’s stock price has fallen from $30.83 per share to $6.74¹².

Poor Management of Highly Diversified Portfolio

A business with a diversified portfolio is delicate because poor management can result in a rapid failure of the segments, resulting in the company’s general loss. GE experienced this issue, and it caused a collapse in most of the segments and an eventual overall failure. The company has relied heavily on diversification as its primary growth factor¹³. Therefore, poor management in these segments affects the business’s growth to a large extent. Poor governance has resulted in the complication in the company’s operations, a reduction in quality, below-average returns, and a lack of enough attention to each segment.

Financial Failures

The financial crisis in General Electric Company began in 2008, and it caused a massive blow to the company. GE experienced a 42% fail in its stock, causing it to rethink its operations¹⁴. At this time, Warren Buffett invested $3B to keep the company afloat¹⁵. This move did not help the company because its losses increased, and it had to sell some of its big money makers, such as GE Water, GE Plastics, and NBCUniversal. The sell-off continued in 2014 when it sold its financial services. It, later on, sold its home appliances segment in 2016 and the oil and gas segment in 2017¹⁶. Immelt had caused financial failure because he had maintained two private corporate jets even during the downfall period without notifying other directors. GE stock increased by 4% after he announced his retirement¹⁷. This figure indicates that Immelt was a crucial player in the company’s downfall.

Failed Return on Investment

GE experienced a failed return on investment in some of its business segments, such as the power unit. This issue was caused by several investment mistakes the company made, such as focusing on the past performances of the industry to determine whether it would be profitable in the future¹⁸. When a company operates in various business segments, it fails to return on investment in some areas because the company had not made a proper evaluation before investing. This issue was the leading cause of the financial crisis that the company faced.

Consistency Issue

General Electronics was not consistent with its operations because it did not allow for one section of the business to grow for years before venturing into a new segment. For a business to thrive, it needs to have a central area of focus and be consistent with it before expanding its operations to other regions.

Ignored Business Needs in Specific Markets

GE operated in several segments, meaning that it targeted different markets with different needs. As the company expanded its operations, it ignored some business needs of various markets¹⁹. Therefore, the business needed to pay attention to the specific needs of each of the markets by treating them as separate businesses. GE was not able to do this, and this caused its failure.

Internal Analysis of the Company

Critical Evaluation of the Value Systems and Resources of the Company

Talent management refers to the human resources of the company and its diversity. The company has physical resources such as GE Power, the biggest business segment of underwater technologies and power generation using industrial applications and independent power producers. Another company resource is leadership, which has transformed into innovation and imagination for the employees²⁰. The company had a tremendous competitive advantage because of these resources and assets, increasing its capability. Some of the challenges within the company are poor flexibility and an underperforming energy sector²¹. The company has excellent technological advancements, enabling it to penetrate the modern market, which is majorly based on digitization. These advancements add value to the company, forcing it to hire new people to facilitate the change, ensure data security and comply with the system.

Conclusion

General Electric Digital has increased its growth by investing in new technologies and businesses. The technical advances have helped the company achieve faster growth and focus on innovation. Its solid and extensive business portfolio has helped it overcome challenges and achieve tremendous business growth. Despite its major failure, the company is working towards strengthening its business segments and the various key markets worldwide. The firm has also invested in innovative practices and smart leadership, which will allow it to regain its position in the industry.

Bibliography

AlKatheeri, Abdulrahman, Ghada AlDhaheri, Hassa Alweswasi, Hamad Almansoori, Wejdan AlKatheeri, Zayed AlKhzaimi, and Haitham Nobanee. “Financial Statement Analysis of General Electric.”

Crawford, Neta C. “Human cost of the post-9/11 wars: Lethality and the need for transparency.”Costs of War (2018).

Erlangga, Heri. “Micro Financial Sharia Non-bank Strategic Analysis: a Study at BMT Beringharjo, Yogyakarta.”Budapest International Research and Critics Institute-Journal (BIRCI-Journal) 4, no. 2 (2022): 1677-1686.

Galli, Brian Joseph. “Change management models: A comparative analysis and concerns.”IEEE Engineering Management Review 46, no. 3 (2018): 124-132.

Gebauer, Heiko, Marco Paiola, Nicola Saccani, and Mario Rapaccini. “Digital servitization: Crossing the perspectives of digitization and servitization.”Industrial Marketing Management 93 (2021): 382-388.

Ocasio, William, and John Joseph. “Rise and fall-or transformation? The evolution of strategic planning at the General Electric Company, 1940–2006.”Long range planning 41, no. 3 (2008): 248-272.

Schmidt, Arine, Thayla T. Sousa-Zomer, João M. Andrietta, and Paulo A. Cauchick-Miguel. “Deploying Six Sigma practices to General Electric subsidiaries in a developing economy: An empirical analysis.” International Journal of Quality & Reliability Management (2018).

Struik, Michael. General Electric (GE) company completes production of 11T dipole coils at CERN. No. CERN-PHOTO-202101-020. 2021.

Tlemsani, Issam, Alanoud Alkhaldi, Batool Aljeshi, Israa Alluwaimi, and Jawaher Alrayes. “Analysis of the Capital Asset Pricing Model: Application to General Electric Performance.”Theoretical Economics Letters 10, no. 05 (2020): 1103.

Wise, George. Willis R. Whitney, General Electric and the Origins of US Industrial Research. Plunkett Lake Press, 2020.

Voynarenko, Mykhaylo, Kathrin Dumanska, and Nataliya Ponomaryova. “Formation of company’s economic activity context in the strategic positioning process in emergent environment conditions.” (2019).

Footnotes

1. Ocasio, William, and John Joseph. “Rise and fall-or transformation?: The evolution of strategic planning at the General Electric Company, 1940–2006.” Long range planning 41, no. 3 (2008): 248-272.
2. Wise, George. Willis R. Whitney, General Electric and the Origins of US Industrial Research. Plunkett Lake Press, 2020.
3. Ibid, 3.
4. Ibid, 1.
5. AlKatheeri, Abdulrahman, Ghada AlDhaheri, Hassa Alweswasi, Hamad Almansoori, Wejdan AlKatheeri, Zayed AlKhzaimi, and Haitham Nobanee. “Financial Statement Analysis of General Electric.”
6. Ibid, 6.
7. Erlangga, Heri. “Micro Financial Sharia Non-bank Strategic Analysis: a Study at BMT Beringharjo, Yogyakarta.” Budapest International Research and Critics Institute-Journal (BIRCI-Journal) 4, no. 2 (2022): 1677-1686.
8. Tlemsani, Issam, Alanoud Alkhaldi, Batool Aljeshi, Israa Alluwaimi, and Jawaher Alrayes. “Analysis of the Capital Asset Pricing Model: Application to General Electric Performance.” Theoretical Economics Letters 10, no. 05 (2020): 1103.
9. Struik, Michael. General Electric (GE) company completes production of 11T dipole coils at CERN. No. CERN-PHOTO-202101-020. 2021.
10. Crawford, Neta C. “Human cost of the post-9/11 wars: Lethality and the need for transparency.” Costs of War (2018).
11. Tao, F., & Qi, Q. (2019). Make more digital twins.
12. Ibid, 11.
13. Voynarenko, Mykhaylo, Kathrin Dumanska, and Nataliya Ponomaryova. “Formation of company’s economic activity context in the strategic positioning process in emergent environment conditions.” (2019).
14. Galli, Brian Joseph. “Change management models: A comparative analysis and concerns.” IEEE Engineering Management Review 46, no. 3 (2018): 124-132.
15. Ibid, 14.
16. Ibid, 1.
17. Ibid, 14.
18. Schmidt, Arine, Thayla T. Sousa-Zomer, João M. Andrietta, and Paulo A. Cauchick-Miguel. “Deploying Six Sigma practices to General Electric subsidiaries in a developing economy: An empirical analysis.” International Journal of Quality & Reliability Management (2018).
19. Gebauer, Heiko, Marco Paiola, Nicola Saccani, and Mario Rapaccini. “Digital servitization: Crossing the perspectives of digitization and servitization.” Industrial Marketing Management 93 (2021): 382-388.
20. Ibid, 18.
21. Ibid, 18.