General Electric StrategyResearch Paper

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GE Industrial Solutions is a producer, primarily, of power and electrical systems and is part of the General Electric conglomerate. Major competitors are Emerson (USA), Siemens (Germany), ABB (Switzerland) and Toshiba (Japan). The industry conditions are favorable, which is born out in the financials for GE, which indicate stable revenue growth and strong profitability. The company competes as either a differentiated player on a best cost player, depending on the product. Firms are all strong, and they compete for customers by offering a comprehensive slate of product and service solutions -- many customer use two or more competitors to encourage competition among the industry players.

GE has tremendous resources, but in general so do the company's competitors. As an American company, GE has the best domestic national market, a fact that has helped it to become bigger that its competitors, though they are all household names within the industry. GE has enhanced R&D capabilities, strong leadership and bargaining power advantages that it can use to extend its market leadership. GE IS currently a well-performing division, and the structure of the division has been built to support the current strategy. Therefore, it is recommended that GE maintains the current strategy, but continue to invest in R&D as maintaining technological competitive advantage will be critical to long-run success.


GE Industrial Solutions, a division of the General Electric conglomerate, manufactures and markets products pertaining to power and electrical systems. It has three main product subdivisions -- Critical Power, Drives & Controls, and Electrical Distribution. IS a B2C company, and defines its markets by customer type. The major customer types that it delineates are commercial, data center, health care, industrial, mining, oil & gas, and telecom (GE IS, 2014). It is often the case that one customer will need products from more than one of the product subdivisions, something that has to be reflected in the marketing strategy.

GE IS trades with a differentiated strategy. The company seeks to differentiate itself in a couple of different ways, and relies on innovation and new products as a means of maintaining a strong market position. This generic strategy reflects the technical nature of the company's products, and the need for performance, therefore the external preconditions exist for the pursuit of a product leadership strategy (Murray, 1986). This paper will examine the strategic management of GE Industrial Solutions, including external environment analysis and an explanation of the strategic planning methodology.

Strategic Planning Methodology

Miles and Snow (1978) elaborated the idea that strategy comes before structure in companies. Strategy is developed on the basis of external environmental analysis, and a desire to find ways to exploit opportunities or to counter the threats that have been identified. There are contrary views to this, the most important being that of Hall and Saias (1980) who countered that structure is a constraint on strategy. While this latter point is true, in particular given that IS operates within the broader structure of General Electric, it is also well-known that of all firms, General Electric is one of the more willing and capable when it comes to dramatic re-organization. Therefore, the constraints that structure put on strategy are minimal. The basic strategic management methodology will thus be followed, with constraints such as organizational structure given due consideration, but not driving the process.

Thus, the first step is to conduct the internal and external analysis of the business. This analysis will provide insight into what the company is capable of, and what strategies it might wish to pursue in the marketplace. It is assumed, but not written in stone, that the current strategy of product leadership is most likely going forward, as it fits within GE's broader strategy and is closely aligned with the current capabilities of the organization.

Internal Analysis

There are several methodologies for conducting an internal analysis. First is an analysis of the dominant economic features of the industry. The customer base provides insight into this. The customer base is diverse. A typical B2C company with a diverse customer base will see its income correlated with the broader economic environment, but subject to individual industry fluctuations. As an example, mining is historically a cyclical business. Right now, mining is expected to be in a down cycle, because key demand drivers like Japan and China are experiencing manufacturing slowdowns and mining giant Australia is beginning to move away from policies that encouraged a mining-centric economy (Mather, Masanao & Bowe, 2014). Thus, IS susceptible to prevailing global economic conditions, but its diversification acts as hedge against demand volatility.

IS retains competency in innovation, as measured by new product launches. The company has been able to launch several new products in the past year, and most of these are subject to patent protection. IS has a large number of patents, and routinely uses IP protections as a means of maintaining competitive advantage and pricing power associated with monopolistic competition. The GE brand and senior management can also act as a strength, because IS can tap those resources if need be. GE famously has an excellent leadership pipeline, which should give IS better leadership than many of its competitors, plus GE benefits like a lower cost of capita and preferential market access. IS also dealing from a position of financial strength. The unit contributes a substantial portion of GE's revenues and profits (2013 GE Annual Report), which means not only does it have significant internal financial resources but it is likely to get preferential access to leadership and other corporate resources.

There are several theoretical models for understanding the external environment in which a company operates. One is the Five Forces model (Porter, 2008), which describes the favorability of an industry from a profit perspective. The bargaining power of suppliers is relatively low. Suppliers in this industry tend to be raw materials and generic components suppliers. The value of their products is considerably lower than the value of the finished goods that GE has designed and made, and thus they have limited bargaining power, especially since GE and its competitors are often very large companies with strong scale advantages. The bargaining power of buyers is relatively low as well. GE is larger than many of its customers, and patents give it a measure of protection for its products. There are competing products, but they are often imprecise substitutes. GE's quality reputation also lends it additional bargaining power even when there are direct competitors.

The threat of new entrants is relatively low. There are high capital costs to enter this industry. There are several multi-billion dollar companies in the industry, most of which started in the 19th century in either the U.S., Japan or Europe. Even major economies like Canada, South Korea or France have struggled to get a foothold in this market. It is possible that a Chinese company could emerge, especially if afforded infant industry protections by its government, but otherwise there is very little threat of new entrants, as the last major one was Toshiba in the 1950s.

Industrial products of this type tends to be a concentrated industry. There are smaller, more specialized players, but in general GE has the ability to combine R&D with economies of scale, and most firms in the industry -- such a Phillips -- have similar capabilities and can compete as such. There are few threats of substitutions, because of the specialized nature of the equipment. Both of these factors serve to enhance the pricing power within the industry. There is, however, some intensity of rivalry. The firms in the industry are large, and exit costs are high -- even if GE divested a division that division would continue to exist in the industry, just under different ownership. Thus, firms compete intensely for customer relationships and major contracts. In many cases, companies seek to offer comprehensive solutions in order to win business. This competition is one of the only factors that contains prices in the industry. But in general, this is a favorable industry in which to operate. The financials support that assessment -- the net margins are high, for example power & water (20.2%) and oil & gas (12.8%).

General Electric is strongly positioned. A few other major competitors like Phillips and Siemens are equally strong in their positioning. These company all have similar strategies, and all are capable of executing on these strategies. Within any given product category, there is likely to be a discount competitor and a niche market player as well. Positional mapping is a technique that helps companies to better understand their strategic positioning. This mapping is done for every product or business, and typically involves understanding the trade-off, from the perspective of the customer, of price and a significant product attribute. Normally, a company wants to be in the upper right (high quality, high price) quadrant, or the lower left (low price, low quality). A position in the upper left is usually good for penetrating markets, but also means the company is leaving profit on the table. A position in… [END OF PREVIEW]

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