Critical Analysis of Ge’s Strategy Under Ceo Jack Welch

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Corporate level strategy is about creating value by coordinating resources across business units and finding new ways to develop and capitalise on the organisation’s capabilities over a long-term horizon. Welch demonstrated his ability to articulate and transmit his values and vision with remarkable fervour and clarity throughout the organisation. However, despite its success, this resource-based view was perhaps too inward looking, the reward system too focused on short term individual performance with not much attention given to creating value for customers. Welch focused on developing GE’s cost advantage. As a result, GE may have missed valuable opportunities to develop new markets or expand its market share through product differentiation during those early years of Welch’s leadership as managers and employees focused on internal efficiency and year-to-year performance.

Welch’s obsession with performance and speed translated to impressive financial results, with net earnings increasing seven-fold over the twenty years while the number of employees remained more or less constant (GE Annual Reports). This implies enormous increases in efficiency and staff performance. However, greater speed and simplicity may have come at the cost of making compromises in other areas, such as Published: November 2009 in Management Online REview, ISSN 1996-3300 5 customer service, quality and safety. It would appear that the company-wide deployment of Six Sigma was a successful attempt to address the quality and process issues that may have resulted from Welch’s unrelenting push for speed and short-term results. Core competencies provide access to new markets, add value to the company’s products and are difficult to duplicate by competitors (Prahalad and Hamel 1990) Welch clearly recognised that GE’s best asset was its human capital. An important strategic step of empowering line management and employees was the delegation of strategic planning and...
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