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General Electric (GE) is a global market leader which is well known for its technological innovation, leadership and world class quality in the conglomerate industry. For the purpose of analysing strategic management in action, this report focuses on its Aircraft Engines (hereinafter referred to as “AE”) and Medical Systems (hereinafter referred to as “MS”) business units – a subset of its ‘Technology’ segment. Its macro-forces (sluggish economy, advent of e-business, ageing demographics) combines with the industry forces (where degree of rivalry is intense and degree of attractiveness to entrants is low-moderate) to identify 3 sets of critical success factors (CSFs) in each industry. Findings from the internal analysis identified GE as pursuing a successful related linked diversification strategy. Results from the VRIO assessment and value-chain analysis suggest that AE and MS pursue a differentiation strategy which strongly matched the industry CSFs. The ESC gap analysis contains insights and potential gaps, derived in relation to its: environment-strategy; strategy-performance; strategy-capability. Overall, GE’s remarkable performance and brand prestige has put them in good light. However, the gaps identified (slow conformance to e-business; inadequate preparation to meet future medical demands; inconsistent strategy to fend off rivalry and entrants) needs to be addressed to concretize its market standing. Finally, a brief recapitulation on issues identified therein completes the analysis.
General Electric is the world’s leading diversified industrial firm widely recognised for its world class quality, innovation and technological expertise, leadership, and brand prestige. Under Welch’s leadership, it has endured massive restructuring efforts (i.e. acquisitions, divestitures, retrenchments, shaping GE’s culture) – the pillar for its success today. Its AE unit – operating within the aviation industry – faces competition from Pratt & Whitney and Rolls-Royce (Society of Manufacturing Engineers, 2001). On the other hand, its MS unit operates within the healthcare industry and faces major competitions from Siemens, Toshiba, Philips and Marconi (Medical Imaging, 2000). The acquisition of Thomson (a medical imaging business) and the development of its online diagnostic technology (which can be integrated into all of GE’s businesses) illustrate some of its rewarding milestones. Both units – being part of its ‘Technology’ segment – are constantly challenged to stay on the leading edge by investing in R&D. In brief, this report attempts to assess GE’s extent of environment-strategy-capability fit through an analysis strategic element within its external and internal environments. Corporate information are drawn from Hill and Jones (2007, pp. C481-C500) and the timeframe from 1981 to 2001 sets the boundary for analysis. In view of the apparent lack of information provided by the case fact, this report is, in part, derived by means of logical assumption and personal judgment.
2.0 External Analysis
According to Kotler (1988), the external environment is made up of the macro-environment that affects all firms and a micro-environment that affects firms within an industry (see Diagram 1: The External Environment). The former is made up of forces which are close to the firm and affect its ability to serve its customers, while the latter (see Table 1: Macro-Elements) refers to the larger societal forces that, in turn, affect the whole micro-environment. Diagram 1: The External Environment
Source: Hubbard (2000, pp. 26)
2.1 Macro-Environmental Analysis
The macro-environmental analysis will help to identify an array of potential opportunities and threats (Kotler, 1998). Table 1: Macro-Elements
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