Questions and Answers on General Electrics Management Strategy

Which diversification strategy is applied by GE? What are the reasons for this strategy?

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General electric company is using corporate diversification strategy. This type of diversification involves the production of unrelated products but are profitable to the company. This type of strategy is usually tied to large corporations which aim at generating very high returns. From the case study, we are told General Electric is diversified into media, technology, provision of financial services and manufacturing. GE was organized into 11 main businesses in 2004, and these very few resources were allocated and shared between the 11 companies while there was little sharing among the independent businesses. In the year 2005, the organization was reorganized into six business units with the purpose of accelerating business growth and assisting the organization in becoming a more customer-focused organization. The new business units were also to help the organization in the delivery of effective solutions to the problems the customers face.

General Electric is also using technological diversification as a strategy. This is because the CEO believes that becoming more of a high technology company and positioning the businesss position in the emerging markets are key to the firms efforts in increasing revenue and profit level.

Why is GE opening their factories worldwide with an international sight?

GE is opening factories worldwide in countries like China, India and other Middle East countries because its vision and main purpose are to increase profitability and revenue. The other reasons which are not mentioned in the case study could be so as to access cheaper raw materials and cheap labor. This also highly contributes to profit maximization since some countries have high rates of unemployment, therefore, there is the high need for jobs. There are countries with raw materials, but there are no industries to process the raw materials into finished goods. GE could also be opening factories worldwide because they want more accessibility to their customers.

Do you thank that GE is adopting acquisition/merger strategies

According (Wallace & Moles, 2012) mergers and acquisitions are defined as the process of combining one or more companies to make it one corporation or business. The key variance between acquisitions and mergers is the manner in which the two corporations are brought together. In mergers, there is normally the process of negotiations amongst the two firms, and if the outcomes are favorable they can decide to merge but if not they can choose not to merge. Unlike in a merger, in acquisitions, there are mostly no negotiations. In acquisitions firm A buys company B and it becomes wholly owned by company A. Company A might decide that B exists as a separate entity or it might choose to absorb the company completely.

From the above illustration and definition of mergers and acquisitions, it is clear that GE is not adopting mergers and acquisition strategies. This is because GE is the mother company with business diversifications and not different owned companies. From the case study, we are told that in 2004 the company reorganized its business portfolio into 11 business unit and later in 2005 reduce the business portfolios into six. Therefore, it is evident to say that GE is not acquiring or merging with other companies.

Conclusion

General Electric is using corporate diversification strategy where the company produces different unrelated products which are all profitable to the enterprise. The strategy is used by large corporations which intend to maximize their profits. From the case study, we are told that the company is diversified into technology, media, manufacturing and provision of financial services. GE is also practicing technological diversification by acquiring high-end technology. GE is opening more factories worldwide with a purpose of increasing profits and revenue. The company is not adopting acquisition and merger strategies since it is not dealing with other companies but its business portfolio and diversification strategies.

References

BIBLIOGRAPHY Wallace, W., & Moles, P. (2012). Mergers and acquisitions. UK: Ediburgh Buusiness School.