Case summary: ‘GE’s Growth Strategy: The Immelt Initiative’ The General Electric Company (GE) is an American multinational conglomerate corporation incorporated in New York. The Company operates through five segments: Energy Infrastructure, Technology Infrastructure, Capital Finance and Consumer & Industrial. The company has 287,000 employees around the world. Products are Appliances, Aviation, Consumer, Electrical, Energy, Entertainment, Finance, Gas, Healthcare, Lighting, Locomotives, Oil, Software, Water, Weapons and Wind turbines. In 2010 company’s Revenue was US$ 104. 635 billion, Operating income was US$ 15.
166 billion, Net income was US$ 12. 163 billion, Total assets was US$ 751. 216 billion Total equity was US$ 124. 198. GE’s Subsidiaries are GE Energy, GE Technology Infrastructure, GE Capital, NBC Universal, GE Home and Business Solutions. On September 7, 2001, Immelt took over the charge of GE from Jack Welch, the almost legendary previous CEO. In his 20 years as CEO, Welch had built GE into a highly disciplined, extremely efficient machine that delivered consistent growth in sales and earnings through effective operations and though continuous stream of timely acquisitions and clever deal making.
This joint approach had resulted in double-digit profit increase through 1990s. However, Four days after joining of Immelt, the world was thrown into turmoil by 9/11 that triggered a downturn in an overheated economy, leading to a fall in economies worldwide. So his task was very challenging. Immelt recognized the need for change the basic business model. He bristled at the characterization of GE as a conglomerate, preferring to see it as a well-integrated, diversified company. He wanted to take the company into “big, fundamental high-technology infrastructure industries,” to have competitive advantage.
He elaborated this into a vision of a global, technology-based, service-intensive company by defining a growth strategy based on five key elements: Technical leadership, services acceleration, Commercial excellence, Globalization, Growth platforms. Within weeks of taking charge, he started making significant investments to align GE’s businesses for growth. He invested NBC broadcast business to capture the fast-growing Hispanic advertising market, for example, the company acquired the Telemundo and Bravo networks.
He invested in power-generation business acquiring Enron’s wind energy business. GE acquired Interlogix, a medium-sized player with excellent technology, and in water services, it bought BetzDearborn, a leading company. Beyond its historic Nishayuna R&D facility, in 2000 the company had established a center in Bangalore, India. To build on that global expansion, in 2002 Immelt authorized the construction of a new facility in Shanghai, China.
And as the year wore on, he began talking about adding a fourth global facility, probably in Europe. Despite the slowing economy, he increased the R&D budget from $286 million in 2000 to $327 million in 2002. He increased the number of engineers, salespeople, and service resources.
He strengthened commitment to China, increasing resources there 25% in 2002, increased their presence in Europe. According to him, acquisitions are a key form of investment and he invested nearly $35 billion in acquisitions over the past two years. GE purchased Amersham at $10 billion, which was an expensive acquisition, a British life sciences and medical diagnostic company. Immelt believed that health care was moving into an era of biotechnology, advanced diagnostics, and targeted therapies and they could create whole new ways of diagnosing and treating diseases.
At Beginning in 2002, Immelt had challenged his business leaders to generate $1 billion in operating profit. In response, six opportunities had emerged: health-care information systems, security and sensors, water technology and services, oil and gas technology, Hispanic broadcasting, and consumer finance. By the end of 2002, these businesses represented $9 billion in revenue and $2 billion in operating profit. He took another operating initiative called “simplification” aimed at reducing overhead, targeting reductions in the number of legal entities, headquarters, “rooftops,” computer systems, and other overhead-type costs.
In the first year, the commercial finance business expected to save $300 million over three years. In another simplification move, bringing in its three existing headquarters into one, saved more than $100 million in structural costs. And the transportation and energy businesses began sharing some IT and operational assets that also reduced structural costs by some $300 million annually. As 2004 progressed, the worldwide economy gradually started to turn around, and GE began showing signs of more robust growth. By year’s end, nine of its 11 businesses had grown their earnings by double digits.
To drive growth platform challenge deep into the organization, Immelt launched a process he called “imagination breakthroughs,” (IBs). Immelt had assigned the company’s best people to drive them and had committed $5 billion over the next three years to fully fund them. In that time, they were expected to deliver $25 billion of additional revenue growth. By 2005, 25 IBs were generating revenue. To stimulate ideas, Immelt set spending at least five days a month with customers, he began creating forums he called “town hall meetings.
” Here, several hundred customers would gather together to hear where GE’s CEO wanted to take his company, to provide input on that direction, and to suggest how GE could be more helpful to them. As an outcome of these meeting, Immelt decided to create another forum that he described as “dreaming sessions. ” In these sessions, he engaged in intensive conversations with a group of senior executives to try to identify major industry trends, their likely implications for them, and how GE might be able to help them. In 2004, Immelt’s push for globalization also began bearing fruit with revenues from outside the U. S. growing 18% to $72 billion.
Of this, the developing world accounted for $21 billion. He also planned to expand aggressively into India, Russia, Eastern Europe, Southeast Asia, the Middle East, and South America. In 2006, Jeff Immelt felt that GE was well placed on the growth path he had laid out over four years earlier. Between 2002 and 2005, he had put $30 billion of divestitures on the block, completed $65 billion in acquisitions, and made major investments in new capabilities in technology, marketing, and innovation. Having just announced an 11% increase in revenues for 2005 (including 8% organic growth), he was now forecasting a further 10% revenue increase in 2006.