Sample Management Report Paper on Strategic Management

Strategic Management

1. Corporation Identification

A corporation is defined as a group of individuals or company recognized by law as having been authorized to act as a single entity. While a charter was all that was needed to establish early incorporated entities, most jurisdictions now permit the establishment of new corporations via registration (Smiddy & Cunningham 2010). Corporations can be broadly categorized into two major forms based on whether they are for profit or not, and if they issue stock, or not. A product portfolio refers to the collection of the products on offer by a business. The Boston Matrix has emerged as the best tool for analyzing product portfolio. Products in a fast growing market and with a high market share are known as stars. Products in a slow growing market and with a high market share are known as Cash Cows.  Products in fast growing markets but which have a low market share are known as Question marks, whereas products in slow growing markets but low market share are referred to as Dogs. A product portfoliois the range of items sold by a business. It can be analyzed using the Boston Matrix. The service Portfolio refers to the fundamental reservoir for all information regarding the various services provided by an organisation. There are three key parts of the Service Portfolio:

Service Pipeline: encompasses references to under developed or proposed services that is, not yet live (Blokdijk 2015).

Service Catalogue: This encompasses connections to active services via their Service Design Package (Johnson 2011).

Retired Services: This refers to the services that are about to be discontinued, prior to decommissioning. Out of the three types of services support team and customers can only see the Service Catalogue (Blokdijk 2015). 

General Electric (GE) is an American company that was incorporated in 1892, but is today recognized as a digital industrial company with a global reach. GE has diverse products and services ranging from oil and gas production equipment, aircraft engines, medical imaging, power generation equipment, industrial and financing products. The company’s products and services have further been categorized into diverse business units or segments that include Power & Water, Aviation, Oil & Gas, Healthcare, Energy Management, Transportation, and Capital (CSI Market (2016).  A business unit or more specifically, strategic business unit (SBU) is a term used in reference to a profit center within a corporation whose key focus is on market segment and product offering. SBUs encompass discrete analysis of competition, marketing plan, as well as marketing campaign. This, even as the business unit could still be part of the larger corporation. An SBU could be a business on its own or part of the larger corporation. Increasingly, corporations have been seen to develop multiple SBUs, and each one of these takes individual responsibility for its profitability. GE encompasses several SBUs, each of whom takes charge of its own profitability. Even though these SBUs are managed as separate business, they are, nonetheless, accountable to the parent corporation.

The individual SBUs have been explored below:

Power & Water: GE’s power segment is involved in power generation it also provides government, industrial as well as other customers across the globe with services and products related to water reuse and energy production.

Renewable Energy: GE’s Renewable Energy segment provides renewable power sources. The segment provides solutions from offshore and onshore hydro, wind, and low carbon technologies (Reuters 2016).

Oil & Gas: This segment services diverse sections of the global oil and gas industry, including drilling, production, transportation via pipelines and LNG (liquefied natural gas), among others. Also, the segment offers compression and industrial power generation solutions to petrochemicals and refining segments.

Energy Management: GE’s Energy Management is concerned with designing and deploying technologies that aid in the transportation, conversion, automation, as well as the optimization of energy into electrical power (Reuters 2016). Some of the control solutions and software that the company provides include relays, circuit breakers, and panel board. These are aimed at protecting people, equipment, and property.

Aviation: The aviation segment at GE designs and manufactures military and commercial aircraft engines, mechanical aircraft and electric power systems, and integrated digital components.

Healthcare: GE’s Healthcare segment offers essential healthcare technologies to software and IT (information technology), medical imaging, drug discovery, performance improvement solutions, patient monitoring and diagnostics, as well as biopharmaceutical manufacturing technologies (Reuters 2016).

Transportation: this segment supplies means of transport to mining, marine, railroad, and drilling and stationary power industries.  GE’s locomotives offer passenger and freight rail services and locomotives that have proved essential in solving rail challenges.

Capital: This segment offer financial products and services to energy, infrastructure, aviation, and healthcare markets.

2. Corporate Research

Business Unit Identification

A product line refers to a related products sold by one company under a single brand (Ireland & Hitt 2005). In contrast, service line refers to the categorization of all services and products related to a single SBU or segment of a particular business.

GE’s product line can be categorized as follows:

Capital finance segment encompasses operating leases, commercial loans, credit cards, home loans, and personal loans

GE’s Technology segment is involved in the manufacture of such products as fire detection and intrusion products, aircraft replacement parts, card access systems, medical diagnostics, jet engines, patient monitoring equipment, and medical imaging (General Electric 2016).

GE’s energy infrastructure products include gas turbines, wind turbines, aircraft engine derivatives, and water purification systems

GE’s Industrial and Consumer Division is involved in the manufacture of products such as washers, refrigerators, residential air conditioners, microwave ovens, as well as gas and electric rangers.

3) Corporation Revenue Centres

In business, a revenue centre can be described as a division that realizes sales from services rendered or products sold (Needles & Crosson 2013). Capital is a leading revenue center for General Electric. In 2015, it accounted for 19.92% of the company’s revenue. In the 2014/15 fiscal year, the energy infrastructure segment accounted for the greatest revenue for GE (38.2%), followed by power and water (20.39%) and capital (19.92%), in that order. On the other hand, the aviation segment accounted for 18.94% of the revenue, healthcare accounted for 13.43% while oil & gas accounted for 12.21% of the revenue. Elsewhere, energy and transportation segments accounted for 5.6% and 5.03% of total revenue by the corporation, in that order (CSI Market 2016). From an accounting context, revenue refers to the income generated by a business from the sale of services and products to customers in its usual business activities (Carcello 2008).

4) External Environment Analysis

The acronym PESTEL refers to the political, economic, social, technological, environmental and legal environment in which a business operates. The PESTEL tool or framework has found widespread use by marketers to monitor and analyze the external marketing environment (or macro-environmental factors that affect an organization.

Political factors: These describe the political stability and attitudes of political movements and parties (Miller, Vandome & McBrewster 2011). It manifests in government involvement in trading agreements and tax policies

Economic: these include levels of employment, economic growth rates, monetary policies, and inflation rates, among others

Social-cultural: this encompasses aspects like age distribution, demographics, wealth distribution, and social classes (Miller et al. 2011), et cetera.

Technological: these refer to the rate of development and emergence of new inventions, and changes in technology

Environmental: describes such issues as waste disposal, limited natural resources, and recycling procedures.

Legal: Includes international trade restrictions and regulations, consumer protection, employment laws, and mergers’ and monopoly rules, among others.

In business, operating environment refers to the political and economics conditions in the national and local levels, market conditions, demographic factors (Mertzger 2014), and other external forces to a business that impacts its overall success.

PESTEL analysis of GE’s Business Units

Power & Water:

Political: General Electric’s Power & Water business unit has operations in diverse political settings such as Europe, North America, Africa, and South America. These locations are governed by varying government policies that impact on the operations of this business unit (Witcher & Chau 2010). While some governments offer subsides that are beneficial to General Electric, others do not.

Economical: Given its wide cope of operations under different jurisdictions, General Electric experiences varying rates of economic factors like inflation rates, taxation changes, and exchange rates. These impact on its operations differently.

Social-cultural: Changes in social trends have also had an influence on GE’s demand for its power & water products (Reuters 2016), as well as the availability of employment opportunities. The company is increasingly appealing to the millennial generation to apply for technical positions in this business unit as a means of spurring innovations.

Technological: advances in technology demand that GE also keep pace with the latest developments as a competitive edge. For example, the company has continually invested in the latest technology in solar systems, wind turbines, and nuclear reactors. 

Environmental: GE endeavors to employ efficient solutions to its operations in Power & Water Unit in an effort to abide by the current strict environmental requirements.

Legal: GE is an equal employment employer and also ensures that its employees are well remunerated in line with the existing pay structures in this area of operations.

Oil & Gas

Political factors: Some governments relies on oil & gas as their economic mainstay and for this reason, they have a lot of interest in the sector. Therefore, this will have an impact on the policies of dong business in a given jurisdiction

Economic factors: again, demand for services and equipment in the oil and gas sector will be determined by the economic conditions of a given region or market. Thus, rates of economic growth will determine the demand for these products and services.

Socio factors: skills shortages, uncertainty over market for products

Technological factors: Ability to keep pace with the latest technological innovations in the industry (General Electric 2016).  

Environmental factors: Oil & Gas companies have come under a lot of criticism over their negative impact on the environment during their down-stream activities and release of emission during manufacture of petroleum products. This might hamper the sale of GE’s products.

Legal factors: the industry is faced with tighter regulatory controls.

Aviation

Political: In the aviation industry, passenger safety is a key requirement.  General Electric mainly manufactures jet engines and service parts for commercial and military use. Therefore, regulations by various airline regulators and governments will impact on their production responsibilities

Economic: GE faces stiff competition in this sector and has been forced to enter into various revenue sharing programs as a means for survival. Currency fluctuations and rates of inflation also affect its revenue. The recent economic slowdown led to reduced passenger traffic, increased cost of aviation fuel, and a rise in operating and maintenance costs. This means a decreased demand for GE’s products.

Social: Increased affluence has meant that more people opt to fly where they would have used other forms of transport. This increases the demands for more aircrafts and aircraft engines and parts, thus increased sales by General Electric.

Technological: the aviation industry is one of the sectors where technology has been embraced extensively. This has meant that General Electric also invests in the latest technology in the manufacture of its products (Reuters 2016). This is important as advances in technology limits the technical lifetime of products like aircraft engines.

Environmental: the consumer (both individual and commercial) has become increasingly conscious of environmental concerns like population. Therefore, General Electric has to ensure that it fulfills al the environmental regulations

Legal: GE in its operations has to ensure that it does not violate any requirements or policies of operations that could bring about safety issues.

Healthcare

Political: GE has to contend with government policies in price control and approval of drug research and discovery. Such delays may end up affecting the company’s operations 

Economic: The healthcare unit of General electric faces a limited timeframe within which it can recoup its investment in R&D (Reuters 2016).

Social: both consumers and industry regulators alike weighs the risk and benefits associated with this sector. The industry also lacks political and public support, while healthcare funding has come under a lot of pressure form an aging population.

Technological: Technological solutions in the industry are very expensive. In addition, the powers and capabilities of regulators cannot match the pace of change in the sector.

Environmental: The industry players like GE faces restrictions to ensure proper disposal of waste from its manufacturing plants.

Legal: The industry faces tighter regulatory controls, while patent protection is also restricted by legislation.

5) Source of Sustainable Competitive Advantage

A company is said to possess a competitive advantage when it time and again outperforms competitors in the same industry. This happens in case the company posts higher profits that those posted by competitors. Sustainable competitive advantage refers to attributes, abilities, or assets of a company that cannot be easily exceeded or duplicated; and affords the company a favorable or superior long-term position relative to the competition.  Sustainable competitive advantage exists when a company manages to maintain their competitive advantage for many years. Factors that influence sustainable competitive advantage include: (i) effective supply chain management; (ii) product innovation and differentiation; (iii) organizational responsiveness, and (iv) cost leadership (Mertzger 2014).

Wen-Cheng, Chien-Hung and Ying-Chien (2011) define sustainable competitive advantage as an organization’s capacity to acquire or develop a combination of attributes that improves its effectiveness in serving the target market more efficiently compared to competitors.  Firms’ capacity to develop sustainable competitive advantage is influenced by the strategic management practices that the firm has entrenched in exploiting internal and external resources (Kabue & Kilika 2016). This highlights the need for organization managers to develop adequate understanding on the most effective source of competitive advantage. General Electric has structured its operations into different business unites that include power and water, transportation, oil and gas, health care, aviation and capital. These units derive sustainable competitive advantage from different aspects.

The power and water unit derives its competitive advantage from integration of effective technologies such as the Air Quality Control System (AQCS) that enables the firm to Use natural resources such as oil, nuclear energy, gas and water in generating electricity.  Similarly, the healthcare segment derives competitive advantage from integration of diverse technologies such as medical imaging. Moreover, the unit has diversified its health care system hence improving its efficiency in addressing diverse healthcare needs (Reuters 2016). The aviation unit sources its competitive advantage from the employees’ skills.  Thus, the firm is able to design and develop effective commercial, electric power, military and commercial aircraft engines.  The source of competitive advantage for the transportation unit is its ability to develop products that meet and exceed the stipulated environmental safety requirements by the Environmental Protection Agency, hence limiting the firm’s contribution to climate change.  On the other hand, the capital business segment derives competitive advantage from its approach to continuously develop new financial products that are aligned with the needs of diverse customer groups (Reuters 2016). Four factors of sustainable competitive advantage

A firm can assess the degree to which it has developed sustainable competitive advantage by assessing four main aspects as examined herein.

Valuable; the source of competitive advantage must be effective in minimizing the threat posed by competitors and enhance the firm’s efficiency in exploiting the market opportunities (Sanchez & Heene 2010).

Rarity; the source of competitive advantage must not be readily available to the competing firms (Pesic, Milic & Stankovic 2012).

Inimitability; the source of competitive advantages should not be easily copied or imitated by competitors (Kumra, Manfredi & Vickers 2011).

Organization; effective frameworks must be establish in order to successfully capitalize on the value inherent in the source of competitive advantage (Helfat 2007).

6) Strategic Direction

According to Watkins and Leigh (2009), an organization’s strategic direction entails the path that an organization intends to take in its pursuit to achieve the overall organizational goals. The strategic direction is defined by a firm’s vision and mission statements and the objectives.  Moreover, the strategic direction further outlines the core values that a firm intends to follow in achieving the strategic goal.   In its quest to achieve sustainable competitive advantage, General Electric should consider the following aspects in its future strategic direct:

  • To achieve sustainable competitive advantage by pursuing the triple bottom-line dimensions of sustainability. These dimensions include environmental, economic, and social dimensions of sustainability. 
  • To develop an effective internal organizational culture that fosters optimization of internal and external organizational resources.
  • To be an attractive employer in the global labor market by providing employees an opportunity to progress through their desired career path.

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