This paper analyzes General Electric's corporate strategy, focusing on the interlocking implementation challenges that arise from its aggressive diversification and expansion objectives. The paper examines how GE's status as an "unrelated diversified company" has led to structural inefficiencies, stretched resources, and investor skepticism — particularly following the 2008 financial recession. It also explores proposed solutions, including transitioning toward related diversification, leveraging synergies across the value and supply chains, liquidating underperforming subsidiaries, and pursuing strategic partnerships to reduce financial risk and improve organizational coherence.
Many parts of General Electric's strategic plan are interlocked and therefore face some of the same implementation issues. For example, GE's strategy of diversification is essentially interlocked with its objectives of expansion. Through diversification, GE can continue a growth strategy that includes both operational and geographic expansion. As such, the strategic plan to diversify and expand represents interlocking dependencies. However, a number of implementation issues could prove problematic for the company in the future as it pursues its objectives to diversify and expand.
The company is what is known as an "unrelated diversified company" (Allen & Gorgeon, 2007, p. 7). GE has been successful in diversifying its operations into new markets; yet, this success can itself become a liability. According to the research, "looking at GE we see a massive, diversified, and profitable conglomerate with a lot of very good but very unrelated businesses" (Baron, 2011). Essentially, GE's strategic plan has moved into too many fields without a streamlined foundation holding them all in place. Future diversification and expansion will ultimately fall into the same trap: the company will simply spread itself too thin, incurring unnecessary costs in operations and resources needed to compete across so many different and unique markets.
To address these interlocking implementation issues, GE needs to streamline its operations in order to better manage its presence across so many markets. It is essential that GE seek "to find a coherent path of profitable growth as it takes on new challenges" (Allen & Gorgeon, 2007, p. 1). GE must reorganize part of its strategy in order to demonstrate a form of related diversification that promotes greater synergy within the company.
Part of achieving related diversification involves exercising the company's strategic relationships within the supply chain, value chain, and internal organization. It is these relationships that will help transform the company's unrelated structure into a more streamlined model. As the research notes, "the goal of related diversification is to exploit competitive advantages arising from the relationships between its different business activities — these are known as synergies. Synergies emerge when the joint effect of merged activities is greater than the sum of the separate events" (Allen & Gorgeon, 2007, p. 8).
Another interlocking factor within GE's strategic plan is the need for stronger financial governance across its many marketplaces — particularly after the company was hit hard by the 2008 financial recession. Since its revenue and stock numbers plummeted in 2008, the company has been striving to regain financial strength. A stronger financial position would, in turn, enable GE to address implementation issues in diversifying and expanding — two other interlocking elements of its corporate strategic plan.
This recovery has proven incredibly difficult, and several implementation issues have emerged as major problems. As the company attempts to regain stronger footing, it is encountering a markedly different market than existed before the recession. The research suggests that "since the financial collapse, investors are far more risk averse and naturally so … looking at GE with all of its subsidiaries and a balance sheet that includes a very large financial component ($322 billion in receivables for GE Capital alone), it's easy to see why investors have said 'why bother' over the past decade" (Baron, 2011). The company's current financial state presents too much uncertainty for many investors to justify the risk. Many of GE's subsidiaries are in their own financial trouble as well, creating risk for the entire organization.
"Proposed solutions: subsidiary liquidation and strategic partnerships"
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