Ges Global M Form Business Structure

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GEs Global M Form business structure:

Under Jack Welch, GEs global business structure was basically the Global M-Form structure. The headquarter included the CEO, Jack Welch, along with 3 more members. The headquarter was known as the corporate executive office. Under this, there were the corporate staffs divided in 8 divisions. Each international office was responsible for its own plans of working and under them operated all the businesses of GE in that country. The international offices reported to the corporate executive office
GEs Hierarchy of growth:

GEs gradual growth from a single focus business to a diversified multi-business corporation can be summarized in the following steps: Generation, distribution and use of electric power Organic growth and transformation to a SBU-based system Divesting unprofitable and low profit generating businesses, acquiring new profitable businesses. These businesses were very much diversified. Included both manufacturing and service related businesses which were not at all related to its core business. Expanded internationally. Went for joint-ventures and acquisitions. Acquisition mainly took place in countries which were then facing economic downturns. GE wanted to capitalize on this opportunity of buying the business incurring lower cost than normal. GE increased its focus more on service, specifically product service. Going for e-business.
Rumelts Diversification Typology:

GE is a Diversified unrelated corporation as its SBUs are not related in strategically significant way. Its core business includes lighting, appliance, motor, transportation, turbine, and equipment, which generates less than 70% of the total revenue. Whereas technology business included industrial electronics, medical systems, aircraft engines etc. and service business 1
Group-3 integrated nuclear service, construction and engineering etc which generated almost 75% of revenues as of 2000. The Diversified unrelated Portfolio:
GE 1982
TECHNOLOGY
Industrial electronics Medical systems Aircraft engines
CORE
Lighting, appliance, motor, transportation, turbine, and equipment
SERVICES
Nuclear service, construction and engineering, GECC info
Porter on synergy:
Transfer of skills: Welch always emphasized on the transfer of skills among different departments as well as different businesses of GE. The Multi-dimensional structure is especially helpful for this. He also focused on the huge task of realigning the skill setsto develop and share the skills of individual employees. To strengthen GEs individual business, Welch articulated GE as a boundaryless company; characterized by an open, anti-parochial environment, friendly toward the seeking and sharing of new ideas, regardless of their origins. Sharing of activities: GE focuses on developing effective process than controlling individual activities. They treated their suppliers as partners. Welch always emphasized on the sharing of knowledge and activities within departments and different SBUs. The Crotonville management development facility helped teams of managers to work together on real priority issues and share the results of the discussion to benefit GEs different SBUs. Thats how by transfer of skills and sharing of activities GE created great synergy among its SBUs.
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Core competence:
Organizational culture High performing employees Financial resources Strong Brand image Valuable Appropriable in multiple industries Inimitable
Dominant Logic for GE:

Dominant logic refers to how things are done in an industry or a firm. It can be determined by the industry or firm history, market trends, technologies, regulations, production processes, etc. Generally, dominant logic concept is more appropriate for an industry. But in this case, both in the era of Reg Jones and Jack Welch, GE has demonstrated their very own style of performing and getting things done. In fact, there were two dominant logics prevailing all over GE under these two CEOs. Dominant logic before Reg Jones: In 1930s GE used to follow highly centralized and tightly controlled form of corporate operation. Though in 1950 it went for decentralized approach, the overall operating process was bureaucratic. Dominant logic under Reg Jones: In the Reg Jones reign, GE transformed from department system to groups-divisions-departments-SBU system. The SBU based structure and strategic planning process was central to its management process. Apart from this structural change, GEs focus was still profit-oriented and they used to perceive a business well-performed if it was making enough profit. Dominant logic under Jack Welch: Jack Welch took this profit-seeking focus of GE to the next step. He used to believe in and wanted to achieve better than the best position in the market. His logic was to change the cognitive schema of everybody in GE to think in a more competitive way and push the best out of everybody. He cut the hierarchical steps down and downsized unnecessary employees. It was more like Do or die challenge for everybody. Continuous innovation, development and opportunists behavior was the prevailing dominant logic. We have learned from this that one thing that never changed in GE is that they were always ready to accept a change whenever it is necessary. They didnt wait for the industry to show the way; rather they created their own way and benchmark for others. 3
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Corporate synergy & business synergy

1. Corporate Synergies Improving product or process technologies: Each SBU identified the flaws in product or process technologies through Six Sigma plan and it was shared across GE. Apart form this programme; GE SBUs disseminated any successful practice and process and the whole company adopted that procedure. For example, the diagnostic sensors and communication capabilities, implanted in GE medical devices were gradually espoused by all other SBUs. This enable GE to provide more value added services to its customers. Replacing inexperienced managers Type 4managers were singled out and were removed because they carried values which contradicted with the overall culture of GE. The 350 business units were the source of ideas that are to be shared, learned, and spread and anyone who failed to do was actually hindering the overall growth of GE. Thus managers ranked their subordinates on a 1 to 5 scale evaluating their long term performance and the people rated 5 were removed. Restructuring the business: Jack Welch delayered the organizational structure by eliminating the sector level. The idea of massive downsizing and restructuring lead to a more agile and lean GE with a significant increase in operating profits ($1.6 billion to $2.4 billion). Businesses were categorized as core, high technology, and services with standard for each business should be #1 or #2 otherwise close resulted in discharging of 200 SBUs and acquisition of 370 businesses. This step made GE a highly diversified company with quality leadership in each of its businesses. The implementation of real time planning in stead of conventional strategic planning system and a budgeting process aligned with external criteria made GE more competitive.
Group-3 GE entered product service because they forecasted the growth opportunity in this arena and in the year 2000 75% of GEs business is comprised of service business. The service business is focused on each businesses and aim to make each of them more productive. Correcting strategic errors Six Sigma design applied across all the SBUs improved quality, lowered costs, and increased productivity of the whole company. A revenue of $750 million over the investment and an anticipated additional revenue of $1.5 billion resulted from sharing the best practices and achievements of single businesses. Facilitating skill and resource linkages across SBUs GE leveraged their skills and resources across SBUs to gain synergy. By instilling the notion of boundaryless company, GE eliminated all the barriers among different SBUs and applied the best practice of one unit into another. As a result it was easier to share know-how, process, resources, and techniques throughout the company. Canadian GE shared their flexible job shop techniques with U.S. appliance business helped to reduce production cycle and inventory cost. The Quick Response Programme which emerged due exchange of information between Canadian GE and U.S. appliance plant became a source of synergy as other businesses adopted this programme. Providing expertise, e.g. global expansion, acquisition Paolo Fresco was one of the key resources to enhance global expansion as he helped to increase the overall portfolio of GE by engaging in acquiring and partnering with multiple diversified business units. GE utilized its knowledge of the situation during economic uncertainty and ended up with global operations in Europe, Asia, and Mexico. GEs global revenues excelled domestic sales and made GE a globally competitive company. 2. Business-Unit Synergies
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Compatibility Same organizational culture and similar values e.g. open, participative, team building, quality focus were disseminated among all the SBUs which contributed to the success of each unit. All the SBUs applied six sigma plan and the units adopted the practices that were successful for other.
Complementarity Since GE has a diversified portfolio of business units the synergies arise from differences. For example, the Diagnostic sensors and Communication capabilities were installed by medical imaging business and later it was adopted by businesses as diversified GE engines and GE power system.
Parenting strategy:
The parenting strategy for GE is a combination of Development and Linkage strategy. Because the degree of corporate intervention is high and the corporate intervention is done on operating as well as financial activities. Using the notion of stretch, Welch actively cultivates synergies among SBUs and does the deal making, restructuring and buy and sell of businesses.
Strategy: Who is going to replace Jack Welch?

There are four men in Jack Welchs corporate executive office; three Vice Chairmen Paolo Fresco, Edward E. Hood, Jr., John F. Burlingma and an Executive Vice Chairman Frank P. Doyle. Any of three Vice Chairmen can succeed Jack Welch upon his retirement. These people have been working with Jack for a very long time and have in depth knowledge about GE, its culture, employees, and tactics which work successfully. Frank P. Doyle can be promoted to Vice Chairman and others can be replaced from Senior Vice President Position based on Jacks 4E criteria.

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Group-3

GEs Global M Form business structure:

GEs Hierarchy of growth:

Rumelts Diversification Typology:

Dominant Logic for GE:

Corporate synergy & business synergy

Strategy: Who is going to replace Jack Welch?

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