Corporate Strategic Management

CorporateStrategic Management

TheGeneral Electric Company was incorporated on April 15, 1982. Thecompany has diversified operations in the engineering industry(Schatz, 1983). According to (Forbes, nd), the General ElectricCompany is one of the top largest companies in America. The companyis ranked number 9 with sales of approximately 148 Billion UnitedStates Dollars. It has annual profits of approximately 15.2 billionUnited States Dollars, assets of approximately 648.3 Billion and amarket value of 253.5 Billion dollars.

Businesslevel strategies entail the actions undertaken to increase the valueprovided to customers and maintain a competitive advantage by anorganization. Specifically, the strategies aim at exploring corecompetencies of the organization in specific products or servicemarkets. The General Electric Company adapts to various businesslevel strategies. First is the Risk mitigation and communicationstrategy. The General Electric Company prioritizes risk reductiondepending on the severity of the risk, escalated to the contractresearch organization. After a thorough discussion of the risks, theyare assigned to the most suitable business or functional leader inconnection with the quarterly operational reviews. The leaders arerequired to monitor continuously, evaluate and report on the risksfor which they bear responsibility. Consequently, the organizationcan classify the various available options for each risk such asavoid, transfer, reduce or accept. The response strategies aretailored to ensure that risks are within acceptable Board guidelines.The ability to manage risks plays a great role in maintaining a lowcost of production and quality for the customer. Low cost ofproduction serves as a competition base for the company (GeneralElectric, 2015).

Thesecond key strategy is the enhancement of global operations throughmergers and acquisitions. The company operates in virtually all partsof the world. It serves customers in approximately 175 countries.Mergers and acquisitions enable the General Electric Company to reachmore customers and consequently increase its revenues. For example,during the year 2014, 50% of the company’s revenues emanated fromactivities outside the United States. In the year 2014, GeneralElectric company entered into an agreement to sell their signalingbusiness to Alstom for 0.8 billion United States Dollars andconsequently acquired renewables and grid businesses from Alstom. Thetransaction was postponed for closing in the year 2015 (GeneralElectric, 2015).

Thethird key strategy entails competition and regulation. The GeneralElectric Company has highly competitive businesses in jet aircraftengines maintenance, component repair and overhaul services. Theproduct development cycles are long while quality and efficiency arecritical to success. The company incurs significant research anddevelopment expenditures focused on the development of intellectualproperty. Consequently, the organization engages in intellectualprotection strategies for basic engine designs manufacture, repairand product upgrade technologies.

Inoverall, the competitive and regulation strategy is the mostimportant strategy for the General Electric Company. Theeffectiveness of the intellectual property protection strategydefines the future success of the company. It is due to the relatedresearch and development expenditure incurred in coming up with newways of production. Research and development serve as the source ofknowledge for the income generation and is consequent, the keybusiness of the General Electric Company. The success of the GeneralElectric Company organization depends on how well it can generateincome for the expenditure it spends on research. Research anddevelopment are the key trade secret of the General Electric Company.Besides, customer satisfaction largely depends on the nature of theinnovative ways developed. It is hence important for the company toprotect its technologies as a way of keeping off the competitors. Theunauthorized use or theft of the company’s publications canadversely affect the company’s competitive position (GeneralElectric, 2015).

Corporatelevel strategies include the overall scope and direction of anorganization and the coordination of business activities to achievethe organization`s specific goals. The first objective of the GeneralElectric Company is to obtain 17% in net margins in the year 2016.Consequently, the company has put in place corporate strategies toreach the goal in the past. The strategies entailed reducing thestructural cost by 4 billion United States Dollars. The need to cutcosts emanates from the fact that the company’s cost base is madeup of 100 billion United States Dollars, and Seventy Percent of thecosts are composed of direct product and service costs. The currentcompany’s gross margins entail 27% and a net return of 10 %(General Electric, 2015).

Thesecond key corporate strategy involves the creation of value throughthe company’s leadership in the industrial internet. The strategyinvolves the utilization of the company’s advantage in broadknowledge at machines and the domain expertise to make meaningfulanalytics. Consequently, the organization utilizes the existingrelationship with the customers to increase the quality of itsproducts for the benefit of both the clients and the organization(General Electric, 2015).

Thethird corporate strategy entails value creation. The company aims atimproving its earnings mix to more than 75% and provide returns toinvestor’s worth of 50 Billion United States Dollars in dividendsand share repurchase. The company executed part of the strategy in2014 by increasing its earnings per share by 1% to 1.65 dollars. Theindustrial components of the company were raised to 10 %. However,the income reduced by 12%. The strategy is achieved by placingefforts to increase the growth in five out of the seven segments ofthe company (General Electric, 2015).

Themost important corporate strategy for the achievement of theorganization`s long-term success entails the reduction of costs. Thereduction of costs implies that an organization becomes effective inits production activities. Besides, it is a pursuit of the overallreason for being in business since a company becomes profitable.Consequently, the organization can comfortably conduct its operationsas opposed to a company that makes losses. Loss-making companies areforced to sustain their operations with debt. Debt financing placeslimitations on the firm regarding the nature of activities it canengage. Profitability enhances the reinvestment of the organizationby pursuing other interests that add to the value of the group.Profitability implies that the group can beat competition that is acrucial determinant of the long-term success of any organization(General Electric, 2015).

Themost significant competitor for the General Electric Company is theSiemens group. It is a diversified corporation with variousbusinesses. Its key areas of business include automation andtechnologies, building technologies, consumer products, smart gridsolutions, drive technology, energy, financial services, healthcare,low and medium voltage, mobility and other services. The companiesalso compare concerning revenues the General Electric Company leadsat 146 while the Siemens follows at 90 Billion United States Dollars.The Siemens Company employs 343,000 employees while the GeneralElectric employs 305,000 employees. Concerning Net Income, theSiemens Company leads at 6.8 while the General Electric Companyfollows at 5.24 Billion United States Dollars (General Electric,2015).

Accordingto Kaeser and Thomas (2015), concerning strategies, the SiemensCompany has implemented policies that have provided steady incomesfor the investors. It has indicated promising financial performancein the past. The Siemens group has robust strategies to increase itsshare in the global market. Specifically, it aims to increase itsinnovations, especially in the healthcare sector. Similar to theGeneral Electric Company, the Siemens group seeks to enhance its riskmanagement strategies as a way of improving the benefits fromopportunities. It applies strict procedures to ensure that risks arecontinuously monitored and kept within their acceptable limits. Thecompany also employs cost reduction techniques and struggles tomaintain high-quality standards for its customers. Currently, thecompany is on a step to improve the digitization of its solutions tothe customers.

Similarto General Electric, the Siemens Company engages in the riskybusiness of mergers and acquisitions. In September 2014, Siemensentered into an agreement with Dresser- Rand in a bid to acquire theDresser-Rands outstanding common shares through a friendly takeoverbid. Subsequently, in May 2014, Siemens entered into an agreementwith Rolls-Royce in an attempt to acquire Rolls-Royce energyaero-derivative gas turbine and compressor business. The key aim isto benefit from the increased intangible assets inform of good will.The transaction was similar to the merger and acquisition of Alstomand the General Electric company in the year 2014 (Kaeser and Thomas,2015).

Despitethe various similarities and differences between the companies, theGeneral Electric Company remains the most successful company in theend. First, the outlook of current financial statements indicatesthat General Electric is larger in multiples compared to Siemens.First, during quarter three of 2015, General Electric recorded netearnings of 2,506 billion United States Dollars. Siemens recorded21.3 billion Euros equal to 23 billion United States Dollars.Besides, the General Electric’s free cash flows are accounted forat15 billion United States Dollars Compared to Siemens cash flows of4.4 Euros equal to 4.752 billion United States dollars. It indicatesthat the General Electric has almost four times the cash flows ofSiemens, and consequently, it can invest in more activities thanSiemens. The ability to generate more revenues by the GeneralElectric is further indicated in the reported proposed dividends forthe two companies. The General Electric proposed dividend per shareis 4.45 while Siemens reported 3.5 euros equal to 3.78 Dollars. Theproposed dividends further indicate that the General Electric Companycan give more to the investors. Consequently, it increases itschances of surviving in the future due to the attraction it makes toother investors. The attraction of investors further implies that theGeneral Electric Company will be able to raise capital more quicklyfor reinvestment purposes in the future (General Electric, nd).

TheGeneral Electric Company has a sequence of smart investment decisionsand a series of fresh technological innovations that has seen itenter into new and profitable contracts. For example, GeneralElectric has won a contract to supply 1,000 locomotives to IndianRailways. The General Electric Company also boasts a good dividendhistory. Specifically, its dividend yield approximately ranges to3.34% while its yield approximates at 15.6 (General Electric, nd).


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