Strategic Management case study for MBA coursework.

1. Case Study
LAUREN & FLORIAN
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2. Index
 History and Background
 Welch: Bio
 Welch: Acquisitions & Innovations
 Welch: Key Events at GE
 Leadership
 Six Sigma
 Immelt: Bio
 Immelt: Changes at GE
 Immelt: Key Events at GE
 Immelt: Leadership Style
 Conclusions
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3. History and Background
 Thomas Edison invented incandescent electric lamp in
1879
 1890 Edison General Electric Company formed, then
in 1892 merged with Thomas-Houston Electric
Company
 The firm developed best practice standards, including
licensing its technology, developing policies for
employees, a formal hierarchy, financial
controls, restructuring, and automation
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4. Welch: Bio
 Born on November 19, 1935 in Salem Massachusetts
 Studied Chemical Engineering at the University of
Massachusetts
 Did PhD at University of Illinois
 He joined GE in 1960 and was not happy with excessive
bureaucratic culture of company
 Hit his peak as CEO in 1981 as the eighth and youngest
chairman and CEO in the history of GE
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5. Welch: Acquisitions & Innovations
 Welch acquired several businesses
 Employers Reinsurance and Radio Corporation of America
 National Broadcasting Corporations
 To promote innovation he launched a program called
“Work Out“
 “Work Out“ brought various employees from different
departments together to asses company and make
suggestions for improvement
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6. Welch: Key Events at GE
 As soon as Welch was in charge he made several
changes aimed at making GE more profitable
 “Number one or number two” strategy
 He insisted that GE should be among the top two players in
every segment it operates; failing to do so will result in closure
of that particular segment – “Fix it, sell it or close it!”
 To improve communication at all levels he trimmed
the number of management levels from 9 to 6
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7. Leadership
 He believed that involving company employees in
quality processes has a great potential benefit
 Welch was good at motivating employees and stirring
them into action
 e.g. He frequently wrote notes to employees
appreciating their contribution, this made them more
motivated
 Welch stressed the importance of communication at
GE
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8. Leadership
 To determine rewards at GE, Welch devised a system where
people are classified into 3 categories
 Each department classified employees into 3 categories
based on their performance
 Top 20 % , Middle 70 % and Bottom 10 %
 Top 20 % were generously rewarded, middle performers were
motivated to emulate top performers whereas bottom 10 % were
fired
 He also introduced the elements of high performing
leadership
 Four E’s: Energy, Energizer, Execute, Edge, and also Passion
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9. Six Sigma
 His commitment to quality led to adoption of Six Sigma at GE in
mid 1990’s
 To launch Six Sigma, the company invested heavily in employees
 Six Sigma is a quality standard
 Streamlining processes to improve productivity, quality, speed and
efficiency
 At the business level it improves profitability, market share and
long-term viability
 At the process level it reduces defects and variation
 Employees were trained at different levels
 Green belts, black belts and master black belts
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10. Welch: Leadership Style
Strengths Weaknesses
 Motivating employees  Putting too much
 Constantly identified pressure on employees
other leaders at GE  Formed opinions too
 Aggressive leadership quickly
 Communication  Criticized for some
 Charismatic
failed acquisitions e.g.
“Black&Decker” and
 Stayed visible at GE mergers e.g.
 Succession planning “Honeywell Inc.”
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11. Immelt: Bio
 Born in 1956 in Ohio
 His father worked at GE and after some time at P&G and
completing an MBA Immelt joined GE’s marketing division
 Immelt was shortlisted as a Welch successor
 He became CEO of GE right before 9/11
 The company faced a series of challenges after he took over
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12. Immelt: Key Events at GE
 The events of 9/11 had lasting effects on the firm
 Some sectors of the business dealt with aviation and
insurance, and they took a beating
 Stock value sank 20%
 There was also an anthrax scare, and GE was viewed
with skepticism after other corporate scandals
 Immelt made some acquisitions, sold less profitable
businesses, and increased GE’s global orientation
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13. Immelt: Changes at GE
 Immelt caved to investor demands for transparency
 Restructured equity packages and GE’s portfolio
 Increased external communication
 Focused on intangible factors instead of just the bottom
line, also was ‘green’ oriented
 Increased number of outsiders were brought in
 Took focus from production to marketing, stressed innovation
and idea generation
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14. Immelt: Leadership Style
Strengths Weaknesses
 People person; more  Somewhat soft
approachable than Welch  Approach too structured
 Focused on innovation  Spent too much time
 Increased transparency placating stakeholders
 Less demanding leadership  Always compared to Welch
style than Welch  Was reactive instead of
proactive at times
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15. Conclusions
 Welch and Immelt obviously had very different
leadership styles
 Welch seems to have been more charismatic and led
with energy and passion, whereas Immelt was more
approachable but formalized some processes that
Welch accomplished naturally
 Immelt took over at GE during a difficult time, so the
external environment impacted his leadership
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