Case Study GE
Luis Soto
Mr. Charles Sammons
MGMT690 Strategic Management in Dynamic Environments
DB – GE
Question 1: What is General Electric's corporate-level strategy and why is it important? Corporate Level strategy is an action a firm takes to gain a competitive advantage by selecting and managing a groups of different businesses competing in different product markets. GE uses corporate level strategies as a means to grow revenues and profits, and an additional strategic intents to growth. This is important because it allows GE to select new strategic positions.
Question 2: What are three reasons corporations choose to diversify their operations?
The three reasons are value-created, value-neutral and value-reducing. A firm uses a corporate-level diversification strategy for a variety of reasons. Typically, a diversification strategy is used to increase the firm’s value by improving its overall performance. Value-created is created either through related diversification or through unrelated diversification when the strategy allows a company’s businesses to increase revenues or reduce costs while implementing their business-level strategies. Value-neutral reasons for diversification include a desire to match and thereby neutralize a competitor’s market power. Lastly, Value-reducing diversification is managerial motives to diversify can exist independent of value-neutral reasons, in order to diversify their own employment risk, as long as profitability does not suffer excessively. (Hit. Ireland, & Hoskisson)
Question 3: What are the two ways to obtain financial economies when using an unrelated diversification strategy? Firms do not seek either operational relatedness or corporate relatedness when using the unrelated diversification corporate-level strategy. An unrelated diversification strategy can create value through two types of financial economies. Financial economies are cost savings realized through improved allocations of financial resources based on
Mr. Charles Sammons
MGMT690 Strategic Management in Dynamic Environments
DB – GE
Question 1: What is General Electric's corporate-level strategy and why is it important? Corporate Level strategy is an action a firm takes to gain a competitive advantage by selecting and managing a groups of different businesses competing in different product markets. GE uses corporate level strategies as a means to grow revenues and profits, and an additional strategic intents to growth. This is important because it allows GE to select new strategic positions.
Question 2: What are three reasons corporations choose to diversify their operations?
The three reasons are value-created, value-neutral and value-reducing. A firm uses a corporate-level diversification strategy for a variety of reasons. Typically, a diversification strategy is used to increase the firm’s value by improving its overall performance. Value-created is created either through related diversification or through unrelated diversification when the strategy allows a company’s businesses to increase revenues or reduce costs while implementing their business-level strategies. Value-neutral reasons for diversification include a desire to match and thereby neutralize a competitor’s market power. Lastly, Value-reducing diversification is managerial motives to diversify can exist independent of value-neutral reasons, in order to diversify their own employment risk, as long as profitability does not suffer excessively. (Hit. Ireland, & Hoskisson)
Question 3: What are the two ways to obtain financial economies when using an unrelated diversification strategy? Firms do not seek either operational relatedness or corporate relatedness when using the unrelated diversification corporate-level strategy. An unrelated diversification strategy can create value through two types of financial economies. Financial economies are cost savings realized through improved allocations of financial resources based on