General Electric Strategic Position - 1981
General Electric (“GE”), similar to many major corporations in the 1980s and 1990s, underwent a restructuring phase in line with the McKinsey Restructuring Pentagon. Through this restructuring, General Electric implemented a portfolio-planning model to manage the ever-increasing demands of a company involved in over 190 businesses. Ultimately, this model allowed GE to formally???
GE set lofty goals of increasing earnings per share 25% faster than the growth of GNP. In order to achieve this the company needed to address productivity and possible realms of expansion, but the systems in place often led to a lack of focus. Reginald Jones attempted to create value and compete in the market by implementing strategic planning and then integrated strategic planning to address productivity. Through GE’s engagement of McKinsey & Co. they devised a structure of Strategic Business Units along with Portfolio Planning.
The development of strategic business units allowed the company to stay competitive in their respective industries by acting somewhat autonomously from GE Corporate. In the restructured GE, the SBUs were responsible for identifying crossovers to expand their competitive position by utilizing the entire GE network.
The Portfolio Planning Model allowed GE to allocate resources to each SBU based on Industry Attractiveness and Business Unit Strength. The allocation of resources focused development on specific projects instead of “sprinkling money across a variety of businesses.” This matrix later would be called the GE matrix, which allowed GE Corporate to quickly analyze a business plan by highlighting the potential industry growth (using a Five Forces-style analysis) and looking at the relative knowledge within GE to capitalize on the industries market share. After the allocation of resources, GE identified business unit strategy. This strategic planning was ahead of its time in terms of management theory. Strategic Planners were required at each
GE set lofty goals of increasing earnings per share 25% faster than the growth of GNP. In order to achieve this the company needed to address productivity and possible realms of expansion, but the systems in place often led to a lack of focus. Reginald Jones attempted to create value and compete in the market by implementing strategic planning and then integrated strategic planning to address productivity. Through GE’s engagement of McKinsey & Co. they devised a structure of Strategic Business Units along with Portfolio Planning.
The development of strategic business units allowed the company to stay competitive in their respective industries by acting somewhat autonomously from GE Corporate. In the restructured GE, the SBUs were responsible for identifying crossovers to expand their competitive position by utilizing the entire GE network.
The Portfolio Planning Model allowed GE to allocate resources to each SBU based on Industry Attractiveness and Business Unit Strength. The allocation of resources focused development on specific projects instead of “sprinkling money across a variety of businesses.” This matrix later would be called the GE matrix, which allowed GE Corporate to quickly analyze a business plan by highlighting the potential industry growth (using a Five Forces-style analysis) and looking at the relative knowledge within GE to capitalize on the industries market share. After the allocation of resources, GE identified business unit strategy. This strategic planning was ahead of its time in terms of management theory. Strategic Planners were required at each