GE-Two -Decade Transformation Case Study Example | Topics and Well Written Essays - 1000 words

GE-Two -Decade Transformation - Case Study Example However, the company has in the past encountered severe challenges before attaining its current global position. In the late 20th century, the company encountered challenges which threatened its operations and stability. This paper will examine GE, discussing strategies employed by the company’s management in the wake of severe challenges. Welch’s Challenge in 1981 In the year 1981, when Welch took over management of GE from Jones, the company experienced numerous of hardships that threatened its existence. In 1981, the US economy suffered serious recession, which meant that banks lent money at unbelievably high interest rates. The high interest rates were especially disadvantageous to companies such as GE that required borrowed capital to sustain its business. In addition, the US dollar was quite strong at the time making GE’s international business operations quite unprofitable and unmanageable. The tough economic times experienced in the US also meant that GE had to lay off some of its employees and reduce hourly positions (O’Boyle, 1999). This put Welch and the company in a tough position, having to balance the company’s operations among the few remaining employees. Moreover, GE faced serious competition, particularly from Japanese companies. Global competitors had significant competitive advantages over GE as their nations of domicile were free of economic crisis like the US. However, despite the immense challenges, Welch was able to take charge of the company rather effectively through the adoption of numerous strategies. Welch first adopted the number one or two, fix, sell or close strategy that required all GE’s business units to be leaders in their respective industries or face closure. This strategy was effective in eliminating unproductive units of GE and strengthening the remaining units, which became leaders in their industries. The closure and sale of unproductive units provided necessary capital for produ ctive units to strengthen their operations. Welch’s strategy was effectual as it freed capital for strategic investments, which enhanced the company’s bottom line performance (Slater, 1998). Welch’s Objectives and Initiatives When Welch became the CEO of GE in 1981, he established the new company objectives to leverage GE’s performance within the company’s diverse business portfolio. In order to do this, Welch required all company employees to become â€Å"better than the best† in their positions and responsibilities (O’Boyle, 1999). In order to ensure the company achieved Welch’s objectives, the CEO initiated a series of strategies between the late 1980s and early 1990s. These initiatives centered on the spectrum of achieving organizational change through restructuring its staffing, layering and size. Through the adoption of the initiatives and strategic change, GE was able to achieve substantial competitive advantage within i ts markets. Welch’s initiatives were able to revitalize the company’s operations, bolster its image, and achieve massive profit margins. Welch streamlined the company’s staffing, especially in the company’s planning unit to ensure GE was lean and agile. The logic behind Welch’s de-staffing initiative centered on the notion that company or unit productivity does not rely on the number of staff in the unit, but rather the value each staff adds to the unit or company. Welch sought to instill the culture of strength in value addition