1. Do you agree with the claim that GE experienced a sustained competitive advantage under Jack Welch, while it experienced a sustained competitive disadvantage under Jeffrey Immelt? Why or why not?

GE under Jack Welch vs. Jeffrey Immelt AN INVESTMENT OF $$100 in General Electric (GE) on April 22, 1981, when Jack Welch took over as chairman and CEO would have been worth $6,320 by 2000 . Including stock price appreciation plus dividends, GE's total shareholder return was 6,220 percent during this period, equating to an annual compounded growth rate of about 23 percent. Although the sheer magnitude of GE's total returns to shareholders is impressive, to assess whether GE had a competitive advantage that produced that return, we need a benchmark. Because GE is a widely diversified conglomerate spanning financial and industrial operations across a number of different industries, one common metric for comparison is a broad stock market index such as the Dow Jones Industrial Average (DJIA). The DJIA (or Dow 30) represents an average stock return, based on the stock prices of the 30 most widely held public companies in the U.S. The DJIA was established in 1896, and GE is the only company remaining from its original members (although GE was delisted for a number of years). Although the DJIA had a return of slightly over 1,000 percent between 1981 and the end of 2000, this return is dwarfed when compared with GE's (see Exhibit MC8.1). This comparison implies that GE outperformed the DJIA by several multiples during this 20-year time period. When we apply total return to shareholders as a performance metric, GE's total return of 6,220 percent is astonishing. GE clearly enjoyed a sustained competitive advantage during the Jack Welch era. This feat is even more impressive for two reasons. First, the calculation was set in a way that both started at 0 percent in 1981. Second, GE is one of the 30 companies included in the DJIA, and thus it is one big reason why the DJIA performed quite well during the 1981-2000 time frame. Jeffrey Immelt was appointed GE's CEO and chairman on September 7, 2001, just four days before the 9/1 terrorist attacks. Since that tragedy. Mr. Immelt had spent his time putting out fire after fire. Following 9/11, the U.S. economy went into a recession, and a global economic slowdown began. Several of GE's key industrial sectors such as aviation and energy were especially hard hit. The global financial crisis beginning in 2008 compounded the company's troubles even further. Because the conglomerate retied on its financial services unit, GE Capital, for more than 50 percent of its profits, the company was hit especially hard during the global financial crisis. In 2009. Standard \& Poor's downgraded GE's AAA credit rating, further underscoring the market's lost confidence in GE's financial health. GE asked famed investor Warren Buffett for a $15 billion liquidity injection. On March 5, 2009, GE's share price hit an all-time low of $6.66. The performance of GE's stock versus the DJIA during Mr. Immelt's tenure is depicted in Exhibit MC8.2. DISCUSSION QUESTIONS Review Chapter 5: Competitive Advantage, Firm Performance, and Business Models. 1. Do you agree with the claim that "GE experienced a sustained competitive advantage under Jack Welch, while it experienced a sustained competitive disadvantage under Jeffrey Immelt"? Why or why not? 2. How much of the performance difference in the Welch versus Immelt time periods do you believe can be directly attributed to the respective CEO? What other factors might have played an important role in determining firm performance? (Hint: Consider especially the time period sinco 2001.) oped for the purpone of das discussive. If is int inisentad to tho used tos