Please answer the following question?

1. Should GE get rid of GE Capital? Why or why not?

2. Should GE concentrate solely on industrial products?

3. Should GE simply minimize the role of GE Capital?

4. How could GE utilize (buy) its key skills to confront its challenges strategically?

Please useparagraphs in your answers.

Reference:

To answer the question, please the following link for the course concept and the following case data:

Concepts:

https://www.coursehero.com/u/file/157783042/BPS-451-Course-concepts-docx/#question

Case: General Electric

Company Background:For more than a century, General Electric (GE), has been a global leader and iconic brand known for innovation and leadership in a wide range of endeavors. Its diversified portfolio of products is organized into four strategic business units: energy, technology infrastructure, GE Capital, and home and business solutions. GE began in 1878 when Thomas Edison formed the Edison General Electric Company (EGEC). Though Edison was best known for inventing the first incandescent light bulb, he also pioneered systems design for generating and distributing electricity, eventually holding over 1000 patents. Within a few years, the rival Thomas Houston Company, which held key patents in the same area, challenged EGEC's position in the marketplace. In 1892, the two companies merged, forming General Electric. GE then parlayed the demand for electricity into the invention of home heating, stoves and other appliances, and refrigeration, transforming American households and went on to become an innovator in myriad fields, from medicine, aviation, and transportation to plastics and financial services. GE created the GE Credit Corporation (later GE Capital) in the wake of the Great Depression to facilitate the sale of household appliances and provide the option of extended payments for consumers. Innovation defined the organization, and the commitment to research and development remained key.

GE was one of the original 12 companies that formed the Dow Jones Industrial Average, and the only one of those companies that was still part of the DJIA in 2012. GE was also recognized for cultivating leaders such as Charles Wilson, Ralph Cordiner, Fred Borch, Reginald Jones, and John Welch.2 In the early 1970s under Fred Borch, GE was one of the first companies with a diversified infrastructure to formalize strategic planning at both corporate and business unit levels with its creation of strategic business units.3 GE always saw itself as striving to create a world that worked better, "making what few in the world can, but everyone needs." The company's strategic philosophy centered on innovation, superior technology, and demonstrating leadership in growth markets. GE sought to maintain a strong competitive advantage through innovation, smart capital allocation and solidifying customer relationships. The strategy also included transitioning from an industrial conglomerate to an infrastructure leader to maximize the core strengths of its existing businesses. Diversification and expansion of its business portfolio was a central focus, designed to minimize volatility and create stability through varying growth cycles. Another facet of GE's strategy was to invest for the long-term in high-growth market opportunities that were closely related to its core businesses. For instance, in 2010 the company launched the GE Advantage Program that focused on process excellence and innovation to improve margins in industrial projects.

One of GE's biggest operational strengths lay in its ability to cut costs and maximize return for shareholders. In the 1990s, GE CEO Jack Welch implemented the Six Sigma approach to business management. This approach helped decrease variability and errors to help cut down waste and build a consistent product, one of the many ways GE trained employees to succeed and build their expertise. GE was also able to cut costs because its reputation as a market leader with a large network of businesses and strong alliances with other major corporations enabled it to leverage long-standing relationships to employ the best human, equipment, and capital resources to ensure quality and consistency at a low cost. It acquired many businesses that provided useful resources and sold off business units that did not contribute to its success.

In 2011, GE's strategic accomplishments included 22% growth (defined as a 22% increase in operating EPS excluding the impact of the preferred stock redemption) and a 20% rise in operating earnings. Over the two-year period through 2011, GE's dividends increased a total of 70%. GE was positioned for continued success in 2012 with a record industrial backlog of US$200 billion, US $85 billion cash, and equivalents offering significant financial flexibility. Internationally, GE saw 18% growth in industrial revenue, and U.S. exports were up US$1 billion from 2010. At the same time, GE's management demonstrated their continued commitment to innovation by investing 6% of the firm's industrial revenue in R&D.6 General Electric was divided into six Operating Segments (five Industrial): Aviation, Energy Infrastructure, Healthcare, Home & Business Solutions, Transportation, and GE Capital.

By 2012, under the leadership of Jeffrey Immelt, General Electric was a powerful conglomerate employing approximately 300,000 people globally and operating in more than 100 countries,7 ranked the sixth-largest American corporation and the 14th most profitable by Forbes. Immelt had replaced the highly regarded Jack Welch as CEO and Chairman of the Board in 2001 and had been named as one of the "World's Best CEOs" three times by Barron's. GE's board of directors was composed of 17 members, of whom two-thirds were considered to be "independent." The board was in continuous dialogue with GE's top management. Together they emphasized strategy and risk management while monitoring strategic initiatives personally through site visits. Fast Company ranked GE the 19th most innovative company; Fortune listed GE as the 15th most admired company; and Interbrand cited GE as the number 5 best global brand.8 General Electric's objectives were, and continued to be, earnings growth, increasing margins, and returning cash to investors, as well as organic growth, increased financial flexibility, and larger U.S. exports. While pursuing these ambitious objectives, GE, at the same time, committed itself to social and environmental responsibility.

GE's Diversified Industrial Products Competitors

Diversified international industrial conglomerates, such as GE, have by definition many strong, direct competitors spanning many industries, as the total market capitalization for this industry is over US$137 billion.9 Aside from GE, the three industrial conglomerates with the best relative performance (based on fundamental and technical strength) were Siemens, Phillips Electronics, and 3M.10 Siemens AG, the largest European electronic engineering and manufacturing conglomerate, based in Munich, Germany, and operating worldwide,11 is split into four sectors: Energy, Healthcare, Industry, and Infrastructure and Cities, yielding 19 divisions with over 360,000 employees and 73.5 billion (US$96.2 billion) in sales in 2011. Its focus is on sustainable value creation, innovation-driven growth markets, customer relations, and capitalizing on core competencies. Royal Phillips Electronics, based in the Netherlands, is split into three overlapping

sectors: Healthcare, Lighting, and Consumer Lifestyle, with many subdivisions in 60 countries,12 over 125,000 employees, and 20.1 billion (US$26.3 billion) in sales in 2011. Phillips' focus is on improving people's lives through meaningful innovation, delivering a quality product, and building value for customers and shareholders. 3M, based in Minnesota, operates in the markets of consumer goods, office supplies, display and graphics, health care, industrial goods, transportation goods, and safety, security, and protection services. With over 80,000 employees and a presence in more than 65 countries, 3M amassed more than US$27 billion of sales revenue in 2011. As a diversified technology company, 3M focuses on ingenious, innovative products and building global market share

GE Capital

GE Capital, the largest of GE's four strategic business units in 2012, was created in 1932 as GE Contracts, an internal business unit to help finance consumer purchases of GE appliances (see Exhibits 1 and 2).14 Particularly in the midst of the Great Depression.

Other Items Net Income 14,151,000 11,644,000 11,025,000 Preferred Stock and Other Adjustments -1,031,000 -300,000 -300,000 Net Income Applicable to Common Shares 13,120,000 11,344,000 10,725,000 NOTE: Currency in USD.EXHIBIT 1 EXHIBIT 2 GE Capital (in millions) Revenues Net Income GE (Parent Company) (in millions) Revenues Net Income 2011 45,730 6,549 2011 147,300 13,120 2010 46,422 3,158 2010 149,593 1 1 ,344 2009 48,906 1,325 154,438 10,725 2008 65,900 7,841 2007 65,625 12,179 EXHIBIT 4 Quarterly Net Quarterly Net Income Growth Income Growth 51 Year GE GE Capital 2008 Q1 -11.7% -27.9% Q2 -3.5% 14.8% Q3 -12.4% -37.6% 04 -43.4% -84.2% 2009 Q1 -34.5% -60.1% Q2 -46.6% -86.8% Q3 -45.2% -94.4% Q4 -21.6% -79.2% 2010 Q1 -19.4% -48.7% Q2 11.3% 100.0% Q3 26.6% 590.3% Q4 28.7% 807.2% 2011 Q1 47.0% 252.2% 02 10.5% 117.0% Q3 3.7% 86.3% Q4 0.6% 60.7% 2012 Q1 -11.2% 1.4%GE interest and other financial charges (1,299) (1,600) (1,478) (2,153) (1,993) GE provision for income taxes (4,839) (2,024) (2,739) (3,427) (2,794) Earnings from continuing operations 14,074 12,517 10,806 17,804 22,268 Earnings (loss) from discontinued opera- tions, net of taxes 77 (873) 219 (394) (60) Consolidated net earnings attributable to the company $ 14,151 $ 11,644 $ 11,025 $ 17,410 $ 22,208EXHIBIT 3 Quarterly Sales Quarterly Sales Growth Growth 50 Year GE GE Capital 2008 Q1 7.7% 3.2% Q2 13.3% 10.4% 10.8% 1.7% Q4 -3.2% -18.4% 2009 -8.7% -19.9% Q2 -15.5% -29.3% Q3 -20.0% -30.8% Q4 -10.8% -14.5% 2010 -6.0% -11.5% Q2 -6.2% -5.0% Q3 -5.8% -5.1% -1.1% -5.1% 2011 Q1 -4.8% -4.6% Q2 -4.5% -9.1% Q3 -1.1% -7.9% Q4 -7.8% -16.1% 2012 Q1 3.4% -6.6%EXHIBIT 5 Quarterly Net Profit Quarterly Net Profit Margins Margins52 Year GE GE Capital 2007 Q1 12.7% 19.5% Q2 13.7% 14.0% Q3 12.1% 17.8% 04 14.3% 17.4% 2008 Q1 10.4% 13.6% 02 11.7% 14.6% Q3 9.6% 10.9% Q4 8.3% 3.4% 2009 Q1 7.5% 6.8% 02 7.4% 2.7% Q3 6.6% 0.9% 04 7.3% 0.8% 2010 Q1 6.4% 3.9% 8.8% 5.7% 03 8.8% 6.4% 04 9.5% 7.9% 2011 01 9.9% 14.5% Q2 10.1% 13.7% Q3 9.3% 13.0% Q4 10.4% 15.1%Other Liabilities Deferred Long-Term Liability Charges Minority Interest Negative Goodwill Total liabilities Stockholders' equity Misc Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholder Equity Total stockholder equity Net tangible assets NOTE: Currency in USD. 70,647,000 13 1 ,000 1,696,000 600,804,000 702,000 137,786,000 -31,769,000 9,719,000 116,438,000 31,745,000 55,271,000 2,753,000 5,262,000 628,857,000 702,000 131,137,000 -31,938,000 19,035,000 118,936,000 44,577,000 104,995 .000 2,081,000 7,845,000 664,610,000 702,000 126,363,000 32,238,000 22,464,000 117,291,000 40,464,000 EXHIBIT 6 GE Income Statement53 (All numbers in thousands) Period Ending Total Revenue Cost of Revenue Gross Prot Operating Expenses Research and Development Selling, General, and Administrative Non-recurring Others Total Operating Expenses Operating Income or Loss Income from Continuing Operations Total Other IncomefExpenses Net Earnings Before Interest and Taxes Interest Expense Income Before Tax Income Tax Expense Minority Interest Net Income From Continuing Ops Non-recurring Events Discontinued Operations Extraordinary Items Effect of Accounting Changes 31-Dec-11 147,300,000 71,190,000 76,110,000 37,384,000 4,083,000 34,643,000 34,643,000 14,545,000 20,098,000 5,732,000 292,000 14,366,000 77,000 31-Dec-10 149,593,000 74,725,000 74,868,000 38,054,000 7,176,000 29,638,000 29,638,000 15,553,000 14,085,000 1 ,033,000 535,000 13,052,000 873,000 31-Dec-09 154,438,000 78,938,000 75,500,000 37,354,000 10,585,000 27,561,000 27,561,000 17,697,000 9,864,000 1 ,142,000 200,000 1 1 ,006,000 219,000 EXHIBIT 7 GE Balance Sheet54 Period Ending 30-Dec-11 30-Dec-10 30-Dec-09 (All numbers in thousands) Assets Current Assets Cash and Cash Equivalents 84,501,000 78,943,000 70,488,000 Short-Term Investments 47,374,000 43,938,000 51,343,000 Net Receivables 307,470,000 329,204,000 30,514,000 Inventory 13,792,000 11,526,000 11,987,000 Other Current Assets Total Current Assets 453,137,000 463,611,000 164,332,000 Long-Term Investments 319,247,000 Property, Plant, and Equipment 66,450,000 103,099,000 103,081,000 Goodwill 72,625,000 64,388,000 65,076,000 Intangible Assets 12,068,000 9,971,000 11,751,000 Accumulated Amortization Other Assets 112,962,000 106,724,000 118,414,000 Deferred Long-Term Asset Charges Total assets 717,242,000 747,793,000 781,901,000 Liabilities Current Liabilities Accounts Payable 58,373,000 56,943,000 32,860,000 Short/Current Long-Term Debt 166,869,000 147,977,000 129,869,000 Other Current Liabilities 59,891,000 67,328,000 50,788,000 Total Current Liabilities 285,133,000 272,248,000 213,517,000 Long-Term Debt 243,459,000 293,323,000 336,172,000EXHIBIT 8 Summary of Operating Segments$5 (In millions) General Electric Company and consolidated affiliates 2011 2010 2009 2008 2007 Revenues Energy infrastructure $ 43,694 $ 37,514 $ 40,648 $ 43,046 $ 34,880 Aviation 18,859 17,619 18,728 19,239 16,819 Healthcare 18,083 16,897 16,015 17,392 16,997 Transportation 4,885 3,370 3,827 5,016 4,523 Home & business solutions 8,465 8.648 8,443 10,117 11,026 Total industrial revenues 93,986 84,048 87,661 94,810 84,245 GE Capital 45,730 46,422 48,906 65,900 65,625 Total segment revenues 139,716 130,470 136,567 160,710 149,870 Corporate items and eliminations(2) 7,584 19,123 17,871 19,127 20,094 Consolidated revenues $147,300 $149,593 $154,438 $179,837 $169,964 Segment profit Energy infrastructure $ 6,650 $ 7,271 $ 7,105 $ 6,497 $ 5,238 Aviation 3,512 3,304 3,923 3,684 3,222 Healthcare 2,803 2,741 2,420 2,851 3,056 Transportation 757 315 473 962 936 Home & business solutions 300 457 370 365 983 Total industrial segment profit 14,022 14,088 14,291 14,359 13,435 GE Capital 6,549 3,158 1,325 7,841 12,179 Total segment profit 20,571 17,246 15,616 22,200 25,614 Corporate items and eliminations(2) (359) (1,105) (593) 1,184 1,441