Strategic Management

Read the following extract and answer the questions that follow: General Electric's Ecoimagination Strategy In 2004, GEs senior management team was going through its annual strategic planning review when they came to the realization that six of the company's core businesses were deeply involved in environmental and energy-related projects. The appliance business was exploring energy conservation. The plastics business was working on the replacement of PCBs (polychlorinated biphenyls which are highly toxic industrial compounds) which had been found to have negative consequences for human health and the environment. The energy business was looking into alternatives to fossil fuels, including wind, solar and nuclear power. Other businesses were looking to reduce emissions and use energy more efficiently. What was striking as that Ge had initiated almost all of these projects in response to requests from its customers. The senior management team at GE initiated a data gathering effort in order to educate themselves on the science behind energy and environmental issues, including greenhouse gas emissions. As CEO Jeff Immelt later explained, "We went through a process of really understanding and coming to our own points of view on the science." GE executives engaged in 'dreaming sessions' with customers in energy and heavy-industry companies to try to understand their concerns and desires. What emerged was a wish list from customers that included cleaner ways to burn coal, more efficient wastewater treatment and better hydrogen fuel cells. At the same time GE talked to government officials and regulators to determine the state and direction of public policy. This external review led to the conclusion that energy prices would likely increase going forward, driven by rising energy consumption in developing nations and creating demand for energy-efficient products. They also saw tighter environmental controls, including caps on greenhouse gas emissions as inevitable. At the same time, the senior management team looked inside GE. Although the company had been working on numerous energy-efficiency and environmental projects, they realized that there were gaps in technological capabilities and there was a lack of an overarching strategy. What emerged from these efforts was a realisation that GE could build strong businesses by helping its customers to improve their energy efficiency and environmental performance. Thus was born GE's ecoimagination strategy. The strategy was first rolled out in 2005 and cut across businesses.GE established targets for doubling investments in clean technology to $1.5 billion per year by 2010 and growing annual revenues from eco-products to $20 billion from $10 billion in 2004. In its own operations, GE set out to cut greenhouse gas emissions per unit of output by 30% by 2008. These corporate goals were broken into subgoals and handed down to the relevant businesses. Performance against goals was reviewed on a regular basis and the compensation of executives was linked to their ability to meet these goals. The effort soon started to bear fruit. These included a new generation of energy efficient appliances more efficient fluorescent and LED lights a new jet engine that burned 10% less fuel a hybrid locomotive that burned 3% less fuel and put out 40% lower emissions than its immediate predecessor lightweight plastics to replace the steel in cars, and technologies for turning coal into gas in order to drive electric turbines, while stripping most of the carbon dioxide from the turbine exhaust. By the end of its first 5-year plan, GE had met or exceeded most of its original goals, despite the global financial crisis in 2008. Not only did GE sell more than $20 billion worth of eco-products in 2010, these products were also among the most profitable in GE's portfolio. Ge reported that its ecoimagination portfolio included over 140 products and solutions that generated $105 billion in revenues by 201. One of the great growth stories in the company was its wind turbine business, which it bought in 2002. In that year, it sold $200 million worth of wind turbines. By 2008, this was a $6 billion business that had installed 10 000 turbines. By 2012, GE had installed over 20 000 turbines worldwide. GE plans were to double clean-tech research and development (R&D) to $10 billion in 2015, to grow ecoimagination revenues at twice the rate of overall revenues, to reduce its own energy intensity by 50% and its greenhouse gas emissions by 25% and reduce its water usage by 25%. Adapted from Hill, Jones and Schilling (2015) Strategic Management An Integrated Approach 11th edition Cengage Learning

Questions:

1.1 Describe the strategy making process at GE in terms of where the original impetus for the ecoimagination strategy emanated from and the process that followed. (15)

1.2 Explain why the implementation of GE's ecoimagination strategy can be regarded as successful.