General Electric Case

John D’Arco

10/17/12

GE

1) I believe that fix, sell, or close is an effective strategy for a conglomerate like GE because a company with as much capital and reach as GE shouldn’t have to settle for being a small player in an industry. Since GE is a conglomerate, there is no aspect of their business that defines them, that is irreplaceable, putting every sector in the crosshairs to perform or to be disposed of. With the ability to perform M&A, GE can make acquisitions into markets that they feel can be successful, and divestiture those businesses that are not performing. Between 1981 and 1991, under Jack Welch’s tenure, GE sold off more than 200 businesses while acquiring 371.

An important aspect of the Fix, Sell, or Close strategy is that it serves as a quick snapshot, a mission statement, into how Jack wanted his company to run, but he elaborated on how it could be effective for GE. He elaborated on this strategy by categorizing his businesses. Core businesses, with a priority of productivity and quality; high-technology businesses, challenged to “stay on the leading edge” by investing in R&D; and services, required to “add outstanding people and make acquisitions”. With a clear picture as to how their businesses were to run, managers were able to implement Jack Welch’s plan with more conviction and vigor than if he had just shouted Fix, Sell, or Close at them.

Jack also wanted to make sure that his vision was being carried out, so he was determined to make GE more “lean and agile.” He eliminated 74,000 workers and cut hierarchical levels from nine to as few as four. Before, businesses would have to communicate with sector groups if they wanted to reach the CEO. Now Jack can effectively run each business since he is closer to all of them than ever before. This effectively acts as a vertical integration, eliminating the middle-man, much like the CSD companies did in the cola wars by buying the bottling companies to improve efficiency in their business model.

Also, since they were getting rid of businesses that were not #1 or #2, they did not have to worry about running into the problem that Continental did when tried to straddle Southwest. There would be no straddling under Jack Welch. Either the business became fundamentally better (Fix), or it would be gone. (Sell or Close) Straddling has ruined many companies’ brand names and profit margins, and GE was not going to chase after competitors that could not be caught. He wouldn’t let them become Microsoft, chasing after search because they missed the boat. If Jack Welch was CEO of Microsoft, I imagine that after a bid to get Yahoo fell through, he would have gathered his 14 business heads in one of his “shirtsleeve sessions” and tell them, “Hey, we tried. Let’s go find another industry to be number 1 or 2. Don’t