Monday, September 30, 2019
Placement report Essay
N.V. Elmar (Naamloze Vennootschap Electriciteit-Maatschappij Aruba) is in charge of providing electricity in Aruba. Formerly, the company’s name is N.V. ELECTRA founded by Mr. John G. Eman in 1950. After his death, his wife Mrs. F. van der Biest-Eman took over his place and continued the company’s operation. In November 9, 1950, N.V. ELECTRA discusses with Parliament the dealings of providing electricity in Aruba at the public’s interest. Under this discourse, the company had experienced several issues. ELECTRA then becomes a government property after the approving the proposal. Within the proposal, the company specifies itself to be under the control of OGEM N.V. located at the city of Rotterdam, Holland. Its first operation in November 15, 1950, N.V. Elmar has the capacity of 3000 KW with three diesel engines and eventually increased in 1958 buying a power station with a capacity of 15,000 KW. However, in 1982, OGEM experienced bankruptcy and decided to sell its shares of N.V. Elmar to Utilities Aruba N.V. owned by the government. Now, the company proudly states of its financial stability and management under the limits of concession (elmar.aw, 2004). Now, Elmar has a number of 163 employees and approximately 33,000 consumers on the island of Aruba. Island of Aruba            Serviced by the N.V. Elmar, Aruba is a Carribean island 24 km west coast of Venezuela. Of the three Dutch Islands, Aruba is the smallest having an area of 194 km2 with eight regions, namely, Noord / Tanki Leendert, Oranjestad (West), Oranjestad (East), Paradera, Santa Cruz, Savaneta, Sint Nicolas (North) and Sint Nicolas (South). The official language used is Dutch, particularly in education, mass media and civil service. Another language, is Papiamento, second to English as the main language in the island. The population also speaks of Spanish, a prevalent language in upper grades of primary schools (Elmar, 2006). Role in the Company            Because I hold a position in the Human Resources Department, most of my concerns are on employee benefits, recruitment and other employee related issue. Six months in N.V. Elmar has undoubtedly reached my capacity as an employee in the Human Resources Department. Two of their projects for employees, health and wellness program and monetary rewards will be discussed as the main concept of this report. Methodology Research Design            Elmar, like any other company, has major concerns on their employees. To address, this, the company initiated a corporate Health and Wellness program. In this program, the awareness of employees on health related issues and quality of life are substantially relayed. The company has outlined the procedures by giving employees education and promotion on health programs, and orientation and coordination of health assistance. Primarily, it is important to know what the general health status in the island is. Some of the researches made convey of obesity as the primary contributor to life-limiting illnesses in Aruba. The reasons for a high rate in the island are the decreased deprivation of food and a sedentary lifestyle. Aruba is a developed country and in most studies, countries in this state have high incidences of obesity especially on families with lower household income. Often, the quality of food is overlooked wherein buying foods high in calorie and fat is rampant. In a survey conducted in 1991-1992, 67% of the Aruba population is overweight. Moreover, this finding affects both sexes. Next study was conducted in 1995 to 1996 showing the nutritional state of first up to fifth grade overweight. Approximately, 13.4 to 14% of the first graders are overweight and 26.1 to 29.4% of the fifth graders experience obesity. A more recent study in 2004 by Dr. Richard Visser stated that of the 367 children studied, 133 were obese, the number of underweight children is 18, and the remaining 216 were healthy. Significantly, Visser found out that one factor of the growing population concerning obesity in oner population is the unawareness and disregard as a public concern. Hence, attention such treatment and proper education about being obese is insufficient.            Monetary and Non-Monetary rewards are essential for performance improvement of employees. Though we may see that vision, mission, and goals would be enough motivating entities in employee performance, still, these direct costs will provide a meaningful and prosperous stay in the company. In the monetary rewards, as the name implies, more of salary additions are being worked upon while the non-monetary rewards focus on recognizing the employee capability on work and other areas. Elmar Company has an incentives and rewards system, wherein it compensates, reinforces, and encourage enhancement of employee duties. In these types, providing incentives and rewards may focus on team or individual distribution. Moreover, the essentiality of these programs for employee performance, will direct work efforts in advantage to the mission, vision and goals of the company. Incentives and rewards are given to teams, organizations, or individuals in the company that exceed the company’s expectations. Procedures            Elmar company has outlined its goals and objectives in preparing the health and wellness programs. In this way, the company will properly monitor how the program is advancing towards the organization’s benefits. The company’s concern for its employees marks the unity of the two in a system of social relations. Upon noting the principles held by the company in this program, the statement now implies that there is the importance for maintenance, prevention, and promotion of health status of employees.            The vision of the company in pursuing this project is to develop an advanced and efficient program for the health and wellness of the company. Conceptual perceptions about this vision are: Corporate health and wellness means work with the employees of Elmar. Corporate health and wellness underlines the positive dimensions of health. Corporate health and wellness has to involve different groups, organizations and institutions.            Subsequently, the company has marked the strategic and operational objectives for this program. Strategic objectives cover the expected results upon reinforcement of the program while the operational objective sees how the actual procedure must perform on the employees. The following are the strategic objectives: To reduce medical costs and disability costs: many companies have found that they can significantly reduce the cost of employee health care benefits by proactively promoting health, safety and wellness. To reduce absenteeism: numerous studies have found that employee wellness programs can significantly reduce employee absenteeism. To enhance productivity: many studies have linked health risks with reduced employee productivity and have found that healthier workers are more productive. To improve general health and well being. (Corporate Health and Wellness Program, 2006: 12) While these are the operational objectives: Structure and develop corporate health and wellness programs and activities according to priorities established. These programs c.q. activities are directed to the individual employee, Elmar as an organization and the community of Aruba. Establish and reinforce collaborative relations with organizations in the community, government, and NGO’s, related to the development of specific projects in corporate health and wellness. Generate an employee data bank related to the risk factors in health and wellness that can be used to generate assistance, prevention and education programs. Develop educational activities for the employees that can reinforce the actions of promotion in corporate health and wellness. (Corporate Health and Wellness Program, 2006: 12).            To start the program, first, the company must identify which are the employee needs prior to implementing operational objectives. In order to have an appropriate amount of data, the company will have to conduct as survey amongst its employees, invite an organization that will manage the physical examination among employees and facilitate education about eating healthy.            The monetary and non-monetary programs will take effect on employee’s performance level. Generally, it enhances the performance to satisfy or exceed the objectives. Examples of Monetary incentives are: Performance awards – monetary incentives that reward employees upon performance that exceeds the expectation of the company. Observation of giving this award is through formal performance ratings of record on the appraisal period. Special act or service awards – one-time awards like lump sum for employees that had done a specific task from performance. Judgment in this kind of award comes from the first line supervisors. Quality Step increases – gives employees faster than normal progression by facilitating stepped rates and a permanent increase in basic pay. Time Off awards – granting employees leave without charging their annual leave. Gain Sharing – a system, wherein both the company and the employee gain improved productivity. In this system, the company measures the productivity of employees, which in turn gives additional income to the company, then, the employees and involved organization will benefit through associated earnings of the company.            Non-monetary incentives may be tangible or incentives that have more bases on rewards like trophies, medals, certificates, and plaques. Moreover, this kind of incentive may take an intangible position, for example, if an employee has exceeded the expectation of the company, the organization may include training opportunities and assignment of employees to a more meaningful, challenging, and prestigious kind of work. Even though these incentives may not have much value directly on budget, some studies have shown that this becomes more important as motivating factors for employee performance. The Report SWOT Analysis            SWOT (which stands for strengths, weaknesses, opportunities, and threats) is a type of management observation on the overall performance of an organization. This method is often used on businesses because results can be easily transformed in other business philosophy like Porter’s five forces. Generally, the SWOT analysis has effect on overall evaluation when one factor has a cited defect or disadvantage. The strengths and weaknesses are the internal factors while the external factors are the opportunities and threats (marketingteacher.com, 2007). Strengths The strengths of the health and wellness program are in aspects of giving educational awareness to employees considering health problems, disease prevention, and health status. Hence, employee performance may increase. Moreover, productivity may increase because of reduced absenteeism, medical insurance policies, and cost effective strategies. The strengths of monetary and non-monetary incentives take effect on employee and company relationship. Employees regard much of their work because of these rewards, which in turn will not only increase productivity but also enhance the quality of products and services as well. In addition, if properly examined, is the preservation and maintenance of employees with exceptional skills and abilities. Weaknesses Apparently, the weaknesses of health and wellness programs are the appropriate participation of employees particularly in health awareness programs. The individual may listen to these lectures but do not apply them in real life. One weakness of incentives is on the monetary rewards. Generally, monetary rewards have the â€Å"amounts†in order to make employee performance more successful and productive. However, some employees may look at incentive as the central mark of their performance rather than cling on the vision and mission of the organization. In addition, not all employees may non-monetary rewards as a moral perspective, because some employees may develop envy among their co-workers if abundantly present in most of the incentive policies. Opportunities A big opportunity for health and wellness program is to widen the controlled areas in health provisions such as insurance policies and discounts on medical services. The company may also generate proper motivation of these programs when medical specialists are very much involved with the program. There should always be continuity with this kind of program because health is a very essential to an individual. In monetary incentives and non-monetary incentives, monitoring units for choosing which of the employees will gain the award should have a regard. In this way, proper evaluation of the programs will provide trust to employees that the awardees deserve. Hence, envy will not have its place in the organization. Threats The health and wellness program should look unto costs prevalently diverse in most health programs like medicines, fees of professionals and other related issues on economic changes in effect to medical facilities. One threat in monetary programs is that there may be possibilities of lost on the best employees if monitoring is not properly achieved. Hence, the probability of giving good services and products may have hindrances. Reflection            As part of this project, I have noticed the essentiality of the company and employee relationship. Seeing how Elmar valued this social interaction, the severity to serve the company is overwhelming yet incomparable to what I have seen on other organizations. Both the company and its employees are very much interested on the productivity and quality of service. Furthermore, I have seen the social impact of the health and wellness project, as it projects how the society has evolved from a simple unit to a larger unit of the company because it affects the employee performance. Monetary and non-monetary incentives are appropriate sources of motivating employees on the vision and mission of the company but proper attention on the monitoring and evaluation of awardees should be considered, as this could affect trust amongst employees. I think these are apparent objectives after the actual placement: Enhance productivity due to reduced absenteeism and proper well-being. Reduced medical costs because of subsequent education of employees on health related issues. Educational activities for employees in areas like Roll in â€Å"Wit Gele Kruis†for yearly check ups and mini health fair. Monetary Rewards has succeeded in increasing productivity. Non-monetary rewards have increased company commitment among employees. Conclusion            Questionnaire results were positive, looking at the overall performance of corporate health and wellness programs. This survey will generally help the family to be aware in eating the right food and proper diet to reduce the medical costs. The mini survey has given positive results and future benefits to most employees. On the other hand, monetary and non-monetary incentives will help in motivating employees of their performance level and commitment to the company. There is also a great probability of preserving and acquiring employees with exceptional talents and skills. Bibliography N.V. Elmar. â€Å"About Us.†2004 29 January 2008 SWOT Analysis. 29 January 2008
Sunday, September 29, 2019
Case of Ge Growth
CHRISTOPHER A. BARTLETT GE’s Growth Strategy: The Immelt Initiative Yet, for the past year GE’s share price had been stuck at around $35, implying a multiple of around 20 times earnings, only half its price-to-earnings (P/E) ratio in the heady days of 2000. (See Exhibit 2 for GE’s 10-year share price history. ) It frustrated Immelt that the market did not seem to share the belief that he and his management team had in his growth forecasts. â€Å"The stock is currently trading at one of the lowest earnings multiples in a decade,†he said. â€Å"Investors decide the stock price, but we love the way GE is positioned.We have good results and good governance. . . . What will it take to move the stock? †1 Taking Charge: Setting the Agenda On Friday, September 7, 2001, Immelt took over the reins of GE from Jack Welch, the nearlegendary CEO who preceded him. Four days later, two planes crashed into the World Trade Center towers, and the world was thrown int o turmoil. Not only did 9/11 destabilize an already fragile postInternet-bubble stock market, but it also triggered a downturn in an overheated economy, leading to a fall in confidence that soon spread into other economies worldwide.Do No After the chaos of the first few post-9/11 days during which he checked on GE casualties, authorized a $10 million donation to the families of rescue workers, and dispatched mobile generators and medical equipment to the World Trade Center, on September 18 Immelt finally focused on reassuring the financial markets by purchasing 25,000 GE shares on his personal account. Three days later, he appeared before a group of financial analysts and promised that 2001 profits would grow by 11% and by double digits again in 2002.As impressive as such a performance might have appeared, it was less than Welch’s expansive suggestion in the heady days of 2000 that GE’s profits could grow at 18% per annum in the future. 2 The net result was that by th e end of Immelt’s first week as CEO, GE’s shares had dropped 20%, taking almost $80 billion off the company’s market capitalization. ________________________________________________________________________________________________________________ Professor Christopher A.Bartlett prepared this case from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright  © 2006 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www. hbsp. harvard. edu.No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any meansâ€â€electronic, mechanical, photocopying, recording, or otherwiseà ¢â‚¬â€without the permission of Harvard Business School. This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. tC op yo In February 2006, after four and a half years in the CEO role, Jeff Immelt felt General Electric (GE) was finally poised for the double-digit growth for which he had been positioning it.Having just announced an 11% increase in revenues for 2005 (including 8% organic growth), he was now forecasting a further 10% revenue increase in 2006. And following 12% growth in earnings from continuing operations in 2005 (with all six businesses delivering double-digit increases), he committed to leveraging the 2006 revenues into an even greater 12% to 17% earnings increase. It was a bold pledge for a $150 billion global company. (See Exhibit 1 for GE financial data, 2001–2004. ) rP os t 9-306-087 REV: NOVEMBER 3, 2006 306-087GE’s Gro wth Strategy: The Immelt Initiative To make matters worse, as the year wore on, a scandal that had been engulfing Enron finally led to that company’s bankruptcy. Soon, other companies were caught up in accusations of financial manipulation, including Tyco, a company that had billed itself as a â€Å"mini GE. †Again, the market punished GE stock, concerned that its large and complex operations were too difficult to understand. Beyond all this immediate market pressure, Immelt was acutely aware that he stood in the very long shadow cast by his predecessor, Welch.During his 20 years as CEO, Welch had built GE into a highly disciplined, extremely efficient machine that delivered consistent growth in sales and earningsâ€â€not only through effective operations management that resulted in organic growth (much of it productivity-driven) of 5% annually, but also through a continuous stream of timely acquisitions and clever deal making. This two-pronged approach had resulte d in double-digit profit increases through most of the 1990s. Building on the Past, Imagining the FutureImmelt committed to building on what he saw as the core elements of the company’s past success: a portfolio of strong businesses, bound through a set of companywide strategic initiatives and managed by great people in a culture that was performance driven and adaptive. It was a source of competitive advantage that Immelt felt was not easily imitated. â€Å"It requires financial and cultural commitments over decades,†he said. Having committed to GE’s fundamental business model, Immelt wasted little time in articulating a new vision of growth based on using GE’s size and diversity as strengths rather than weaknesses.He wanted to take the company into â€Å"big, fundamental high-technology infrastructure industries,†places where he felt GE could have competitive advantage and where others could not easily follow. He elaborated this into a vision o f a global, technology-based, service-intensive company by defining a growth strategy based on five key elements: 2 This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Do No Our businesses are closely integrated.They share leading edge business initiatives, excellent financial disciplines, a tradition of sharing talent and best practices, and a culture whose cornerstone is absolute unyielding integrity. Without these powerful ties, we could actually merit the label â€Å"conglomerate†that people often inaccurately apply to us. That word just does not apply to GE. . . . What we have is a company of diverse benefits whose sum is truly greater than the parts; a company executing with excellence despite a brutal global economy. . . . We believe GE is different, and one of the things that makes us different is that in good times and in badà ¢â‚¬â€we deliver.That is who we are. 4 tC While recognizing the need for change, Immelt saw little need to challenge the basic business model on which GE had operated for decades. Like his predecessor, he bristled at the characterization of GE as a conglomerate, preferring to see it as a well-integrated, diversified company. On taking charge, he explained: op yo The consistent reliability of GE’s growth had created an image in shareholders’ minds of a powerful machine that could not be stopped and earned the company a significant premium over price/earnings multiples in the broad stock market.As a result, over two decades, GE had generated a compound annual total return to shareholders of more than 23% per annum through the 1980s and 1990s. (See Exhibit 3 for summary GE financials, 1981–2000. ) But Immelt was very conscious that he could not hope to replicate that performance by simply continuing the same strategy. â€Å"I looked at the world post-9/11 and rea lized that over the next 10 or 20 years, there was not going to be much tailwind,†he said. â€Å"It would be more driven by innovation, and a premium would be placed on companies that could generate their own growth. 3 rP os t GE’s Growth Strategy: The Immelt Initiative 306-087 †¢ Technical leadership: Believing that technology had been at GE’s core since the day Thomas Edison founded the company, Immelt committed to technical leadership as a key driver of future growth. †¢ Services acceleration: By building service businesses on its massive installed base of aircraft engines, power turbines, locomotives, medical devices, and other hardware, Immelt believed GE could better serve customers while generating high margins and raising entry barriers.Commercial excellence: Reflecting his own sales and marketing background, Immelt committed to creating a world-class commercial culture to overlay the engineering bias and financial orientation of GE’s d ominant business approach under Welch. †¢ †¢ †¢ Growth platforms: Finally, he recognized that significant resource reallocation would be necessary to build new business platforms capitalizing on â€Å"unstoppable trends†that would provide growth into the future.Because plans at GE always came with measurable goals attached, Immelt committed to increasing the company’s organic growth from its historical 5% annual rate to 8% and, beginning in 2005, to generating consistent double-digit earnings growth. Investing through the Down Cycle Do No Within weeks of taking charge, he started making significant investments to align GE’s businesses for growth. Seeing opportunities to expand its NBC broadcast business to capture the fast-growing Hispanic advertising market, for example, the company acquired the Telemundo and Bravo networks.And its power-generation business acquired Enron’s wind energy business as a new platform that management felt was p ositioned for long-term growth and high returns in the future. In addition to these and other natural business extensions, management identified whole new segments that provided a stronger foundation for innovation and where future market opportunities would drive rapid growth. For example, in security systems, GE acquired Interlogix, a medium-sized player with excellent technology, and in water services, it bought BetzDearborn, a leading company with 2,000 sales engineers on the ground.Internally, Immelt also lost little time in making big financial commitments to the growth strategy. Within his first six months, he committed $100 million to upgrade GE’s major research and development (R&D) facility at Nishayuna in upstate New York. In addition to building new laboratories, the investment provided for new meeting centers on Nishayuna’s 525-acre campus, creating an environment where business managers and technologists could meet to discuss priorities. 3 This document i s authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. du or 617. 783. 7860. tC Perhaps predictably, the press was skeptical of the notion that a $130 billion company could grow at two to three times the global gross national product (GNP) rate. Still, there was no shortage of advice for the new CEO in his attempt to make the company do so. Some suggested he should sell off the mature lighting and appliances businesses. 5 Others proposed bold expansionsâ€â€into the hospital business, for example. 6 And as always, there were calls for GE to break up the company and sell off its component businesses. 7 But Immelt insisted GE had great businesses that provided a strong foundation for the future.All he planned to do was rebalance and renew the portfolio, then drive growth from the revitalized base. op yo Globalization: Building on an old Welch initiative, Immelt committed to expanding GEâ₠¬â„¢s sourcing strategy and market access worldwide, in particular focusing on its underexploited opportunities in developing world countries such as China and India. rP os t 306-087 GE’s Growth Strategy: The Immelt Initiative Scott Donnelly, a 40-year-old researcher who led GE’s overall R&D activity, said, â€Å"GE is not the place for scientists who want to work on a concept for years without anybody bothering them.Here scientists can do long-term research, but they have to be willing to spar with the marketing guys. This is the best of both worlds. †8 Beyond its historic Nishayuna R&D facility, in 2000 the company had established a center in Bangalore, India. To build on that global expansion, in 2002 Immelt authorized the construction of a new facility in Shanghai, China. And as the year wore on, he began talking about adding a fourth global facility, probably in Europe. a Despite the slowing economy, he upped the R&D budget from $286 million in 2000 to $327 million in 2002.When asked about this increase in spending during such a difficult time for the company, he said, â€Å"Organic growth is the driver. Acquisitions are secondary to thatâ€â€I can’t see us go out and pay a start-up $100 million for technology that, if we had just spent $2 million a year for 10 years, we could’ve done a better job at. I hate that, I just hate that. †10 Reflecting on his extensive investments in 2002, a year in which the stock dropped a further 39% from its 2001 close, Immelt said: Financial strength gives us the ability to invest in growth and we have viewed this economic cycle as a time to invest.We’ve increased the number of engineers, salespeople, and service resources. We will invest more than $3 billion in technology, including major investments in our global resource centers. We’ve strengthened our commitment to China, increasing resources there 25% in 2002, and we’ve increased our presence in Europe. Acquisitions are a key form of investment for us and we have invested nearly $35 billion in acquisitions over the past two years. They are a key way for us to redeploy cash flow for our future growth. 11Ongoing Operations: Rigor and Responsiveness To fund his strategy, Immelt drew his first source of capital from the sale of underperforming businesses, and the company’s struggling insurance business was his prime target for divesture. But in the depths of an economic downturn, getting good prices for any business was not easy. So the investments needed to drive the company’s growth still relied primarily on funds generated by ongoing operations, and Immelt drove the organization to deliver on the market’s expectations for current-year performance.Picking up on initiatives launched years earlier, he harnessed wellembedded capabilities such as Six Sigma and digitization to drive out costs, increase process efficiency, and manage resources more effectively. Do a I n 2003, GE opened its Shanghai research center and broke ground for another center in Siemens’s backyard in Munich, Germany. In 2004, its 2,500 researchers worldwide filed for more than 450 patents. 4 This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. du or 617. 783. 7860. No tC op yo Although Immelt was willing to increase his commitment to R&D, he pushed to change the balance of work being done. In addition to developing technologically sophisticated new products, he wanted to commit more resources to longer-term research that might not pay off for a decade or more. In the past, limited commitment to such long-term research had frustrated many of the center’s science and engineering Ph. Ds. (â€Å"Science was a dirty word for a while,†said Anil Duggal, a project leader on the advanced lighting project. â€Å"Now it’s not. )9 In selecting the long-term projects for funding, Donnelly whittled down more than 2,000 proposals and then worked with researchers to come up with the technologies that could transform a business. From the 20 big ideas his staff proposed, Donnelly had them focus on a group of five, representing fields as diverse as nanotechnology, advanced propulsion, and biotechnology. rP os t GE’s Growth Strategy: The Immelt Initiative 306-087 In this tough environment, Immelt’s primary operating focus was on cash flow, and he realigned all the powerful tools in GE’s toolbox to meet that objective.For example, Six Sigma discipline was applied to reducing the cash tied up in inventory and receivables, while process digitization was focused on sourcing economies and infrastructure efficiencies. By 2002, digitization alone was generating savings of almost $2 billion of savings a year. As always at GE, initiatives were tied to metrics, with 60% of incentive compensation dependent on cash flow gen eration. So, despite a tough 2002 economy that held GE’s revenue growth to 5%, its cash flow from operations was $15. 2 billion, up 10% on the previous year. Do NoThe new CEO also wanted to create a more open and less hard-edged environment within the company. He asked the 2002 class of GE’s Executive Development Course (EDC) to study where GE stood in its approach to corporate responsibility. b Historically, this was not an issue that had received much attention at GE. Although Welch had always emphasized the importance of integrity and compliance, he had shown little interest in reaching beyond that legal requirement. The several dozen participants in the 2002 EDC visited investors, regulators, activists, and 65 companies in the U. S. nd Europe to understand how GE was performing in terms of corporate responsibility. They reported to top management that although the company was ranked in the top five for its financial performance, investment value, and management tal ent, it was number 72 for social responsibility. One outcome of the EDC group’s report was that Immelt appointed GE’s first vice president for corporate citizenship. He tapped Bob Corcoran, a trusted colleague from his days running GE Medical Systems, to lead an effort to ensure that the company was more sensitive and responsive to its broader societal responsibilities.Ever the pragmatist, Immelt saw this as more than just an altruistic response. He believed it was important for the company to remain effective: To be a great company today, you also have to be a good company. The reason people come to work for GE is that they want to be involved in something bigger than themselves. They bEDC was the top-level course at GE’s renowned Crotonville training center and was reserved for those destined for the most senior echelons of management at GE. As part of their studies, each EDC class was assigned a major corporate issue to study in teams and then report back to GE’s Corporate Executive Council. C Immelt understood that in such a skeptical environment, there was a need for a CEO to establish much more openness and trust. Since his natural style tended to be open and communicative, he was perfectly comfortable with the idea of increasing the transparency of GE’s often complex operations. In July 2002, to make the performance of GE’s financial businesses easier to understand, he broke GE Capital into four separate businesses, each with its own balance sheet and explicit growth strategy. He also committed to communicating more frequently and in more detail with investors. We have the goal of talking about GE externally the way we run it internally,†he said. After his first analysts meeting, where everyone got an advance bound copy of the data and forecasts, BusinessWeek commented, â€Å"That’s already a break with the Welch regime where, some say, you were scared to blink in case you missed a chart. †1 4 op yo Although this disciplined approach was reminiscent of GE in decades past, Immelt’s management style contrasted with Welch’s in many ways. First, he recognized that in a post-Enron world, corporate executives faced a more skeptical and often cynical group of critics.For example, an article in BusinessWeek suggested, â€Å"Increasingly, the Welch record of steady double digit growth is looking less like a miracle of brilliant management and more like clever accounting that kept investors fat and happy in boom times. †12 And The Economist opined, â€Å"Immelt has had a torrid time since taking over from Jack Welch, GE’s former boss, in 2001. Waking from the dreamy 1990s, investors discovered that GE was not, after all, a smooth earnings machine that pumped out profit growth of 16 to 18% a year. †13 This document is authorized for use only by DINDIN SYARIFUDIN until August 2009.Copying or posting is an infringement of copyright. [email prote cted] harvard. edu or 617. 783. 7860. rP os t 5 306-087 GE’s Growth Strategy: The Immelt Initiative want to work hard, they want to get promoted, they want stock options. But they also want to work for a company that makes a difference, a company that’s doing great things in the world. . . . It’s up to us to use our platform to be a good citizen. Because not only is it a nice thing to do, it’s a business imperative. 15 Rebuilding the Foundation: Beginning a Marathon In the midst of the turmoil, however, he reminded himself of advice he received from his predecessor. One of the things Jack said early on that I think is totally right is: It’s a marathon, it’s not a sprint,†Immelt recalled. â€Å"You have to have a plan, and you have to stick with it. You have to modify it at times, but every day you’ve got to get out there and play it hard. †17 Entering 2003 with that thought in mind, Immelt continued to drive his growth-s trategy agenda. Rebalancing the Portfolio Do Two days after announcing final terms in its purchase of Vivendi-Universal Entertainment (VUE), GE announced an agreement to purchase Amersham, a British life sciences and medical diagnostic company that Immelt had been pursuing for many months.He believed that health care was moving into an era of biotechnology, advanced diagnostics, and targeted therapies and combining GE’s imaging technology with Amersham’s pharmaceutical biomarkers, for example, could create whole new ways of diagnosing and treating diseases. At $10 billion, this was a more expensive acquisition but one that he believed could boost GE’s $9 billion medical products business to a $15 billion business by 2005. More important, he saw it as an engine of growth that would continue for years and even decades into the future. In his mind, it was a classic â€Å"growth platform. †This document is authorized for use only by DINDIN SYARIFUDIN until A ugust 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. No Immelt’s vision was to create a media business that was better positioned for a digital future. The NBC franchise, although strong, was being buffeted by changes in media distribution that saw the share of broadcast television’s market shrinking. Universal added content, production facilities, cable distribution, and a strong management teamâ€â€all assets that Immelt felt could greatly strengthen GE’s core business.On top of that, the $5. 5 billion up-front purchase price for assets valued at $14 billion was seen as an excellent buy. tC The year turned out to be an important one in the new CEO’s efforts to rebuild the business portfolio on which he would drive GE’s growth. Even after completing $35 billion worth of acquisitions in the previous two years, 2003 became the biggest acquisition year in GE’s history with tota l commitments exceeding $30 billion. The first megadeal came when the company decided to bid for the Universal entertainment business of French conglomerate Vivendi.Defying those who suggested that GE should exit the volatile media business, Immelt pushed ahead with the acquisition, which included Universal’s film library, film studio, cable services, and theme park. â€Å"This is about stuff we know how to do,†he said. â€Å"We understand the nuances of this industry and where it’s going. †18 op yo As 2003 began, Immelt was not sorry to see the end of his first full year as CEO. Despite all his efforts, 2002 had been a terrible year for the company. Revenues were up only 5% after a 3% decline the prior year.And rather than the double-digit growth he had promised, 2002 earnings increased by only 7%. By year’s end the stock was at $24, down 39% from the year before and 60% from its all-time high of $60 in August 2000. Having lived through a struggl ing economy, the post-9/11 chaos, new regulatory demands following the corporate scandals, and an unstable global political situation, Immelt commented, â€Å"This was a not a great year to be a rookie CEO. †16 rP os t GE’s Growth Strategy: The Immelt Initiative 306-087The real issue that many saw in the deal, however, was less about strategic fit than organizational compatibility. The concern was that the highly innovative, science-oriented talent that Amersham had developed in the U. K. would not thrive when swallowed up by GE. It was the same criticism that Immelt had heard when critics wondered whether the creative talent in Universal’s film studios would tolerate the management discipline for which GE was so well-known. But the idea of bringing creative and innovative outsiders into GE was part of the appeal to Immelt.He saw people like Sir William Castell, Amersham’s CEO, as major assets who could help develop in GE the culture of innovation that he longed to build. To emphasize the point, he put U. K. -based Castell in charge of the combined $14 billion business renamed GE Health Care and made him a vice chairman of GE. For the first time, one of the company’s major businesses would be headquartered outside of the United States, a move that Immelt felt fit well with his thrust of globalization. Focusing on Customers, Emphasizing Services Do NoIn addition to his portfolio changes, the new CEO kept working on his internal growth initiatives. As an ex-salesman, Immelt had always directed attention toward the customer, and one of his priorities was to redirect GE’s somewhat internal focusâ€â€an unintended by-product of Welch’s obsession with operating efficiency and cost-cuttingâ€â€toward the external environment. â€Å"In a deflationary world, you could get margin by working productivity,†he said. â€Å"Now you need marketing to get a price. †19 In 2001, among his first appointments ha d been Beth Comstock, named as GE’s first chief marketing officer.Next, to drive the change deeper, he redeployed most of GE’s extensive business development staff into marketing roles, then asked each of GE’s businesses to appoint a VP-level marketing head, many of whom had to be recruited from the outside. â€Å"We hired literally thousands of marketers,†he said. â€Å"For the best, we created the Experienced Commercial Leadership Program, the kind of intensive course we’ve long offered in finance. That’s 200 people a year, every year. †20 cAfter taking a $1. 4 billion write-off in 2004 due to claims relating to asbestos and September 11, the company finally sold ERC for $8. billion in 2005, but only after booking another $2. 9 billion insurance loss. tC To communicate the major portfolio transformation he had undertaken to date, in 2003 Immelt began describing GE’s businesses as â€Å"growth engines†and â€Å"cash generators†(see Exhibit 4). He characterized the former, which accounted for 85% of earnings, as market leaders that could grow at 15% annually through the business cycles with high returns. The latter were acknowledged as being more cyclical in nature but with consistently strong cash flows. p yo The other great challenge in the ongoing task of portfolio rebalancing was that GE was finding it difficult to dispose of some of the assets it no longer regarded as vital. While the recession provided lots of buying opportunities if one was willing to step up and invest, it was hardly an ideal environment in which to be selling businesses. For GE, the biggest challenge was to find buyers for the struggling insurance businesses. Although its 2003 sale of three of its major insurance entities had freed up $4. billion in cash, the company was still trying to find a buyer for Employers Reinsurance Company (ERC), a business generating huge ongoing losses due to its poor underwriting in the late 1990s. c And several other GE businesses from motors to super adhesives remained on the blocks with no bidder offering a price the company was willing to accept. Part of the problem was that bidders felt that if GE had run the business for years, most of the potential savings had already been extracted, making the units being offered less attractive for a company that wanted to squeeze out costs.This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t 7 306-087 GE’s Growth Strategy: The Immelt Initiative In 2003, with strong marketing capabilities now embedded in the businesses, he formed a Commercial Council to bring GE’s best sales and marketing leaders together in a forum that could transfer best practice, drive initiatives rapidly through the organization, and develop a world-class commercial culture.Chaired by Immelt per sonally, the council’s agenda included developing worldclass marketing capabilities, taking Six Sigma to customers, and driving sales force effectiveness. As always, metrics were attached. Using a tool called Net Promoter Score (NPS), the company began to track changes in customer attitudes and loyalty, tying compensation to improvements in NPS scores. â€Å"If we can create a sales and marketing function that’s as good as finance at GE, I’ll change this company,†he said. â€Å"But it will take ten years to drive these changes. †21 Yet despite all these efforts, the reality was that just as many of GE’s roducts were becoming commodities, its service contracts were increasingly going to the lowest bidder and not providing the barriers to entry they once did. GE’s solution was to make itself indispensable by building enduring relationships based not only on offering its products and services but also its expertise. One initiative, dubb ed â€Å"At the Customer, For the Customer†(ACFC, as it soon became known), was designed to bring GE’s most effective internal tools and practices to bear on its customers’ challenges. Immelt used health care as an example of what GE could offer.With cost control being a major concern as health-care expenditures headed toward 20% of GDP, Immelt felt that GE could help its customers, only 50% of which were profitable. â€Å"Through our health care services agreements, we are the hospitals’ productivity partner,†he said. â€Å"We completed more than 6,000 Six Sigma projects with health care providers in 2002 and these projects are improving the quality of patient care and lowering costs. †22 In addition, the company began bundling its services and linking its products to clinical information technology.It also added a health-care financial services business to the GE Health Care organization to provide it with specialized financing support. â€Å"The phrase ‘solutions provider’ is so overused it makes us all snore,†said Immelt. â€Å"I want GE to be essential to those whom we serve, a critical part of the profit equation, a long-term partner, a friend. †23 Driving for Growth: New Platforms, New Processes Beginning in 2002, Immelt had challenged his business leaders to identify growth business platforms with the potential to generate $1 billion in operating profit within the next few years.In response, six opportunities had emerged: health-care information systems, security and sensors, water technology and services, oil and gas technology, Hispanic broadcasting, and consumer finance. By the end of 2002, these businesses represented $9 billion in revenue and $2 billion in operating profit. But, as Immelt pointed out, at a 15% annual organic growth rate, they were on track to become a much larger portion of GE’s future business portfolio. With 2003’s major acquisitions such as Am ersham and VUE, the company added new growth platforms such as biosciences and film/DVD to its list.Through other acquisitions, renewable energy Do 8 This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. No tC op yo Immelt also believed GE could significantly strengthen its customer relationships by becoming more of a services provider. In 2002, $23 billion of the company’s $132 billion revenue came from services, but with its massive installed base of more than 100,000 long-lived jet engines, locomotives, power generators, and medical devices in the field, the CEO saw the potential service annuity stream.As someone who had increased GE Medical Systems’ share of service business from 25% to 42% in the three and a half years he headed that operation, Immelt was convinced that services could grow much faster than hardware and at much higher profit levels. To underscore his belief, whenever businesses developed important service contractsâ€â€GE Transportation’s sale of its IT-based dispatch system to railroad customers to increase locomotive utilization, for exampleâ€â€he celebrated them very publicly. rP os t GE’s Growth Strategy: The Immelt Initiative 06-087 (wind, solar, biomass), coal gasification, and supply chain financing became elements of GE’s new growth platform. And the emphasis on services built a series of businesses in environmental services, nondestructive testing, and asset optimization that were also seen as having high growth potential. In defining and then building these growth platforms, GE followed its normal disciplined approach. First, management segmented the broad markets and identified the high-growth segments where they believed they could add value.Then, they typically launched their initiative with a small acquisition in that growth platform. After integrating it into GE, the objective was to transform the acquisition’s business model by applying GE growth initiatives (services and globalization, for example) that could leverage its existing resources and capabilities. As a final step, the company applied its financial muscle to the new business, allowing it to invest in organic growth or further acquisitions. The objective was to grow it rapidly while simultaneously generating solid returns.As Immelt summarized, â€Å"A key GE strength is our ability to conceptualize the future, to identify unstoppable trends, and to develop new ways to grow. The growth platforms we have identified are markets that have above average growth rates and can uniquely benefit from GE’s capabilities. . . . Growth is the initiative, the core competency that we are building in GE. †24 Aligning Management: New People Profiles The biggest challenge Immelt saw in implementing his agenda was to make growth the personal mission of every one of the company’s 310,000 employees worldwide. If I want people to take more risks, solve bigger problems, and grow the business in a way that’s never been done before, I have to make it personal,†he said. â€Å"So I tell people, ‘Start your career tomorrow. If you had a bad year, learn from it and do better. If you had a good year, I’ve already forgotten about it. ’†25 As the company began to implement its new growth strategy, the CEO worried that some of his current management team might not have the skills or abilities to succeed in the more entrepreneurial risk-taking environment he was trying to create.Realizing that this implied a massive challenge to develop a new generation of what he termed â€Å"growth leaders,†he said: Historically, we have been known as a company that developed professional managers . . . broad problem solvers with experience in multiple businesses and functions. However, I wanted to raise a generation of g rowth leadersâ€â€people with market depth, customer touch, and technical understanding. This change emphasizes depth. We are expecting people to spend more time in a business or a job.We think this will help leaders develop â€Å"market instincts†so important for growth, and the confidence to grow global businesses. 26 Do No Beyond changes in career path development that emphasized more in-depth experience and fewer job rotations, GE’s HR professionals wanted to identify the new personal competencies that growth leaders would need to exhibit. Benchmarking GE against best practice, they researched the leadership tC op yo GE’s expansion into Hispanic broadcasting provides an example of the process.After identifying this as a fast-growth segment in its broadcast business, the company acquired Telemundo, the number two player in the Hispanic entertainment segment. Believing that the Hispanic demographic would drive growth, management felt that it would be able to apply GE’s capabilities to fix Telemundo’s struggling business model. Through 2002 and 2003, NBC offered its management and programming expertise, helping Telemundo to evolve from purchasing 80% of its content to producing two-thirds of its own broadcast material.In the second half of 2003, Telemundo grew its ratings by 50% over the first half and captured 25% of the Hispanic advertising market. The company expected revenues to grow more than 20% in 2004. This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t 9 306-087 GE’s Growth Strategy: The Immelt Initiative profiles at 15 large global companies â€â€Toyota and Dell among themâ€â€that had grown for more than a decade at three times GDP rates or better.In late 2004, they arrived at a list of five action-oriented leadership traits they would require: an external f ocus that defines success in market terms; an ability to think clearly to simplify strategy into specific actions, make decisions, and communicate priorities; the imagination and courage to take risks on people and ideas; an ability to energize teams through inclusiveness and connection with people, building both loyalty and commitment; and an expertise in a function or domain, using depth as a source of confidence to drive change.To help develop these characteristics, each business created 20 to 30 â€Å"pillar jobs†: customer-facing, change-oriented assignments in which growth leaders could be developed in assignments of at least four to five years. The new leadership competencies also became the criteria for all internal training programs and were integrated into the evaluation processes used in all management feedback. Funding the Growth: Operating Excellence Do Yet another operating initiative called â€Å"simplification†aimed at reducing overhead from 11% of rev enue to 8%.Targeting reductions in the number of legal entities, headquarters, â€Å"rooftops,†computer systems, and other overhead-type costs not directly linked to growth, the company set a goal of removing $3 billion of such costs over three years. In the first year, the commercial finance business consolidated into three customer service/operations centers and expected to save $300 million over three years. In another simplification move, the consumer and industrial business brought its three existing headquarters into one, saving more than $100 million in structural costs.And the transportation and energy businesses began sharing some IT and operational assets that also reduced structural costs by some $300 million annually. 10 This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. No By 2004, while the drives for cash generation and cost re duction were still in place, Immelt added a new initiative called Lean Six Sigma, which borrowed the classic tools of lean manufacturing and set them to new applications.In its industrial businesses, the focus was on reducing working capital and improving return on equity, while in its commercial finance business it was on margin expansion, risk management, and cost reduction. Through these efforts, in 2003–2004, the company achieved $2. 7 billion in improvement in working capital and expected that kind of progress to continue. tC While driving growth, Immelt never forgot that he inherited a great operating company. He did not want long-term growth to distract managers from current performance. I’ve always worried about a jailbreak,†he said. â€Å"How do we make sure people don’t say ‘Jeff doesn’t care about productivity’? †29 So he insisted that innovation be â€Å"funded with an intent to lead, but paid for by increasing prod uctivity. †30 During 2003, for example, about one-third of the Six Sigma specialists were focused on a new initiative called â€Å"cash entitlement. †The target was for GE to be twice as good as competitors on a number of benchmarks such as accounts receivable or inventory turnover. At ull potential, Immelt told his team, it would free up an additional $7 billion in cash. op yo Immelt was also quite involved personally in developing growth leaders on his team. In response to a question about his time utilization, he said, â€Å"I’m probably spending 20% of my time with customers, 30% of my time on people, teaching and coaching . . . [and] 10% of my time on governance, working with the board, and meeting with investors. The rest would be time spent on the plumbing of the company, working on operating reviews and strategy sessions. 27 But, as he regularly pointed out, the time he spent on the â€Å"plumbing†in operating reviews and strategy sessionsâ€⠀â€Å"touch points,†he called themâ€â€was primarily about people development. He was committed to make â€Å"every moment a learning opportunity, every activity a source of evaluation. †28 rP os t GE’s Growth Strategy: The Immelt Initiative 306-087 Preparing for Liftoff: Innovation and Internationalization As 2004 progressed, the worldwide economy gradually started to turn around, and GE began showing signs of more robust growth. By year’s end, nine of its 11 businesses had grown their earnings by double digits.For the first time, Immelt sounded confident that the company was finally moving beyond the disappointing results of the previous three years and onto the growth trajectory for which he had been preparing it. In his annual letter to stakeholders in February 2005, he recalled his time as a college football player to draw a sports analogy to GE’s recent performance: GE has â€Å"played hurt†for the last few years. . . . So we we nt to the â€Å"training room. †These difficult years triggered a critical review of our capabilities, and as a result, we initiated an exciting transformation.We invested more than $60 billion to create a faster-growing company. We committed to divest $15 billion of slow-growth assets. We built new capabilities, launched new products, expanded globally and invested in the GE brand. Now the company has begun an era of strong performance. . . . We’re back at full strength. This is our time. 31 To underscore the point, he predicted that GE’s â€Å"growth engines†â€â€businesses whose earnings growth since 1999 had averaged 15% annuallyâ€â€would generate 90% of the company’s earnings in 2005, compared with only 67% in 2000. See Exhibit 5 for a representation of the shift. ) Due to this transformation of the business portfolio and also the addition of more than a dozen new capabilities from biosciences to renewable energy, Immelt claimed that f or the first time in 20 years, GE was positioned to grow its industrial earnings faster than its financial services earnings. Imagination Breakthroughs Do No To drive his earlier growth platform challenge deep into the organization, the CEO launched a process he called â€Å"imagination breakthroughs,†quickly abbreviated to IBs.These were projects technological innovations, market expansion opportunities, product commercialization proposals, or ideas to create value for customersâ€â€that had the potential to generate, over a three-year horizon, at least $100 million in incremental earnings. The process required each business leader to submit at least three breakthrough proposals a year for review by the Commercial Council. â€Å"Imagination Breakthroughs are a protected class of ideasâ€â€safe from budget slashers because I’ve blessed each one,†said Immelt. â€Å"What we’re trying to do is take risks, using my point of view.I have the bi ggest risk profile and broadest time horizon in the company . . . so I can bring to bear the right risk-taking and time horizon tradeoffs. †32 A year into the program, 80 IB initiatives had been identified and qualifiedâ€â€half technically based programs and half commercial innovations. Immelt had assigned the company’s best people to drive them and had committed $5 billion over the next three years to fully fund them. In that time, they were expected to deliver $25 billion of additional revenue growth. By 2005, 25 IBs were generating revenue. The big difference is that the business leaders have no choices here,†Immelt explained. â€Å"Nobody is allowed not to play. Nobody can say, ‘I’m going to sit this one out. ’ That’s the way you drive change. †33 Believing that the businesses could initiate 200 such projects over the next year or two, Immelt said, â€Å"Our employees want to live their dreams. It is up to me to give the m that platform. I can help them take smart risks that will win over time. . . . We aim to be the best in the world at turning small ideas into huge businesses. †34 tC op yoThis document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t 11 306-087 GE’s Growth Strategy: The Immelt Initiative Of Town Halls and Dreaming To stimulate ideas that would drive the imagination breakthroughs, Immelt continued to push his leaders to get out in the field and in touch with the market. Setting the example himself by spending at least five days a month with customers, he began creating forums he called â€Å"town hall meetings. Here, several hundred customers would gather together to hear where GE’s CEO wanted to take his company, to provide input on that direction, and to suggest how GE could be more helpful to them. For example, in one meeting wit h the CEOs and key operating managers of companies in the railroad industry, Immelt spent an afternoon listening to their view of their industry situation, the key trends, and its five- to 10-year outlook. GE’s CEO then asked them to think through a number of scenarios including higher fuel prices, a growth in east-west rail shipments due to increasing Chinese imports, and so on.He then challenged them to think through how they would spend $200 million to $400 million on R&D at GE. The ensuing debate highlighted, for example, the relative importance of spending on fuel efficiency versus information technology to optimize rail movement planning. But Immelt was careful to note that while the company listened carefully to the input, GE always made its own choices on these investments. â€Å"I love customers. I get great insight from them, but I would never let them set our strategy for us,†he said. â€Å"But by talking to them, I can put it in my own language.Customers always pay our bills, but they will never pick our people or set our strategies. †36 Infrastructure for Developing Countries: A New Growth Market In 2004, Immelt’s push for globalization also began bearing fruit with revenues from outside the U. S. growing 18% to $72 billion. Of this, the developing world accounted for $21 billion, an even more impressive 37% increase on the previous year, leading Immelt to predict that over the next decade, 60% of GE’s international growth would come from developing countries.China represented the most visible growth opportunity, but he also planned to expand aggressively into India, Russia, Eastern Europe, Southeast Asia, the Middle East, and South America. Through the imagination breakthrough program, proposals for improving GE’s ways of doing business in the developing world began bubbling up. For example, one plan that would quickly generate $100 million in sales involved shipping unassembled locomotives to Russia, In dia, and China, where they would be assembled in local factories and workshops. Furthermore, through an initiative known as â€Å"one GE,†the ompany began creating vertical teams to deliver what it called enterprise selling. For example, companywide enterprise teams had targeted the Olympics in Beijing, Vancouver, and London and were aiming to deliver additional sales of $1 billion in energy, security, lighting, and health-care products to those venues. And increasingly GE was adopting â€Å"company-to-country relationships†in selling infrastructure projects. It was an approach that had helped it book $8 billion in Middle East orders in 2005, twice the level of 2003. Do 12This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. No tC op yo As an outgrowth of these meetings, Immelt decided to create another forum that he described as â€Å" dreaming sessions. †In these sessions, he engaged in intensive conversations with a group of senior executives drawn from key customers in a particular industry to try to identify major industry trends, their likely implications for them, and how GE might be able to help them.Immelt understood the importance of his own role in these meetings. â€Å"If I show up, we’ll get six CEOs to show up,†he said. â€Å"So you don’t have to cut through anything else if we all do it together. We can make some high-level tradeoffs that way. †35 rP os t GE’s Growth Strategy: The Immelt Initiative 306-087 Reorganizing for Efficiencyâ€â€and Growth Driven by such developments, in July 2005, Immelt announced a major reorganization that consolidated GE’s 11 businesses into six large units, one of which was GE Infrastructure.Integrating aircraft engines, rail products, water energy, oil and gas, and some financial services, the unit was headed by GE v eteran David Calhoun, who aimed to offer one-stop shopping for all infrastructure products and services. Immelt’s expectation was that by focusing on the needs of an underserved customer groupâ€â€the governments of developing countriesâ€â€GE could tap into investments in developing country infrastructure predicted to be $3 trillion over the next 10 years. Going Forward: Immelt’s Challenges His main challenge now as he saw it was to maintain the growth in this $150 billion global giant.But to those who felt GE was too big to grow so fast, he had a clear response: Do No The corporate landscape is littered with companies that allowed themselves to be trapped by size. But GE thrives because we use our size to help us grow. Our depth allows us to lead in big markets by providing unmatched solutions for our customers; our breadth allows us to spread concepts across the company, leveraging one small idea to create big financial gains; and our strength allows us to tak e the risks required to grow. . . Our goal is not just to be big, but to use our size to be great. 38 All he had to do now was convince the financial markets that the changes he had initiated would enable this global giant to deliver on his promise of continued double-digit growth. tC In 2006, Immelt felt that GE was well placed on the growth path he had laid out over four years earlier. Between 2002 and 2005, he had put $30 billion of divestitures on the block, completed $65 billion in acquisitions, and made major investments in new capabilities in technology, marketing, and innovation.He now represented GE’s growth engine as a linked six-part process (see Exhibit 6). While the components varied little from his original 2001 list of growth elements, he explained the difference: â€Å"You’ve got to have a process. Investors have to see it is repeatable. . . . It took time, though, to understand growth as a process. If I had worked out that wheel-shaped diagram in 2001 , I would have started with it. But in reality, you get these things by wallowing in them awhile. †37 op yoWhile one objective of the reorganization was to create savings (expected to be $400 million in administrative costs alone), Immelt emphasized that a more important goal was to better align the businesses with customer and market needs. But he also made clear that he wanted to create an organization that gave more opportunity for younger growth leaders to drive their businesses. The six new macrobusiness groupsâ€â€GE Industrial, GE Commercial Financial Services, NBC Universal, GE Health Care, GE Consumer Finance, and GE Infrastructureâ€â€would each be led by one of GE’s most experienced top executives.But these individuals would be forced to step back more from operations and spend most of their time coaching, developing, and supporting the younger managers who were to be pulled up into the 50-odd profit-responsible units directly under them. It was all par t of the company’s commitment to developing its growth leaders and the businesses they ran. This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t 13 306-087 -14-Exhibit 1 GE’s Performance, 2001–2005: Selected Financial Data General Electric Company and Consolidated Affiliates (in millions, per share amounts in dollars) Do 2003 $112,886 13,766 2,057 15,823 -587 15,236 7,759 19. 60% 2002 $113,856 15,798 -616 15,182 -1,015 14,167 7,266 27. 20% 2001 $107,558 12,948 1,130 14,078 -287 13,791 6,555 24. 70% $ 1. 37 0. 2 1. 57 -0. 06 1. 51 1. 37 0. 21 1. 58 -0. 06 1. 52 0. 77 32. 42–21. 30 30. 98 503,610 647,828 170,309 10,018,587 670,000 $ 1. 58 -0. 06 1. 51 -0. 1 1. 41 1. 59 -0. 06 1. 52 -0. 1 1. 42 0. 73 41. 84–21. 40 24. 5 441,768 575,236 138,570 9,947,113 655,000 $ 1. 29 0. 11 1. 4 -0. 03 1. 37 1. 3 0. 11 1. 42 -0. 03 1. 39 0. 66 52. 90–28. 25 40. 08 373,550 495,012 77,818 9,932,245 625,000 No 2005 $149,702 18,275 -1,922 16,353  16,353 9,647 17. 60% 2004 $134,481 16,285 534 16,819  16,819 8,594 17. 60% tC 1. 73 -0. 18 1. 55  1. 55 0. 91 37. 34–32. 67 35. 05 626,586 673,342 212,281 10,569,805 634,000 161,000 155,000 316,000 This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860.Selected Financial Data Revenues Earnings from continuing operations before accounting changes Earnings (loss) from discontinued operations, net of taxes Earnings before accounting changes Cumulative effect of accounting changes Net earnings Dividends declared Return on average shareowners' equity (a) Per share Earnings from continuing operations before accounting changes diluted Earnings (loss) from discontinued operationsâ€â€diluted Earnings before accounting changesâ€â€diluted Cumulative effect of accounting changesâ€â€diluted Net earningsâ€â€diluted Earnings from continuing operations before accounting changes basic Earnings (loss) from discontinued operationsâ€â€basic Earnings before accounting changesâ€â€basic Cumulative effect of accounting changesâ€â€basic Net earningsâ€â€basic Dividends declared Stock price range Year-end closing stock price Total assets of continuing operations Total assets Long-term borrowings Shares outstandingâ€â€average (in thousands) Shareowner accountsâ€â€average Employees at year-end United States Other Countries Total Employees op yo 1. 72 -0. 18 1. 54  1. 54 $ 1. 56 0. 05 1. 61  1. 61 1. 57 0. 05 1. 62  1. 62 0. 82 37. 75–28. 88 36. 5 618,241 750,507 207,871 10,399,629 658,000 165,000 142,000 307,000 155,000 150,000 305,000 $ 161,000 154,000 315,000 158,000 152,000 310,000 Source: GE 2005 Annual Report. rP os t GE’s Growth Strategy: The Immelt Initiative 306-087 Exhibit 2GE Stock Price and P/E Multiple vs. S 500 Performance, 1995–2005 GE Price & P/E vs. S 500 1995-2006 (indexed 1/1995=100) 700 GE Price & S 500 (indexed 1/95=100) 600 500 400 300 200 100 0 97 96 95 Ja nJa nJa n- GE P/E S 500 GE Price op yo 99 00 01 02 Ja nJa n03 Ja nJa nJa n- 30 20 10 0 04 05 Ja nJa n06 Ja n- 98 Source: Thomson Datastream International. Do No tC Ja n- GE P/E (%) This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t 60 50 40 15 306-087 -16- Exhibit 3 GE Financial Performance, 1981–2000 ($ millions) Do 000 1999 1998 1997 1996 1991 1986 1981 $129,853 10,717 -9,296 4,081 25. 7% 25. 0% 24. 0% 3,535 3,138 1,808 12. 2% 8,203 7,280 2,636 –492 9,296 8,203 7,280 3,943 $111,630 $100,469 $90,840 $79,179 $51,283 $36,725 3,689 N/A 2,492 1,081 17. 3% $27,240 N/A N/A 1,652 715 19. 1% 12,735 –10,717 General Electric Company & Consolidated Affiliates Revenues Earnings from continuing operations Loss from discontinued operations 12,735 4,786 Net earnings 5,647 26. 8% Dividends declared 27. 5% No 3. 87 3. 81 1. 71 1. 47 159. 5-94. 3 405,200 71,427 3,277,826 3,268,998 3,274,692 59,663 46,603 355,935 304,012 103. 9-69. 0 76. 6-47. 9 1. 25 1. 08 0. 95 3. 21 2. 80 2. 46 2. 16 3. 27 2. 84 2. 50 2. 20 2. 55 1. 51 1. 04 78. 1-53. 272,402 49,246 3,307,394 166,508 22,602 1,737,863 2. 73 N/A 1. 18 44. 4-33. 2 84,818 100,001 912,594 Earned on average shareowners’ equity Per share: Net earnings N/A N/A N/A 69. 9-51. 1 20,942 1,059 227,528 Net earningsâ€â€diluted tC 53. 1-34. 7 167,000 143,000 -310,000 293,000 -130,000 163,000 165,000 155,000 111,000 173,000 84,000 -62,000 -276,000 49,000 Dividends declared 181. 5-125. 0 437,006 82,132 3,299,037 Stock price rangea Total assets of continuing operations Long-term borrowings Shares outsta ndingâ€â€average (in thousands) Employees at year-end: 168,000 145,000 -313,000 United States 302,000 N/A 71,000 N/A N/A N/A 239,000 284,000 373,000 404,000Other countries Discontinued operations (primarily U. S. ) Total employees op yo Source: GE annual reports, various years. This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. aPrice unadjusted for four 2-for-1 stock splits during the period. rP os t 306-087 -17- Exhibit 4 Do No tC op yo GE Portfolio: Growth Engines and Cash Generators This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860.As of January 1, 2004, GE has reorganized its 13 businesses into 11 focused on markets and customersâ€â€seven Growth Engines, which generate about 85% of earnings and are market leaders with strengths in technology, cost, services, global distribution and capital efficiency; and four Cash Generators, which consistently generate strong cash flow and grow earnings in an expanding economy. This chart reflects the most significant changes: the combination of Aircraft Engines and Rail into GE Transportation; the combination of Industrial Systems and Consumer Products into Consumer & Industrial, with portions of Industrial Systems moving to other businesses; and the formation of Infrastructure from portions of Industrial Systems and Specialty Materials. Results for 2003 in this annual report are reported on the 13-business basis in effect in 2003. P os t Source: GE 2003 Annual Report, p. 6. 306-087 GE’s Growth Strategy: The Immelt Initiative Exhibit 5 GE’s Representation of its Portfolio Transformation, 2000–2006 Portfolio Transformation GE has added more than a dozen new capabilities to its seven Growth Engines, which should generate approx imately 90% of GE’s earnings in 2005, substantially more than five years ago. The Growth Enginesâ€â€Transportation, Energy, Healthcare, NBC Universal, Infrastructure, Commercial Finance and Consumer Financeâ€â€are robust, capital-effective businesses with leadership positions for sustained doubledigit earnings and cash flow growth. New Growth CapabilitiesBiosciences Film + DVD Healthcare Information Technology Renewable Energy (Wind, Solar, Biomass) Coal Gasification Water Security Hispanic Television Oil & Gas Exploration Technology Services (Asset Optimization, Environmental Services, Non-Destructive Testing) â€Å"Vertical†Financing Full Supply-Chain Financing Real Estate Operations Global Mortgage Source: GE 2004 Annual Report, p. 4. Do 18 This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. No tC op yo rP os t GE’s Gr owth Strategy: The Immelt Initiative 306-087 Exhibit 6 GE Growth Strategy: Core Elements, 2005 Version Customer ValueUse our process excellence to create customer value and drive growth Growth Leaders Inspire and develop people who know how to help customers and GE grow Globalization tC Create opportunities everywhere and expand in developing markets Do No Source: â€â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€-GROWTH IS THE GE INITIATIVE After growing historically at an average of 5% revenue growth, in 2004, we launched this initiative to achieve 8% organic growth per year. This is about twice the rate of our industrial and financial peers. We want to make or ganic growth a process that is predictable and reliable. â€â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€- GE 2005 Annual Report. op yo Execute for Growth Commercial Excellence Create a world-class marketing and sales capability to drive â€Å"one GE†in the marketplace This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t Innovation Generate new ideas and develop capabilities to make them a reality Leadership in Technology Have the best products, content and s
Saturday, September 28, 2019
Operation management within maintenance operation in Maersk Oil Qatar Essay
Operation management within maintenance operation in Maersk Oil Qatar - Essay Example The intention of this study is an operations management as a segment of business that focuses on the production of goods and services. It focus is to make sure that business operations are efficient in that it uses as little resources as possible and effective in terms of meeting customer requirements and expectations. It focuses on managing the process that transfers inputs (in the forms of materials, labor and energy) into outputs (in the form of goods and services). Major operations management and problem solving techniques pertaining to the oil and gas industry include: estimating, organizing, modeling, planning and controlling resources and schedules with the aim of optimizing project performance and quality. Due to intense competitiveness, companies need to look for differentiating elements in the products and services they offer. After the business and service strategies have been identified, the management of productive and logistic operations plays a crucial role in the deve lopment of products and services to be supplied. Once the requirements of various clients have been identified, the operations management is applied to assess, define, schedule and monitor the resources and capacities needed to provide the solutions they want. Operations management is needed so as to make sure the efficiency and effectiveness of the flows of materials from the supplier, through the productive and distribution systems, to the customer, along with the related information flows.
Friday, September 27, 2019
Design entrepreneurship-business innovation Essay
Design entrepreneurship-business innovation - Essay Example In short chaos ruled and the area of greater concern was the bad atmosphere that was developing among the group members. It was necessary that leadership emerge in the group to pull the group out of the morass that it was falling into, in keeping with Max Depree’s differentiation between management and leadership in his book, Leadership is an Art â€Å"that management is essentially a push operation while leadership is a pull operation†. Yet, as leadership emerged it would need to display the four essential dimensions of vision, reality, ethics and courage to be successful, as suggested by philosopher Peter Koestenbaum. (Ind, N. 2001). As I sit back and reflect on the manner in which I contributed to the group during my tenure of leadership I feel that I did in some way display the four essential characteristics of leadership. I had the vision to see that in the manner that we were going about, we would not complete the journal that we were supposed to do. I had accepted the reality that I was a member of a group, each with talents and individual abilities that only needed to be harnessed. There was no discrimination in my acceptance of the individuals that made up the group and their views. I did display courage in standing firmly by the group activities that I had planned despite the slight objections that arose. Reflecting again on my performance as a leader of the group there were two activities that provide me with the impression that I am more of a transformational leader than any other form of leader. The first was the brain storming session that I implemented to cause the group to focus on the job at hand and make individual contributions that could be used by the group, thus bringing about mutual satisfaction. The second aspect was the ability to set a framework of ground rules for the group and the acceptance of these ground rules by the group. This meant that I
Thursday, September 26, 2019
Responding to argument Essay Example | Topics and Well Written Essays - 750 words
Responding to argument - Essay Example While a group of people consider homosexuality as part of what God has intended for some people in the time of creation, some others consider all kinds of sexual orientation and its practical aspects as part of human freedom and susceptibility to sin. Naturally, the former group tries to justify homosexual tendencies as normal and not something to be cured, while the latter seek religious and other sorts of help to cure themselves of this ‘disease’. Fr.Hopko tries to substantiate the orthodox position with the help of scriptures. He chooses to make use of three references from the Bible – Leviticus 20:13, Romans 1: 26-27 and I Corinthians 6:9-11 – to display how the Bible considers homosexuality an abomination that deserves due penalty and how those who practice it will fail to inherit the Kingdom of Heaven. However, the arguments are not totally intolerant towards people who happen to be homosexuals by choice or circumstances. Hopko asserts the concept that Christians are redeemed sinners and reveals the extent to which sinful acts are forgiven in the Christian ideology if the people acknowledge their sins and repent for them. There could even be cases where people are led against their will to commit sins, where their passions overpower their conscience. Even as such sins remain a serious affront towards Christian faith, Hopko points out how such sinners could seek the religious and community help to come back t o a true Christian life. He tries to strike a balance in his arguments by criticizing the mindless, truly demonic hatred of anti-homosexuals and also the mindless, equally demonic homosexual activity by its misguided advocates and enablers. He brings in the analogy of the burden of a cross to define homosexuality and affirms that there is redemption for people with homosexual affinities if they are willing to struggle against it. Though the entire article sounds sensible and balanced at first reading, anyone who is aware
Wednesday, September 25, 2019
Kush dynasty before the 1600 Research Paper Example | Topics and Well Written Essays - 250 words
Kush dynasty before the 1600 - Research Paper Example (Mazour, 1993). Though the Kush Dynasty was a separate entity, they were more interested in the Egyptian culture. The major reason behind the invasion of Egypt was Kush Dynasty’s alliance with the Hyskos. During this period, they captured every part of Egypt and at last the entire country came under their control. (Redford, 2006). Kerma was the first place to be captured by the Kingdom of Kush and this was the initial stage of the invasion into Europe. Soon after this, the entire Egypt came under their control. (Torok, 1997). Even though the Egyptian people strived hard to retain their old ruling regimen, they could not succeed. But this did not last for a longer time, since the reunion of the entire country ended up in the eradication of the Kingdom of Kush. (Welsby, 1998). Soon after this, the Kush Dynasty took over Nubia and later on Egypt fell as the prey to Kush Dynasty once again. The Kush kings dominated the country right from the initial parts of Nile, till the Mediterranean coast. This period is often referred to as the Black Period of
Tuesday, September 24, 2019
Network administration capstone project Case Study
Network administration capstone project - Case Study Example There was also the need to analyze the components and features of the software in relation to the demands of the department. Result of the component and system analysis is what has been presented in this capstone project. Like all other forms of major institutional projects, the usage of the present project, which was the internalization of software, was taken through a number of development levels. There were three major development levels identified and these are the search level, implementation level and evaluation level. At the search level, developers were tasked and at the same time offered the opportunity to undertake comprehensive research and feasibility study about the intended project. This was done with the aims and objectives of the project in mind as data and information were searched on how to ensure that the usage of the present software would meet the standards on the estimating software market, and if possible become a new model that will also set a new and higher s tandard for the market. This was followed by the implementation level, which was an action driven point of the actual development whereby all the paper works were put into action. This involved all software and hardware managers operating from their different areas of expertise to ensure that the construction of the software was done according to the stipulated standards that were set ahead of the implementation stage. To ensure that the finished work matched up the planned purpose of the project, a comprehensive evaluation level was instituted. The evaluation of the task was made up of a comprehensive critic and appraisal of the finished work to ensure that there were no areas or aspects of it that produced sub-standardization. What is more, it was to ensure that the system specifications were working as planned. Project Description The present project involves the process of internalizing purchased software to solve the everyday estimation tasks that is undertaken by the company. By this, reference is being made to the fact that, because the system was not internally created by the department, it is important that is will be adjusted to fit the requirements and needs of the department. Therefore, two major roles are involved in describing the project. The first is in giving a vivid identity to how the creator of the software designed it to work and how it is currently being re-created to take up quotes for the customers who would presently be using it for their own estimations most importantly however, it is worth emphasizing that due to the fact that the purchased product was designed purposely for the task of estimation, it did not take much work to be done by the company in getting new features fixed to make the software ideal for the department. All in all, in describing the project, an overall identity that can be given to it a SQL based software that has come to compliment and replace the old DOS and Excel estimating system that is currently used by th e sales department of the company. The project, and for that matter the software has some specifications that distinguishes it from other estimation software and the old DOS and Excel estimating system. One of such is the fact that the present project guarantees more detailed, professional and accurate estimation tasks that were otherwise seen as weaknesses of the old estimation system. These detailed, profes
Monday, September 23, 2019
Management Information Systems Project Research Paper
Management Information Systems Project - Research Paper Example The dot.com bubble was a cycle that emerged in form of nuttiness. Although the dot.com bubble was a new bust, it was not the first bubble to come up. This is because there was the CD-ROM bubble that was in existence. This CD-ROM bubble was from the companies like the bill gate’s company by the name â€Å"information at your fingertips†. This company was among the companies that were the watchword of the world. Another example of a company that was with the CD-ROM bubble is the Microsoft home (Preissl, Bouwman & Steinfield, 2004). The chief reason for the upcoming of the dot.com was to offer an e- commerce service to the computer internet users. The bubble was basically for the marketing in the internet to the potential client. The dot.com bubble aimed at increasing the internet stock market for specific companies which were calling themselves the dot.com. The NASDAQ was at the highest level of its stock marketing records during the dot.com bubble. Subsequently, NASDAQ i s the dominant and widely known for the market capitalization. For instance, the NASDAQ in the year of 2000 was able to make up to about 5048.62 peak value, which was double the previous year’s amount which was roughly 2500. This was consequently termed the2000 burst as the cataclysmic. The chief examples of the big busts that were capable of buying these bubbles included the Microsoft Company, the dell, and also the Intel Company. Additionally, the Cisco Company, the oracles and also the sun Microsystems Company. These companies were competent of venturing into this business by funding the bubble. For instance, a sum of approximately 600 US Dollars was put for utilization in the starting up of the wed 2.0. Unfortunately, this funding did not lead to the subsequent success of the bubble. Thus it was a loss to the companies that put their money into the venture. Moreover, these companies that were dealing with the internet business were known by the name of the â€Å"four hor semen of the NASDAQ.†this was chiefly due to their significance in the contribution of the capitalization in the business industry (Preissl, Bouwman & Steinfield, 2004). Unfortunately, the NASDAQ lost a huge sum of cash during the funding of the web 2.0 and also the dot.com. This is because the NASDAQ businesses thought that they were going to get a higher amount of revenue from the investments in this bubble. The chief significant acquisitions market is the sole vital and further the only feasible supply of the potential startup of this bubble. Though there has been a significantly large and further potential high profile of the web 2.0 acquirement, the investors have subsequently been reducing their potential expectations since the time of 1998 (Argenti & Barnes, 2009). Evidently, the price of these companies that was capable of acquiring was large during the first year of the funding. Unfortunately the amount began to reduce for the next coming financial years, thus leadin g these companies into a financial loss (Preissl, Bouwman & Steinfield, 2004). We learn from the dot.com bubble that when making long-term investments, we should do it when prices are not overvalued as well as when fundamentals are good, especially when it comes to stock market. This is because the market is bound to clash due to overvaluing of prices as well as due to poor fundamentals. In case of short-term investments, one should trade and upon getting the profit, move out. Last, one should be skeptical when a company is promising to make life-altering
Sunday, September 22, 2019
Fiscal Federalism in Nigeria Essay Example for Free
Fiscal Federalism in Nigeria Essay The question of an acceptable formula for revenue sharing among the component tiers of the Nigerian nation is one of the most protracted and controversial debates in the political and macroeconomic management of the economy. This debate has its foundations in the history and evolution of the Nigerian federation. â€Å"Revenue allocation or the statutory distribution of revenue from the Federation Account among the different levels of government has been one of the most contentious and controversial issues in the nation’s political life. So contentious has the matter been that none of the formulae evolved at various times by a commission or by decree under different regimes since 1964 has gained general acceptability among the component units of the country. Indeed, the issue, like a recurring decimal, has painfully remained the first problem that nearly every incoming regime has had to grapple with since independence. In the process, as many as thirteen different attempts have been made in devising an acceptable revenue allocation formula, each of which is more remembered for the controversies it generated than issues settled†Fiscal federalism refers to the scope and structure of the tiers of government responsibilities and functions as well as the allocation of resources among the tiers of government. Perhaps the most important issue of fiscal federalism is the revenue allocation formula, the sharing of national revenue among the various tiers of government (vertical revenue sharing) as well as the distribution of revenue among the state governments (that is, horizontal revenue allocation). The centralization of Nigeria’s fiscal federalism began with the report of the Dina Commission (1968) which argued that an appropriate revenue allocation system should result in a more equitable distribution of revenue among the states to achieve a balanced development of the federation. Revenue allocation can be described as a method(s) of sharing the centrally generated revenue among the different tiers of government and how the amount allocated to a particular tier is shared among its components. Nigeria is a federal state – under the federal system of government, federation or centrally-generated revenue is shared among the three levels of government, namely; the federal government, the states and the local governments. The theory of revenue sharing in a federal state is that each level of government receives an allocation of financial resources tailored to their specific requirements as defined by the mandate of legislative competence, their actual situation and the statutory indices of calculation. In Nigeria, decisions as to what proportion of centrally-generated revenue that would be retained by the federal government, the proportion that will be shared among the state governments and the proportion that will go to the local government has always been a problem, due to the fact that there is no consensus of opinion as to what could be seen as an ideal formula. The principles that guide the implementation of intergovernmental fiscal relations include: (a) The Principle of Diversity: The federal system must have the ability to accommodate a large variety of diversities. Hence, the fiscal system must provide scope for variety and differences to supply national, regional and local public goods. (b) The Principle of Equivalence: Based on the geographical incidence of different public goods, allocative efficiency requires the equalization of locational advantages arising from inter-jurisdictional differences with a combination of taxes and public goods and services. This requires the use of fiscal instruments for achieving macroeconomic objectives of growth, stabilization and full employment by residents of different geopolitical units; this requirement controls for what is often referred to as â€Å"central city exploitation thesis†. (d) Minimum Provision of Essential Goods and Services: This ensures that fiscal federalism guarantees all citizens, irrespective of where they reside, the minimum provision of ertain basic public goods and services. (e) Principle of Fiscal Equalization: In order to ensure a minimum level of public goods and services same degree of fiscal equalization is required. This is as a result of differences in resource endowment. (f) The Efficiency Principle: This principle implies that efficiency must be applied in the allocation of resources (g) The Principle of Derivation: The component units of a system should be able to control some of its own resources as they desire. h) The Principle of Locational Neutrality: Interregional fiscal differences tend to influence location choices of individuals and firms. Therefore, policy should focus on minimizing distortions due to some interference. Hence, differential taxes which create locational distortions should be avoided as much as practicable. (i) The Principle of Centralized Redistribution: This principle states that the redistribution function of fiscal policy through progressive taxation and expenditure programmes should be centralized at the federal level. That is, if the redistributive function is decentralized, it can result in distortions in location decisions. It should be noted that the above principles are not mutually consistent. There are several challenges and contending issues confronting intergovernmental fiscal relations in Nigeria: 1) Non – Correspondence Problem Ideally, each level of government should be given adequate resources to allow it discharge its responsibilities. Because this is not possible, there is usually a lack of correspondence between the spending responsibilities and the tax powers/revenue sources assigned to different levels of government. It is this incongruence that is often referred to as the non-correspondence problem. In Nigeria, most of the major sources of revenue come under the jurisdiction of the federal government yet lower levels of government are supposed to generate internal revenue. There is, therefore, the need to resolve the imbalance between assigned functions and tax powers. The issues concerning fiscal relations among the constituent units of the Nigerian federation that remain mostly unresolved are the divergence between assigned functions and tax powers, principle of horizontal and vertical revenue allocation, dependence of states and local governments on federal sources of funding, tendency towards concentration and federal presence in the states (Fadahunsi, 1998). The five principles currently applied in the horizontal revenue allocation formula are far from acceptable to all the stakeholders. 2) Fiscal Autonomy and Independence The issue of relative fiscal autonomy and independence of the state and local governments in a true federal structure goes with the corollary issue of the correspondence of governmental functions and revenue sources. Since the creation of the twelve-state structure in 1967, states and local governments have been excessively dependent on the Federation Account. This independence must be reduced if the federating units are to be free to pursue their own development goals without being hampered by the unpredictable fluctuations in their shares of the Federation Account. It is important that revenue sources should be reallocated and made compatible with the fluctuations stated for each tier of government to enhance steady and proper funding of administrative and developmental activities instead of the often experienced unexpected financial constrictions at the two lower tiers of government. 3) Oil Producing States, Oil Producing Local Government Administrative Areas or Communities Professor Omo Omoruyi in his treatise â€Å"the Politics of Oil: who owns the oil, Nigeria, states or communities†(2000) raised three salient questions on true ownership of oil in Nigeria. The question of local control over local resources is an established constitutional principle in federal systems. But the way the Nigerian federal system developed under the external colonial order (1954-60) and continued under the period of geo-ethno-military internal colonial order (1960-1999) and in the democratic dispensation between 1999 to date is yet an unresolved contending issues in the discourse about Nigeria’s federalism. He challenged the â€Å"Tripod†approach to Nigeria’s problem where the three major ethnic nationalities decide the content and the trend of national issues. This tripod approach to Nigerian politics, should have been done away with by now, with the introduction of the notion of ‘federal character’, which takes states in the federation as the units of representation. The tripod approach to Nigerian politics applies to how the oil, which comes from the non-majority areas, is approached in the political and economic discourse. We should also be aware of the feeling among the majority ethnic nationalities that the areas producing oil by virtue of powerlessness in the military and politics should not be allowed to lay claim to the oil from their areas as of right†. However, theres a distinction between oil producing communities and oil producing states. This is the basis of the activities of the Traditional Rulers of the Producing Communities who are dealing with the President and want the money due to states on the basis of the 13% derivation in the Constitution should be paid to the â€Å"oil producing communities/local government areas†. The Traditional Rulers’ argument is that â€Å"communities†own oil and not â€Å"states†. This is an unresolved issue and separates the communities in riverside areas directly affected by oil spillages from their compatriots in landed areas from enjoying the full benefits of allocations to producing states. One does not know the end of this argument. How should the National Assembly address this matter? The federal government should find a way of making the oil producing local government administrative areas as shareholders in the joint venture arrangements with the oil companies, thus making them stakeholders in the oil industry. There was the issue of who should be spending the oil money. Should it be the Nigerian government in conjunction with the oil producing areas? Should it be the oil producing areas alone? The Constitution from 1960 till after the civil war up till 1978 gave the right of ownership to the federal government but the proceeds were shared between the federal government and the regions or states on the basis of derivation like the agricultural crops. 4) Federation Account and the Derivation Fund It is important to define what constitutes the Federation Account – to which the various vertical revenue allocation formulae have been applied and what should be directly financed from it. Up to 1990, the amount accruing yearly to the Federation Account was still over 96% of totally federally collected revenue; but since 1991, when it first dropped to about 75% and nose-dived to around 35% by 1997, it showed no sign of recovery (Olowononi, 1999). It is therefore clear, that in such a situation, whatever the vertical formula applicable, there must still be a serious fiscal imbalance between the ederal government and the two lower tiers of government. It is crucial to redress this revenue imbalance in the spirit of balanced true federalism. What appears to account for this imbalance is the assertion of the self-claimed right by the federal government to finance various first-line charges from the Federation Account before the application of the vertical formula. The first-line charges include funding for external debt service, national priority projects, NNPC priority projects, special reserve account, and excess proceeds of the crude oil sales account, and in addition, the joint venture cash calls account. These deductions are made from the proceeds of crude oil sales before the derivation fund in the Federation Account is arrived at, and after which further deductions for special funds and the funding of the federal capital territory are made. It will seem more logical, with the exception of the joint venture case calls, that these various charges which are federal government obligations be financed solely from the federal government’s revenue proper, that is, from its share of the Federation Account or from its revenue from other sources. Therefore, in order to determine what constitutes the derivation fund, resolving the issue of the Federation Account is crucial. Thereafter, the derivation formula to be utilized can be arrived at. 5) Oil – Producing Areas and the Derivation Principle The crude oil production has been the most important economic activity in the Nigerian economy since the early 1970s is not subject to debate. Its impact is not limited to its contributing almost 90% of Nigeria’s total foreign exchange earnings but also to the fact that the national budgets are predicated on the expected annual production and price of crude oil.
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