Related diversification strategy is when a company has many different products and they are all related to each other in some way. First glance at a product line of GE and especially when you explore the company’s history you will notice one thing their entire arrays of products all entail, innovation (see timeline in appendix). GE uses its core competences of innovation, technology, globalization, customer focus, and services when making all of their products (see appendix). Even though their products cover a wide variety of markets, they all fall back on these core values. When they take on new products they make sure that the product can apply their GE technology and management expertise to accelerate growth for the company. “A key GE strength is our ability to conceptualize the future, identify “unstoppable” trends and develop new ways to grow. Growth is the initiative, the core competency we are building at GE. We can take every growth idea and multiply its effectiveness through globalization.” This quote goes into detail of their main core competences and how they effectively use them in each product line to produce growth and success.
The reach of GE’s businesses is reflected in their expansive line of products and services that span many industries and customers worldwide. GE businesses all share one important trait: each harnesses the power of imagination to make life better for our customers and consumers all around the world (Immelt). Some of these products include appliances, such as dishwashers, dehumidifiers, freezers, air conditioners and refrigerators. Another sector of their business deals with aviation, including commercial rail, engines, military engines, etc. They provide consumer products such as cameras, house wares, telephones, and home electronics. Other sectors they are part of are the energy, finance, healthcare, lighting, media and entertainment, oil and gas, software and services and water industries. I believe that all of these products are similar in the sense that they all do not do exactly the same thing but they are all a part of an underlying sector in a person’s life. They all provide service to our daily routines, some used more often than others.
The diversification strategy is multifaceted, I will talk about two types of relatedness: operational and corporate while observing General Electrics strategy. Operational relatedness is achieved when the firm’s businesses successfully share resources and activities to produce and sell their products, not used as widely in GE. Corporate relatedness is achieved when corporate level core competencies are successfully transferred into some of the firm’s businesses. I believe that GE is an example of corporate relatedness because their economies of scope are generated through their core competences. For instance they are able to enter all of the consumer services and appliances industries because of their innovation, technological advancements and service sector.
“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” (Case Study, pg. 2). Quote from strategic leader Jeff Immelt in discussing their wide yet related variety of products.
General Electric has grown as a company since 2006 and the company, constructed on innovation and internationalization, has made many moves in multiple industries.
For more information see: How Much Did the Recession Effect GE