General Electric played an essential part in electrifying America. From generators for creating electricity, transmission equipment for transporting it and industrial motors for motoring factory floors to light bulbs – everything was produced at General Electric by 1981 when Jack Welch took over as CEO and started buying out other businesses to diversify its revenue streams from manufacturing into services and technology.
The Company’s Origins
Early days for General Electric focused primarily on electricity-producing equipment and electricity-consuming products. One of GE’s earliest innovations included manufacturing electric locomotives, generators for buildings and light bulbs – as well as an early venture into transformer manufacturing through acquisition of Stanley Electric Manufacturing Company of Pittsfield Massachusetts in 1903.
Research was an integral component of General Electric and in 1900 established its inaugural industrial laboratory in Schenectady, New York. There researchers collaborated with English, Swedish and other inventors in creating high-speed steam turbine generators capable of increasing output per unit of electricity production.
As soon as GE realized its growth was outpacing its control, management instituted a massive restructuring of operations and products to help keep up. This included creating many different divisions focused on particular markets. Their success has been credited to continued research and innovation as well as diversification strategies which allow the company to weather economic fluctuations within various industries.
Electrification
As society gradually transitioned away from Thomas Edison’s light bulb invention and towards more advanced technologies, General Electric expanded its industrial manufacturing footprint. They developed power generation, healthcare tech and aviation equipment as a part of their portfolio of products and services to help it weather economic fluctuations within specific industries.
General Electric continued its growth through acquisitions and a focus on service and high technology. Their first major diversification occurred in 1903 with their purchase of Stanley Electric Manufacturing Company of Pittsfield Massachusetts (a manufacturer of transformers). This gave GE access to an important manufacturing operation with substantial potential growth potential.
Under Welch’s direction, the company adopted “six sigma,” a quality control and improvement initiative which reduced costs by decreasing errors or defects. This was one of several initiatives adopted under his leadership that helped sustain success for the business throughout its existence, such as globalization and services initiatives that helped it continue growing throughout the late 90s.
Plastics
As General Electric expanded into new industries, research and development became ever-more intensive, leading to inventions that propelled it into new markets such as plastics and radio broadcasting. Researchers invented photoelectric-relay principle; glass-to-metal seals for vacuum tubes; frequency modulation (FM) technology that replaced AM radio broadcasting; as well as FM technology which replaced it.
GE developed plastic coatings, varnishes, and insulation materials to strengthen electrical wiring – as well as household items like refrigerators and washing machines – making their durability more reliable.
As soon as World War II broke out, General Electric quickly went to work producing military equipment. In fact, GE earned numerous contracts from the war effort for building radars and power plants for use during battle.
At this time, the company also conducted several acquisitions to expand its business, including purchasing 73% of DAKO S.A. of Brazil – one of Brazil’s leading gas range manufacturers – as well as the consumer finance, leasing, and automotive services businesses from Lake Corporation, Koei Credit, and Toho Mutual life Insurance.
Aerospace
Thomas Edison is perhaps best-known as the inventor of the light bulb, yet also had an aptitude for business entrepreneurship and formed various companies to protect and profit from his inventions.
As aviation and power industries grew, General Electric began producing turbines and engines for airplanes – an essential step towards expanding consumer goods offerings.
By the 1970s, General Electric had become more engaged with consumer products such as television and healthcare services; these activities soon expanded into manufacturing and power transmission as well.
Jack Welch took control of General Electric during the late 1970s, leading to significant restructuring that included divesting some unprofitable units and divesting debt, while increasing efficiency through quality control practices such as “six sigma.” These measures helped lower operating costs while making General Electric more competitive and profitable.
Energy
With its eye on expansion, GE continued its business expansion throughout the 1990s. The company reached several key milestones during this time period, such as becoming one of the original members of the Dow Jones Industrial Average and becoming one of the leading suppliers of electrical equipment such as home appliances and power turbines. Furthermore, GE ventured into high-technology fields such as laser technology and medical imaging – while expanding manufacturing operations through acquisitions such as Calma and Intersil as well as developing robotic factory automation systems.
In terms of energy, General Electric made significant strides forward. They purchased Utah International, an energy producer specialising in coal, copper, uranium and iron mining; combined their utility company with Kidder Peabody Inc, an oil and gas producer; partnered with the government on nuclear research through the GE-Kidder Agreement; began expanding into leasing and asset management; as well as building up their credit corporation during this period.
As the new millennium began, GE made moves to reduce debt and take cost-cutting initiatives – among them was six sigma – an organizational system focused on eliminating errors and defects from production processes.
Healthcare
GE made waves in the consumer market in the 1950s and 1960s through innovative consumer products like refrigerators, lights and jet engines that became household names. As a result, this segment became its fastest-growing. At the same time, they expanded their R&D capabilities through acquisitions such as Instrumentarium Corp’s medical equipment maker Instrumentarium Corporation as well as Amersham Plc’s diagnostic agents production facility Amersham plc.
GE not only expanded their presence in the market, but they also diversified by restructuring existing businesses and restructuring them accordingly. They aimed to become the largest corporation in the US by emphasizing services and technology. CEO Jack Welch placed great emphasis on increasing efficiency through adopting six sigma methodologies that helped improve quality control and mitigate risks.
As a result of these changes, GE has since returned to its industrial roots, such as aviation, energy, and healthcare. While recent financial crises highlighted its vulnerabilities in finance sectors such as investment banking and derivative trading, divestitures and restructuring efforts have successfully repositioned GE for success – now operating as a highly-diversified conglomerate with revenue streams from water utilities, aviation services, power systems manufacturing and oil and gas extraction industries.
Aviation
A company founded with an incandescent light bulb has grown to become one of the world’s largest industrial conglomerates, dominating fields such as electrical appliances, finance, energy consumption management and healthcare delivery as well as aviation.
GE made several significant acquisitions during the 1990s. They expanded their financial services by purchasing Transamerica Finance Corporation and Instrumentarium Corp, two medical-equipment manufacturers. Furthermore, they acquired broadcast network NBC as well as Vivendi Universal Entertainment which later gave rise to MSNBC.
GE Aerospace manufactures jet engines, propellers and rotorcraft for military and commercial aircraft. In addition, GE holds an important place in the ever-emerging homebuilt aircraft industry which features smaller aircraft without as high costs than certified airliners.
GE remains an energy industry pioneer, known for its innovation. Despite facing economic headwinds such as recession fears and rate hikes to combat inflation, GE remains on a path toward growth; in 2021 CEO Lawrence Culp announced that three divisions – aviation, healthcare, and power – would become independent publicly-traded companies.
Financial Services
GE expanded its assets through acquisitions that ranged from coal mines, copper mines and uranium mines to financial companies and investment vehicles like GE Capital which now generates over half the parent company’s revenues.
Throughout this time period, the company was embroiled in numerous lawsuits regarding price fixing and antitrust violations; nevertheless, its growth continued unabated, leading to its inclusion as the final original member of the Dow Jones Industrial Average in 1996.
Beginning in the early 1990s, General Electric gradually divested itself of less-than-profitable businesses while sales and profits continued to increase – even without accounting for losses from Kidder Peabody in 1994.
Trian Partners eventually convinced the company to split into three publicly traded companies, an initiative which I consider wise despite any risks involved. If successful, the new structure should provide each division with more market focus, greater operational accountability and flexible capital allocation decisions as well as reduce debt load – making this move beneficial to the company while managing debt load effectively. Consequently, this was my pick as a good strategy.
