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Case 2 General Electric: Ecomagination as a CSR Initiative

SUMMARY

After a meeting in 2002, General Electric was being accused of not caring enough about the environment according to several religious groups. Jeffrey Immelt, the CEO of General Electric, introduced a new program to his company in 2005. This new program is known as Ecomagination. Ecomagination, according to Immelt, is to utilize the resources and experiences of the company in responding to environmental concerns of GE’s stakeholders. This program began by trying to count all of GE’s global warming emissions, but quickly spread to other processes showing that financial and environmental performance could work together.

After the launch of Immelt’s new program, Ecomagination, Immelt still did not impress the GE shareholders. Tom Borelli, a spokesman for the Free Enterprise Action Firm (FEAF), thinks that Mr. Immelt is distracted from focusing his attention on General Electric. In 2006, FEAF withheld their support of approving Jeffrey Immelt as a director.

In 2010, it was very apparent that Mr. Immelt and the GE management team needed to focus more on the profitability and environmental response of the Ecomagination program. According to Immelt, he launched this program to try and boost economic growth. GE’s Ecomagination is committed to developing eco-friendly products and solutions that will help their shareholders. The bottom line is that Ecomagination was put into effect to create products and services that were profitable and eco-friendly.

INTERNAL ANALYSIS

Strengths

General Electric is a multinational company that is a major competitor to industries all over the world. GE offers their customers products and services in a wide range of categories such as aircraft maintenance, water processing, and power generation to name a few. GE has to continue to be innovative when coming up with new products and services for their customers. With that being said, the creation of Ecomagination has brought about a strength for GE in the form of innovation. I think that if GE continues to innovate new and unique programs like Ecomagination they will continue to be successful in boosting economic growth worldwide.

Another strength for Immelt’s Ecomagination program is the advancement of green technologies. “Going Green” is a phrase used when companies want to protect the environment and use more energy efficient products. GE’s Ecomagination is doing just that; going green. Ecomagination was created to offer profitable services and products that were more ecologically sound. I think that the Ecomagination program provides an economic value to the company that not many companies have. Although there are more and more companies that are attempting to “go green”, I believe that GE has a competitive advantage with Ecomagination and other innovative ideas that will provide long term advantages over other industries in the same market. With the launch of Ecomagination, GE has started to push more towards their green technologies such as solar panels and wind turbines.

I believe another strength for General Electric is their leadership. Jeffrey Immelt took over as CEO only four days before the horrific tragedy on September 11, 2001. With all that was happening in the world and the change in leadership, Immelt had to endure a lot of criticism and skeptics who had lost their confidence in multinational corporations like GE. Immelt had to prove himself to not only customers but GE’s shareholders. During the early years of Immelt’s CEO career, GE faced several issues in regards to corporate social responsibility (CSR). The launch of Ecomagination was also to improve CSR and communication strategies within GE. CSR has two elements: responsive CSR and strategic CSR. According to Michael Porter and Mark Kramer, responsive CSR acts a good corporate citizen that is aware of the changing social concerns of shareholders and also mitigating existing or anticipated adverse effects from business activities. Porter and Kramer also say that strategic CSR goes beyond corporate citizenship and mitigating harmful value chain impacts to launch a number of initiatives whose social and business benefits are large and distinctive. I believe that with Immelt’s leadership, both CSR strategies apply to GE. Immelt is aware of social concerns and is a good corporate citizen by acting on the concerns of his shareholders. Also, strategic CSR applies to GE due to Immelt’s innovative ideas and programs he has launched under his term as CEO of General Electric.

Global transformation is also a strength for GE’s current business strategy. Expanding the business globally opens the doors to new customers and to profitability. In 2010, GE’s global transformation was able to earn the company several accomplishments. GE launched 22 new Ecomagination products and solutions, bringing the total to 110. GE continued to lead in clean tech innovation by committing nearly $2 billion to research and development and by launching the Ecomagination Challenge, which is a record breaking $200 million partnership to drive and fund open innovation for clean tech. Also, GE’s global transformation has helped to reduce greenhouse gas (GHG) emissions by 24% compared to 2004 and water use by 22% compared to 2006. The accomplishments listed above are just a few examples of the companies many achievements with global transformation.

Weaknesses

Although GE has several strengths, they unfortunately have weaknesses as well. I know I mentioned global transformation as a strength, but it can also be a weakness for GE. Expanding globally could hurt GE’s profits due to unstable international economies. With a large company like GE, charting in the territory of the “unknown” could potentially hurt GE’s revenues. Unstable economies come with negative consequences and that would not be good for GE.

A potential weakness for GE is the use of technology. GE advertises their ecologically sound green technologies that should be used for alternate energy sources. With the advancement of technologies, “going green” has more technical difficulties that arise with little knowledge on how to fix the problem. Having green technologies, such as solar panels, on hand to meet the demands of customers will be a difficult task to handle for GE. Since “going green” is still fairly new, it is hard to plan for how many customers will install green technologies in their home. If GE does not stay on top of things, they could potentially lose business and money. Weaknesses in a company’s business strategy do not mean that they are not successful. With the few weaknesses listed, GE seems to have a handle on their business strategies and how they plan to implement them to service their customers.

General Electric has the right resources and capabilities for their current business strategies. GE has a very strong leader in Jeffrey Immelt, who knows exactly what it is going to take to be successful and to boost economic growth.

EXTERNAL ANALYSIS

Opportunities

An external opportunity for GE could be environmental leadership. Ecomagination brought about the use of more alternative energy sources such as wind turbines and solar panels. The use of the wind turbines and solar panels allow for a push toward a greener environment and a goal of reducing greenhouse gas emissions. These technologies will help to protect and clean our environment. This is just one way Ecomagination is helping to better the world we live in. If these two technologies continue to grow in demand, GE will see a huge boost in profitability and the environment will be a lot cleaner. Also, GE will become more marketable and will be a top leader in green energy.

Another opportunity for GE is their expertise in the water value chain. Water desalination is a problem in some areas internationally and GE has the resources to fix the issue. GE takes the dirty water and purifies it which can be used for drinking water or for recycling it back into agricultural and industrial processes. An example of GE’s accomplishments with the water value chain was the Hamma Seawater Desalination Plant in Algiers, Algeria. GE was able to purify up to 53 million gallons of seawater a day. This provided up to two million Algiers residents with a supply of fresh water. If GE can continue to use their water value chain like the example above, GE could open opportunities for several developing countries internationally. This opportunity will help GE expand globally and become more reputable with other countries.

Threats

Although GE leads the way in the green energy industry, they had to outperform their competitors to get to the top. This brings about a threat of competition from companies such as 3M, Hitachi, and United Technologies. These competitors have the ability to produce substitutes of GE’s products and sell them at a lower cost. It is possible that some customers will purchase products and services form the competitors because they can save more money. In today’s economy everyone is looking to save a dollar or two, so they settle for the next best thing. These competitors, with their substitute products, can hurt GE’s revenues because they are ultimately losing money to other businesses.

Another threat for GE is the threat of rivalry with Siemens. Siemens is their biggest competitor. This means that the two companies compete against each other because they tend to offer the same products. This also means that GE needs to stay on top of competitive advantages with their products in order to create a bigger market share between them and Siemens. There is also a battle between GE and Siemens for innovation and technological improvements. In order for GE to stay at the top, they need to continue creating new and innovative programs like Ecomagination. Right now, the only differences between which company gets the customer’s business comes down to customer loyalty and product differentiation. GE has a high brand recognition, market share, and customer loyalty making them highly competitive in this industry.

SWOT ANALYSIS

GE’s strengths, weaknesses, opportunities, and threats allow them to focus on new business opportunities, implement new green technologies for a cleaner environment, and deal with the competition that will ultimately better them. Although opportunities can be great for companies, they can also be problematic. GE’s “going green” strategy with the use of alternative energy sources could be a problem for them. Unfortunately, not everyone in today’s society care about green technology and bettering the environment. Also, not everyone can afford to purchase alternative energy sources such as solar panels and wind turbines. Both sources are too expensive and people aren’t going to spend the money on them. Personally, I know that solar panels and wind turbines are a great investment that will last for 20-25 years, but I just do not have the money to put up front to purchase either one of these. If other people are like me, then this could be a problem for GE because if no one is purchasing these energy sources, then GE isn’t making any money. In the long run this could be detrimental to GE’s profitability. This is where the opportunity comes in for GE because it allows them the chance to produce new alternate energy sources at a lower cost.

ALTERNATIVES AND EVALUATION

However, when there are problems that come up, there are always alternative choices that can help to fix the situation. When thinking about alternative energy sources, the only two that come to mind are the ones stated above: solar panels and wind turbines. Fortunately, there are several other options to “going green” with other alternative energy sources. One alternative that is less expensive than solar panels and wind turbines is that people can start off on a smaller scale and install a solar water heater into their home. These solar water heaters help to preserve the environment and tend to be a more affordable form of alternative energy. The way these solar water heaters work is by using the sun to warm the water, which ultimately reduces energy bills. IF GE were able to create a new and innovative solar water heater that was highly-efficient and affordable to customers, it could open doors for creating profit and allowing more people the chance to start going green.

Another alternative to the problem is by using geothermal energy. Geothermal energy allows people to live a greener lifestyle by providing a cheap way to heat or cool your house. In order to hear or cool your house with geothermal energy, a geothermal heat pump is used by the Earth’s below ground temperature and above ground temperature. Geothermal energy is extremely efficient but is almost as expensive as using wind turbines. This is because most of the equipment used is buried underground so it costs more to maintain, but it is still cheaper than installing solar panels. GE could come up with an innovative way to make the geothermal heat pump in a way that customers aren’t paying as much. If GE could keep their production cost low and sell the geothermal heat pump at an affordable price for everyone, it could become a win-win situation for both customers and GE.

BEST ALTERNATIVE

I think the best alternative solution for GE to incorporate their “going green” strategy is by producing a solar water heater that is affordable. By doing this, GE would be able to reach out to more people who are interested in going green and protecting the environment who just can’t afford the solar panels and wind turbines. Not everyone has the money to be able to afford the most expensive energy sources, so this could be a great starting point for GE and many of their customers. It is not as expensive and it helps to reduce energy bills that can be outrageous at times. The solar water heater would allow customers to save money with a trusted brand that is trying to protect the environment one family at a time. In today’s society companies need to create products that are not only appealing to the eye, but the bank account as well. GE has a great reputation worldwide so I believe that by creating and selling solar water heaters it will benefits the company and boost economic growth, which is one of the reasons Immelt came up with the Ecomagination program.

IMPLEMENATION

In order to implement the new strategy for producing solar water heaters, GE needs their management and design teams to come together and come up with a design for the solar water heater. This design needs to be true to the GE brand and something that will be cost efficient for GE and their customers. Then, GE will actually need to design the products at one of their factory plants or warehouses. This process is the most important because each solar water heater has to be made with exact precision in order for it to work correctly and efficiently. Once this step has been taken care of, GE needs to test out the solar water heaters to make sure they work how they should before they place them online or in stores for sell. This can be done by allowing a few people to install them in their homes to see how well they work. This is known as a trial and error period for GE because they will have the ability to fix any issues that come up before more people purchase them. If there are issues that arise, GE takes the product back to the warehouse and fixes the problem. If no issues arise, then the product is ready to make its debut. GE is already successful, but by implementing new and cutting edge green technologies, GE can become a more profitable company.