Ranked #1 in the World
Global business managers who hunker down and stop investing during the current economic crisis will miss big opportunities for growth, General Electric Chairman and CEO Jeffrey R. Immelt said Oct. 24 in a teleconference that included Thunderbird School of Global Management in Glendale, Ariz.
“If you’re just playing defense right now in this environment, you’re ultimately going to lose,” Immelt told graduate students at six business schools around the world in a live question-and-answer session from New York University. “The trick is to choose selectively where you want to win.”
Immelt said General Electric’s first priority as the economy spirals downward is to keep the company safe. This means stockpiling cash, having ready assets and protecting General Electric’s triple-A bond rating.
At the same time, Immelt said, the company’s leadership team will focus on accountability and results through careful cost management and cash management. The company also will work to keep its employees motivated and focused on long-term goals.
But none of this will stop General Electric from investing in the future.
“Now is not a time for me or for you to give up on our dreams,” Immelt said. “There is going to be a future.”
He said global business managers who stay alert will find investment opportunities during the current financial crisis that might not come again for another generation.
“You’re going to live history, and it’s not all going to be pleasant,” he said. “But we’re going to see some of the best investing opportunities in this cycle that we’re going to see in the next 25 years.”
The key, he said, is to build processes around three things: globalization, new technology and customer service.
Regarding globalization, Immelt said the distinction between emerging markets and developed markets has blurred. Some countries are rich in raw materials, others are rich in labor, and others are rich in education.
He said large companies such as General Electric must seize opportunities to expand in all three types of countries.
“We believe that globalization is uniquely a big company game,” Immelt said. “We believe that companies with scale and breadth can globalize better than small companies.”
New technology and innovation represent another opportunity for growth. Immelt said General Electric will be “pouring it on” in research and development while more timid companies scale back their operations in anticipation of a new wave of market turbulence and possible recession.
“We are going to take a lot of cost out of the company to get ready for this second economic downturn,” he said. “But the last thing that gets hit in GE is technology.”
In the area of customer service, Immelt said many companies will shortchange their customers as they scramble to make ends meet. But General Electric will take the opposite approach.
“People are going to abandon customers right now,” he said. “But now is the time to be in front of customers building great operations.”
Immelt said he is unsure how bad things will get before they get better, but his hunch is that the U.S. economy will see two or three more quarters of negative growth and then a “slow pullout.”
“You’ve got this financial crisis going on, and behind it is a recession,” he said. “But if all we have to deal with is a recession, we know how to do that and come out the other side.”
He said the big question will be: Can the governments of the world solve the financial crisis before the real recession hits?
What’s for sure, Immelt said, is that the role of government in all aspects of business will increase.
“It’s just going to happen,” he said. “Business is going to have to re-earn the trust of the public and investors and a lot of other people.”
The question-and-answer session was emceed by Maria Bartiromo, anchor of CNBC’s “Closing Bell with Maria Bartiromo.” The cable channel is part of NBC Universal, a company predominantly owned by General Electric.
Stephen Roach, a 2006 Thunderbird graduate and General Electric manager, moderated the discussion at Thunderbird. Other participating schools included New York University, Emory University in Atlanta, University of North Carolina, University of Virginia, London Business School and University of Navarra in Barcelona and Madrid.
Immelt joined General Electric in corporate marketing in 1982 and became chairman and chief executive officer in 2001. He also works as director of the Federal Reserve Bank of New York.
October 26th, 2008 at 2:55 pm
Immelt continues to dream, GO BIG, GO GLOBAL and wheel and deal… this amazes me since it didn’t work when his stock was 42, he had cash to use and was buying back stock. In the past two weeks his stock was down to 17, he had to ask Warren Buffet, sell stock and stop buying it.
There is no question that if a company hunkers down and just plays defense it will not capitalize on the opportunities, but the key IS SELECTIVITY and it appears that Immelt and his dream team don’t practice the art and science of being selective… it has moved aggressively, made deals across its portfolio and has not been able to exit businesses since he waited too long.
If you want the only comprehensive, objective and insightful view of why GE is still alive and well and not in the intensive care ward, read THE SECRET TO GE’s SUCCESS and not just the self serving press releases of the current management.
Bill Rothschild, author of THE SECRET TO GE’s SUCCESS and GE WATCHER…on http://www.strategyleader.com.
October 29th, 2008 at 10:01 am
This Financial Crisis began a long time before America was “discovered”, long before the British Isles were settled, in fact so long ago that many of us have forgotten. It was when humanity first made the decision that Land could be considered personal property and belonged in the marketplace as a commodity when in fact Land is a necessary component of Life and therefore a Birthright. Food and materials for clothing and shelter all originate from Land. In fact Land is where the majority of wealth producing goods originate. Along with Oxygen and Water, Land is a necessary component of Life and therefore a Birthright of every human being. All “great” societies have met their demise due to the neglect of this simple fact. We can point our fingers at peripheral problems and solutions all we want but until we learn to honor the contract of Life and build our social structure upon that Sacred Foundation we will always reap dire consequences in the long run. Land is a Universal Birthright!
There is a principle called Ockham’s razor which is attributed to the 14th-century English logician and Franciscan friar, William of Ockham. It basically states that – “All other things being equal, the simplest solution is the best.”
The following are two simple ideas that effectively create the ideal social construct.
Simple Idea #1
1. Socialize ALL Land (True Socialism defined as the vesting of ownership of Land back in the community as a whole)
2. Charge leases on ALL Land based on current market prices.
3. Return 100% of the resulting revenue equally to every man, woman and child (no matter their financial status) in the form of a yearly Land Dividend check.
4. Make the Universal Birthright of Land an Everlasting Standard in the education/understanding of every human being.
This effectively makes the average piece of Land Free for every Living Soul and restores our Natural Birthright as well as coupling our social construct to the Principles of Life.
Simple Idea #2
1. Remove ALL FORMS of taxation
2. Implement a Tax on ALL NEW goods based on the resources they contain and the resources they use in production and delivery (this can easily be implemented with the current barcode system used at the checkout)
3. Use this system to encourage/discourage various resource usages (High tax on non-renewable/ecosystem damaging products and low/no tax on renewable/ecosystem enhancing products) and to encourage purchasing of local products.
4. Use the resulting revenue to fund infrastructure expenses and the restoration of ecosystems.
This effectively encourages the creation/use of longer lasting, high quality products as well as encouraging recycling and reuse of existing products while also establishing a compatible relationship with the ecosystem.
Idea #2 effectively constrains the ravaging appetite of the capitalistic consumer society within the Boundaries of Sustainability while Idea #1 effectively encloses both Sustainability and capitalism within the Principles of Life.
That’s it! The path to True Democracy (rule by the people) – True Liberty (Freedom of expression) – True Socialism (Universal Birthright of Life). Simple and Effective
Scott
February 4th, 2009 at 12:38 pm
Who is John Galt?
JA
M’76
April 25th, 2013 at 6:40 am
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