Question

On June 26, 2018, CEO John Flannery of General Electric Company (GE) announced that the company planned to spin off its healthcare business and divest its stake in oil-services firm Baker Hughes. The slimmed-down company would re-focus on jet engines, power plants and renewable energy. What was not an important consideration for CEO Flannery when evaluating the merits of this diversified company's new strategy?

Multiple Choice
A) ranking the performance prospects of the current portfolio of GE businesses from best to worst and deciding what priority to give each of the company's business units in allocating resources
B) assessing the attractiveness of the industries GE had previously diversified into, both individually and as a group
C) analyzing the strategic fits and resource fits among the various sister businesses
D) assessing the competitive strength of each business GE had previously diversified into
E) determining which business units were cash cows and which ones were cash hogs, and then evaluating how soon GE's cash hogs could be transformed into cash cows

Answer 1

CEO John Flannery's strategy for GE did not consider whether the conglomerate would pass cost savings to consumers, but instead focused on evaluating the performance prospects, industry attractiveness, strategic fits, competitive strengths, and cash flow potentials of the company's diverse units.

Step-by-step explanation:

On June 26, 2018, CEO John Flannery of General Electric Company (GE) announced plans to streamline the company's focus, which entailed spinning off its healthcare business and divesting its stake in oil-services firm Baker Hughes. The considerations for this strategy did not include whether the new conglomerate would pass on cost savings to consumers, as this aspect relates more to the impacts of a merger on market competition and consumer pricing rather than internal strategic refocusing.

The primary considerations included ranking the performance prospects of GE's current portfolio, assessing the attractiveness of industries GE had diversified into, analyzing strategic and resource fits among GE’s businesses, assessing the competitive strength of each business, and determining which units were cash cows or cash hogs. These considerations are integral to defining a clear strategic direction and resource allocation for the slimmed-down company, with a renewed focus on jet engines, power plants, and renewable energy.