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General Electric Financial Problems to Measure by Balance Scor

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Under CEO, Jeffrey Immelt leadership and cultural integration GE is committed to achieving worldwide leadership in each of its businesses. To achieve that leadership, GE’s ongoing business strategy centers on five key growth initiatives: Technical Leadership; Services; Customer Focus; Growth Platforms; and Globalization. GE is committed to leadership in the “next generation” of technology. It’s well-positioned to drive growth for the future with technical excellence in each business by developing a global technical capability, increasing new product growth, and investing in global research. GE services have grown from the traditional activities of parts replacement, overhauling and reconditioning machines to a larger and broader vision. The new vision includes investing in business and technology to improve the performance on its installed base and the way it actually services it. Through higher technology, it has the ability to go beyond servicing to reengineering the installed base. By doing so, it dramatically improved its customers’ competitive positions. GE is in the midst of an incredible transformation brought on by the Internet explosion.

Its pursuit of digitization will rapidly change its dealings with vendors, partners, and most of all, its customers. GE is using the integrated systems between Six Siqma and the International Quality Management System which adopted by TQM to keep on enhancing GE’s customer. GE’s Customer Focus is ensuring that everything it does provides value to our customers. It means creating a partnership that – combined with expertise in financial, service and technology industries – maximizes customer profitability and ensures quality. A key GE strength is the ability to conceptualize the future, identify “unstoppable” trends and develop new ways to grow. Growth is the initiative, the core competency in building at GE. The challenge is to coordinate the activities of these units and leverage their skills for the benefit of the organization as a whole. Too often, these units are out of synch and work at cross purposes.

GE Balance Score Card Module To Reduce Performance Gaps


As the pioneer of Balance Scorecard (BSC) how can GE use Balanced Score Card to align its highly diversified business units including GE capital finance affiliated company. Even though the idea of GE large diversification globally in order to minimize risks, but the downgrade ratings by Moody’s Investment services in 2009 placed on GE and its affiliated GE Capital was primarily due to uncertainty regarding GE Capital’s asset quality and earnings performance in future periods. Further, Standard & Poor’s downgraded the company’s ratings outlook from stable to negative. Lower credit ratings represent higher borrowing costs and reduced access to capital markets for GE. These debt problems can be affected on GE internal and external stakeholders included GE prime customers and investors, as well as its employees in particular those whom purchased GE stocks and the integrity of the management itself. GE has a high level of indebtedness, which could adversely affect its financial condition and future operational plans. For instance by 2008, the company’s total debt (short and long term) amounted to $523,762.

General Electric’s high debt produces an interest burden which could increase in the period of rising interest rates. In 2008, the interest coverage ratio of the company declined to reach 3.8, as compared to 4.2 in 2007, and 4.5 in 2006. The company’s substantial debt limits its ability to obtain additional financing to fund future working capital, capital expenditures. All these financial impact and leverage can diminish GE internal and external stakeholders level of confidence on GE financial capabilities to manuever to over come the financial and debt collaterized risks. Based on GE’s long-term experience to use the Balance Scorecard (BSC) tools to measure the GE capital financial performance. GE could establish the perspective categories for the Balanced Scorecard by two important guidelines: Firstly, the BSC should not contain more than eight perspectives to keep the process focused and manageable. Secondly, the perspectives should build upon each other toward the overall accomplishment of the business vision.

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