General Electric Company (GE) applies strategies that appropriately respond to the most significant external factors relevant to the business, such as the factors identified in this PESTEL/PESTLE analysis of the company. The PESTEL/PESTLE analysis model is an external analysis tool that evaluates the opportunities and threats in the company’s remote or macro-environment. In this case of General Electric, the remote or macro-environment is composed of various industry environments. For example, the conglomerate has business operations in the energy, oil and gas, electric lighting, healthcare, aerospace/aviation and transportation industries. Thus, GE’s strategic management must consider the macro-environmental factors relevant to these various industries. Managers must address these factors’ effects on General Electric’s business in general, while taking account for the factors’ industry-specific influences. Addressing these external factors requires consideration for General Electric’s generic competitive strategies and intensive growth strategies to ensure strategic alignment. Such alignment is essential to maintaining the company’s position as a major industry influencer.
A PESTEL/PESTLE analysis of General Electric Company enumerates the external factors that are significant in the industry environment. Managers use these macro-environmental factors in implementing strategies to ensure the competitiveness and growth of GE’s business. The external analysis provides information that reflects General Electric’s current needs and the challenges it faces in the remote or macro-environment. For example, the external factors present managerial issues for the conglomerate in the electric lighting and aviation industries. Suitable shifts in management approaches based on these factors buttress General Electric’s competitiveness against firms like 3M and Siemens.
Political Factors Affecting General Electric’s Business
Political influences are macro-environmental factors based on governmental activity. For example, political decisions are considered in this external analysis of General Electric. This component of the PESTEL/PESTLE analysis determines the external factors that reflect governments’ impact on GE’s business and its remote or macro-environment, which includes the aviation industry environment and the electric lighting industry environment, among others. General Electric Company’s management must address the following political external factors in strategic decision-making processes:
- Continuing governmental support for digitization of industries (opportunity)
- Continuing governmental support for the shift to renewable energy (threat and opportunity)
- Governmental openness to global trade (threat and opportunity)
- Increasing governmental support for intellectual property protection (opportunity)
Governmental support for digitization of industries is an opportunity for General Electric to improve its business. This political external factor increases the demand for digital technologies, including some of the digital industrial technologies available from GE. This factor links to General Electric’s mission and vision statements, which push for the company’s aim of becoming the world’s premier digital industrial company. On the other hand, governmental support for the shift to renewable energy is a macro-environmental factor that affects GE’s Renewable Energy and Oil & Gas operating segments. For example, this external factor threatens General Electric’s Oil & Gas segment, which relies on the growth of the oil market. However, the same political factor creates opportunities for GE’s strategic growth in the renewable energy industry. Also, governmental openness to global trade threatens to increase competition in the company’s remote or macro-environment. Competitive rivalry is a major managerial issue in GE’s industry environment (Read: Porter’s Five Forces Analysis of General Electric Company). Nonetheless, this external analysis considers the same external factor as an opportunity for GE to expand its operations globally. Furthermore, governmental support for intellectual property protection is an opportunity for the conglomerate to grow with minimal business challenges pertaining to intellectual property rights. Thus, the political factors identified in this component of the PESTEL/PESTLE analysis of General Electric Company shows opportunities for growth and expansion of operations, such as in the renewable energy market.
Economic Factors Important to GE
Economic conditions are external factors that directly influence General Electric Company’s revenues and business growth, as well as the industry environment. This component of the PESTEL/PESTLE analysis identifies the macro-environmental factors that represent how conditions and trends in economies affect the company and its remote or macro-environment. For example, the impact of global oil market changes on GE is relevant in this external analysis. The following economic external factors are pertinent to the strategic management of General Electric:
- Economic growth of developing countries (opportunity)
- Increasing disposable incomes (opportunity)
- Increasing global trade of firms from developed countries (threat)
This PESTEL/PESTLE analysis considers the economic growth of developing countries as a macro-environmental factor that creates an opportunity for General Electric to increase its revenues. For example, the company can improve its performance by increasing its operations in Asian markets. On the other hand, increasing disposable incomes are an economic external factor that also promotes growth in General Electric’s business. For instance, this external factor relates with the increased capacity of customers to purchase GE consumer appliances and lighting products. In contrast, this external analysis of General Electric also points to the adverse effects of increasing global trade of firms from developed countries. Such external factor is a strategic management concern because it increases competitive rivalry in the conglomerate’s industry environments. This component of the PESTEL/PESTLE analysis shows that economic factors in General Electric Company’s remote or macro-environment mainly present opportunities for business development.
Social/Sociocultural Factors Influencing GE’s Business Environment
Social macro-environmental factors reflect changes in people behaviors that affect General Electric Company’s business performance. For example, the influence of sociocultural trends on customers’ support for technological products in the transportation and healthcare industries is pertinent in this external analysis of GE. This component of the PESTEL/PESTLE analysis identifies the most significant of such external factors in the company’s remote or macro-environment. Strategic formulation must respond accordingly. To ensure strategic success in the industry environment, managers at General Electric must account for the following sociocultural external factors:
- Increasing popularity of green lifestyles (opportunity)
- Increasing adoption of mobile technologies (opportunity)
- Increasing popular support for renewable energy use (threat and opportunity)
The increasing popularity of green lifestyles brings opportunities in General Electric Company’s remote or macro-environment. For example, the company’s Renewable Energy operating segment benefits from the increased demand associated with this external factor. This external analysis also identifies the increasing adoption of mobile technologies as a macro-environmental factor that presents business opportunities for GE, such as in technological innovation. For instance, the external factor increases demand for mobile-accessible online industrial services from companies like General Electric. Moreover, the increasing popular support for renewable energy threatens the company’s oil and gas business, but creates opportunities for the GE Renewable Energy operating segment. General Electric’s organizational culture is partly a reflection of the influences of these sociocultural external factors on employees’ decisions for achieving corporate goals. The social external factors in this component of the PESTEL/PESTLE analysis of General Electric Company indicate that the industry environment has opportunities for technological innovation. Appropriate strategic management for these factors should contribute to the conglomerate’s performance growth.
Technological Factors in General Electric’s Business
Technological macro-environmental factors affect General Electric Company’s technological resources, as well as the suitability of products in the industry environment. This component of the PESTEL/PESTLE analysis considers the effects of technological conditions and trends on the remote or macro-environment of businesses. For example, the external analysis involves an evaluation of external factors that demonstrate technological issues in GE’s strategies in the energy industry. General Electric’s managerial approaches must incorporate the following technological external factors:
- Increasing digital technology adoption in industries (opportunity)
- Increasing adoption of online mobile services (opportunity)
- Increasing availability of renewable energy technology (opportunity)
Increasing digital technology adoption in all industries is an opportunity in General Electric’s industry environment. This technological external factor makes industries more likely to pay for GE’s products. For example, digitalization in healthcare organizations facilitates the company’s penetration of the market for digital healthcare equipment and services. This factor relates with business strengths in research and development, which is identified in the SWOT analysis of General Electric Company. Also, the increasing adoption of online mobile services promotes mobile-accessible services in industries where GE operates. This macro-environmental factor creates an opportunity to provide mobile-accessible online industrial services for General Electric’s target customers. For instance, the company can enhance its current services to make them more mobile-accessible. In addition, the increasing availability of renewable energy technology is considered in this external analysis of General Electric. The external factor supports demand for renewable energy in the conglomerate’s remote or macro-environment. Thus, GE can expect higher demand for its products in the renewable energy market. Corresponding management approaches and strategies are needed to ensure that the business benefits from this external factor. Overall, this component of the PESTEL/PESTLE analysis shows various opportunities for General Electric’s growth and expansion in its industries of operation.
Ecological/Environmental Factors influencing GE
Ecological macro-environmental factors affect General Electric Company and its industry environment in terms of natural resources used in business. This component of the PESTEL/PESTLE analysis covers the external factors that show how the natural environment is a determinant of GE and the remote or macro-environment. For example, this external analysis considers the impact of resource scarcity on the company’s management and strategies in the oil and gas industry. In this regard, General Electric must develop strategies based on the following ecological external factors:
- Limited oil reserves (threat and opportunity)
- Increasing availability of recyclable materials (opportunity)
- Growing global energy consumption (opportunity)
Limited oil reserves are identified in this PESTEL/PESTLE analysis as a macro-environmental factor that limits the business performance of General Electric Company’s Oil and Gas operating segment. This threat pushes economies to search for alternatives. As a result, it opens business opportunities for the strategic expansion of GE’s Renewable Energy segment. Also, this external analysis shows that the increasing availability of recyclable materials creates an ecological opportunity in the company’s remote or macro-environment. For example, aligning General Electric’s corporate social responsibility strategy to this external factor can improve brand image and the conglomerate’s business leadership in the industry environment. On the other hand, growing global energy consumption presents growth opportunities for GE’s business in the renewable energy industry. The external factors in this component of the PESTEL/PESTLE analysis of General Electric Company push managers to implement strategies for business growth based on ecological opportunities in the industry environment.
Legal Factors in General Electric’s Industry Environment
Legal macro-environmental factors influence the business performance of General Electric and the situation of relevant industry environments. This component of the PESTEL/PESTLE analysis evaluates how legal systems affect the remote or macro-environment of businesses. For example, the external analysis includes laws that shape GE’s strategic direction in the energy, transportation, and aviation industries, among other industries. Such external factors impose limits and requirements on the company. The following legal external factors are significant in General Electric’s management:
- Widening reach of intellectual property protection laws (opportunity)
- Increasing complexity of waste disposal laws (threat and opportunity)
- Increasing complexity of online product regulation (threat and opportunity)
The widening reach of intellectual property protection laws is an external factor that increases legal protection for General Electric against intellectual property theft in the industry environment. This opportunity is significant, considering that the conglomerate is one of the firms with the highest number of company-owned patents in the world. On the other hand, the increasing complexity of waste disposal laws is considered a threat and an opportunity in this external analysis of GE. For example, the macro-environmental factor threatens General Electric by requiring costly changes in business operations. However, the same factor creates an opportunity for the company to improve its sustainability through suitable changes in its activities. Furthermore, the increasing complexity of online product regulation is a threat and an opportunity relevant to GE and its remote or macro-environment. For instance, this external factor creates challenges to General Electric’s use of online technologies for its consulting services in the energy industry. Nonetheless, GE’s strategic management can focus on appropriate operational enhancement to improve business competitiveness based on the same external factor. This component of the PESTEL/PESTLE analysis indicates General Electric’s opportunities for strategic improvement by exploiting the identified opportunities.
Summary & Recommendations – PESTEL/PESTLE Analysis of General Electric Company
The external factors determined in this PESTEL/PESTLE analysis create major opportunities that General Electric can take to grow its business operations. For example, GE has the opportunity to increase its level of penetration in developing countries. Also, General Electric has the opportunity to strategically expand its operations in the renewable energy market. Moreover, this external analysis points to the opportunity for technological innovation in the remote or macro-environment. Such innovation ensures the conglomerate’s growth alongside the macro-environmental factor of the digitization of industries. General Electric’s management must account for these and many other opportunities in the industry environment.
Aside from opportunities, General Electric Company’s remote or macro-environment presents threats to business success. For example, the increasing global trade involving firms from developing countries intensifies competitive rivalry in the industry environment. In addition, the shift to renewable energy is a threat against GE’s oil and gas operations. However, this external analysis considers the same external factor as an opportunity for growing the company’s renewable energy operations. These macro-environmental factors are threats that General Electric’s strategic management can address while exploiting business opportunities. Based on the threats and opportunities identified in this PESTEL/PESTLE analysis, it is recommended that General Electric:
- Enhance and expand its operations in the renewable energy industry.
- Gradually diversify its operations based on the digitization trend affecting industries. This recommendation exploits General Electric’s new growth opportunities based on industries’ technological advancement.
- Increase its level of penetration in developing markets.
- Enhance competitive advantages and products through technological innovation that considers mobile technologies.
References
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