Case Study For Gec

Case Study for GEC

CONTENTS

1 Introduction

2 Pre-Weinstock Era

3 Weinstock Era

4 Simpson Era

5 Conclusion

References

1 Introduction

GEC (General Electric Company Ltd.), a private limited UK company established in 1889, was a major company involved in consumer electronics. After the continuous growth and a series of merger, GEC started defence electronics and telecommunication business. GEC was renamed to Marconi plc in 1999 after Lord Simpson took over this company from Lord Weinstock in 1996. In 2005, Marconi was took over by Ericsson, a world-class company celebrated in research and development especially telecommunication. This takeover also indicated GEC, a well-known mighty British company, brought down its curtain on more than 100 years history. (Harrison 2005)

Kam (2005) argues that organizational failure is usually attributed to either environmental change or managerial behavior. However, she also claims that "Drawing lessons from organizational failure with such lop-sided understanding is unlikely to be productive and may even lead to wrongly prescribed solutions." (ibid: 400) Therefore, in this report, I will focus on analysing GEC's evolving progress and the final organisational failure through both perspectives: the environmental and behavioural factors. When these two elements are taking into account at the same time, the GEC dynasty could be generally divided into three eras: pre-Weinstock (Hugo Hirst) from 1889 to 1963, Weinstock from 1963 to 1996 and post-Weinstock (George Simpson) from 1996 to 2006. These three eras stand for the different environmental and behavioural perspectives in the GEC history.

2 Pre-Weinstock Era

When GEC formed in 1889, this company expanded rapidly and opened new braches and factories because the founder, Hugo Hirst (later Lord Hirst), was a visionary entrepreneur who foresaw the potential of electricity and had the competence in direct standardisation of this industry in its infancy. (Wikipedia 2006) Based on the foresight and belief in the future of electrical appliances, Hirst coined a motto "Everything Electrical" as the policy of GEC and tried to create such a culture in the organisation. Like Schein's fundamental view (1985) that "culture is the sharing of meanings and the sharing of basic assumptions among organizational employees" also cited in Buchanan (2004), Hugo would like to set this business objective to achieve by all GEC's employees. Such inventing a maxim could be viewed as the visible thing that a culture produces. It can be referred to the surface manifestation of culture addressed in the first level of Schein's model of organisational culture as shown in Figure 1.

Figure 1. Schein's three levels of culture (Courtesy from Buchanan:2004 p.644)

In 1893, GEC decided to invest in lamp manufacture and then, in 1909, established Osram which was to lead the electric lighting industry and to bring a great fortune to GEC. Furthermore, rapidly growing private and commercial use of electricity also stimulate the strong demand for electrical appliances and the company expanded both at home and overseas, with the establishment of international agencies. (Wikipedia 2006)

After the outbreak of World War I, GEC provided all necessary support for Britain in war with products such as radios, signalling lamps and arc-lamp carbons. Because of deeply involved in the war effort, GEC became a major player in the electrical industry. Between World War I and World War II, GEC expanded to become an international corporation. "The take-over of Fraser and Chalmers in 1918 took GEC into heavy engineering and consolidated their claim to supply 'Everything Electrical'." (Wikipedia 2006) At this period, GEC also set up the premier industrial research laboratory "GEC HIRST RESEARCH CENTRE" at Wembley in 1923. Forming this pioneering research and development centre not only symbolizes the GEC's continuing expansion into the electrical industry but stands for the values of GEC: team work, and research and development.

During World War II, GEC continued to pay significant contributions to the war effort and performed a key supplier to the electrical military products. However, the end of World War II in 1945 following the death of Hugo Hirst in 1943, GEC's expansion started to slow down. "Despite the demand for electrical consumer goods and large investments in heavy engineering and nuclear power, profits began to fall for the first time in the face of increasing competition and internal disorganisation." (Wikipedia 2006)

3 Weinstock Era

In 1961, when GEC took over Radio and Allied Industries, Arnold Weinstock (later Lord Weinstock) was also acquired to become a director and, in 1963, he was appointed chief executive by GEC. In the 1960s, by means of the high market valuation given to GEC and government support, GEC acquired AEI (Associated Electrical Industries) in 1967 & merged EE (English Electric) in 1968. As stated by Lancaster and Brierley (2000), GEC, a new electrical giant, was formed "at a time when management in the industry was poor, financial discipline weak, and strategic direction lacking." In order to improve the profitability, increase the competitiveness and formulate the right business strategy, Weinstock made use of the following approaches.

On the one hand, Weinstock built a new organisational structure based on market grouping and profit-center concept. He employed a divisionalized form and did away with corporate headquarters and committees to communicate directly with the rest of the organisation. (Tell 2003) Such a structure also meant that most of strategic decision-making was held by Weinstock himself. Through such a vertical communication between him and managers of separated headquarters, Weinstock could strictly control these sub-organisations by frequent evaluation of cash and profit performance. Furthermore, the environment was also changing to be more beneficial to GEC because the merger of GEC, AEI and EE created a better environment for easy over-capacity control and many of its operations are in fast-growing industries.

In