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General Electric (A): Sustainable Competitive Advantage?
In October 2015, the investment management firm Trian Partners disclosed a US$2.5 billion investment in one of the largest industrial enterprises in the world, General Electric Company. The investment was the largest in the firm’s 10-year history. At the time, General Electric Company was the longest-standing member of the Dow Jones Industrial Average, the 18th-largest company by market capitalization in the entire S&P 500 Index, and featured regularly on Fortune’s list of the world’s most admired companies. General Electric Company’s reputation as an enviable employer and world-class company had largely been cemented under Jack Welch’s tenure (1981–2001), when the company’s share price had reached its all-time high. Understanding what drove its performance during that period was therefore an essential part of any effort to determine whether General Electric Company had a sustainable competitive advantage to carry that performance into the future. -
General Electric (B): Sustainable Competitive Advantage?
By November 2016, Trian Partners had built up a sizable stake in General Electric Company shares and became the company’s eighth-largest shareholder. General Electric Company’s total shareholder return had outperformed the market by 9 per cent since June 2015, when Trian Partners initially invested in the company. However, it was important to consider whether the factors that had led to this performance could be sustained, and a comparison of General Electric Company’s performance over the last 10 years under the current chief executive officer with that under his predecessor could offer some useful perspective. General Electric Company’s share price had reached its all-time high under Jack Welch, solidifying his reputation as the “Manager of the Century.” However, there were several important questions to consider: What factors contributed to the success of General Electric Company historically? How might those same factors influence the company’s future prospects? And how might an analysis of these factors shape an agenda with the board?