General Electric Financial and Strategic Priorities

FINANCIAL AND STRATEGIC PRIORITIES 9

GeneralElectric: Financial and Strategic Priorities

GeneralElectricals: Financial and Strategic Priorities

GeneralElectricals has gained great market popularity and this is attributedto the good services it offers to its clients. Despite this, thefinancial growth of this company has remained stagnant for the pasttwo financial years.GE has established a three- year operationstrategy in which it projects an annual growth of 5% for eachfinancial year. This report looks into the factors which may haveaffected its performance basing on its financial health andperformance by assessing its strategies and behaviors of performanceincluding internal risks and non-monetary aspects that may help indecision making (Nobes, 2005).

SuccessFactors and Risks

Theprevious success of GE has been as an outcome of factors such as theestablishment of principles and productive environment of operation,customer friendly services, well set principles of operation and acontinuous organizational and staffing plan.

  1. Environment of operation

GEhas established conducive environments in which its employees andclients operate. This has been achieved through the company’sactions and policies in which the working environment has beenimpacted to influence the outcomes which are related to its mission.In doing this, the company has put into consideration its strategiesto operate in the constraints of the resources at its disposal. Thecompany appreciates that the environment of electricity andelectronics is highly complex with constant changes and risks, has alot of diversity and competing needs, is globalized as a result ofsocial and technological forces and competitive but extremelycollaborative. GE has created an enabling environment by increasingits levels of transparency and accountability in all sectors andestablishing a strong and sustainable model of funding.

  1. Principles of Operation

GeneralElectricals has set principles it adheres to when undertaking itsoperations of service delivery. The principles include stronggovernance and management structures in which only qualified peopleare allowed to take positions of leadership to ensure competency(Needles, Powers &amp Crosson, 2013). The principle of effective andefficient communication sets plans of communication with thestandards of the organization. The principles of maintainingfinancial sustainability and well-being of the organization aims atstrengthening the funding model of the company.

  1. Finance and Staffing

GEhas well managed processes of financial reporting and management,effective planning processes with well set priorities, sources oflinkage and high levels of efficiency. The company has put in placean effective bi-annual recruitment program in which at least 50employees are hired on full time basis using recruitment companies.It enjoys a stable foundation in its upper and middle managementspread within the operations and technical departments. The companyhas at least five offices in each of theEU countries to ease itsoperations.

Effectsof Financial and Strategic Priorities on Accounting and DecisionMaking

Thestrategic plan of General Electricals focuses on its financial growththrough increased profit margins. It also focuses on the efficiencyof service delivery through providing an enabling environment andcustomer satisfaction. The aim of the strategic plan is to driveGeneral Electricals as an electrical supplies firm with credibilityon the internationally set standards. The plan forecasts the annualgrowth of the company by 5% for three years. To achieve this,efficiency in operations is vital. Through the recruitment program,GE ensures that its employees work effectively since average work peremployee is reduced.

Thecompany appreciates that risks may emerge at any point of itsoperation. To tackle this, GE has established an expansion program byincreasing its shareholding capacity. Despite this, the company seeksto increase its number of equity investors and decrease itsinvolvement with creditors. This will help the company to establish along term relationship with its potential investors.

Howto Capitalize on Non –Financial Factors

GeneralElectricals does not only depend on financial factors for itssuccess. The efficiency of other factors such as reputation, humanresources and physical facilities play a great role in the success ofthe company. To maximize its potentials for growth, the company hasmaintained its reputation as a leading firm in electrical suppliesservices by adhering to its values of operation, its vision andmission. The company’s vision, “Ensuring supply of high qualityand reliable electrical appliances” helps its staff to deliver highquality services.

GEhas a recruitment program which works to ensure effective servicedelivery and customer satisfaction. Its main office is located inLondon and the company enjoys its availability in all European Unioncountries with at least five offices in each of these countries. Thecompany has the aim of opening more offices in these countries toenhance its reachability. Despite physical locations, GE has employedtechnology to increase its customer base. The members of staff andclients are allowed to interact on social media platforms. Similarly,a 24-hour operational customer service department tackles all clientrelated issues. These establishments have seen the number of clientsinquiring for the services provided by the company increase by 34% in2016 compared to that of 2015.

InternalRisks

Beinga supplies company, GE has many internal threats. One significantthreat is the rate at which the company loses highly qualifiedemployees to other companies. While the company invests a lot of itsresources to train its staff, most of them exit to other companiesdue to competitive perks (Schipper,2003). Like other establishedcompanies, GE spends expensively in initiating a competent workforce.

GEhas adopted technology to boost its tasks. It has not eluded mattersof machinery and cybercrimes. In 2015, the company got complaintsfrom its clients with assertions of other firms pretending to be GE.The company’s website was hacked and misleading information sent tothe clients ( Agoglia, Doupnik &amp Tsakumis, 2011).

Projections

  1. Likely Performance

Thecompany needs to increase its profits by 5% in each year for a periodof three years. This is to be achieved though increasing fruitfulinvestments and reducing flaws emanating from inventory issues. Thetable below indicates how this will be achieved.

GeneralElectric

3Year Financial Projections (2016-18)

FiscalYear (January to December)

(Allvalues in USD Millions) 2018 2017 2016

Sales/Revenue 147.95B 149.91B 147.46B

Costof Goods Sold ( COGS) incl. D&ampA 68.68B 74.79B 77.39B

COGSexcluding D&ampA 59.49B 65.44B 67.63B

Depreciation&amp Amortization Expense 14.19B 14.35B 14.76B

Depreciation 12.45B 12.73B 13.05B

Amotizationof Intangibles 4.73B 4.67B 4.71B

GrossIncome* 83.28B 79.12B 75.07B

SG&ampAExpense* 48.77B 47.56B 45.87B

GrossInterest Expense 7.6B 7.52B 7.75B

OtherSG&ampA 44.17B 43.04B 42.12B

OtherOperating Expenses 5.91B 5.86B 5.68B

UnusualExpense 765M 663M 1.31B

EBITafter Unusual Expense 34.84B 32.05B 27.27B

NonOperating Income 5.2B 871M 1.72B

NonOperating Interest Income 263M 157M 80M

Equityin Affiliates 899M 1.60B 1.90B

InterestExpense* 19.14B 17.26B 14.76B

Grossinterest expense 19.11B 17.23B 14.74B

Interestcapitalized 30M 33M 34M

PretaxIncome* 25.1 B 22.41B 21.15B

Bestand Worst Scenarios.

GEexperienced its worst scenario in 2015 and the best scenario in 2011

FiscalYear (January to December)

(Allvalues in USD Millions) 2011 2015

Sales/Revenue 137.95B 130.91B

Costof Goods Sold ( COGS) incl. D&ampA 58.68B 65.79B

COGSexcluding D&ampA 49.49B 54.44B

Depreciation&amp Amortization Expense 4.19B 5.35B

Depreciation 2.45B 12.64B

Amotizationof Intangibles 3.73B 4.58B

GrossIncome* 73.28B 70.12B

SG&ampAExpense* 38.77B 38.56B

GrossInterest Expense 6.6B 7.43B

OtherSG&ampA 34.17B 34.04B

OtherOperating Expenses 4.91B 5.77B

UnusualExpense 665M 654M

EBITafter Unusual Expense 24.84B 23.05B

Non-OperatingIncome 4.2B 862M

Non-OperatingInterest Income 163M 148M

Equityin Affiliates 799M 1.51B

InterestExpense* 9.14B 8.26B

Grossinterest expense 9.11B 8.23B

Interestcapitalized 20M 24M

PretaxIncome* 15.1 B 13.41B

Thefinancial information above indicates a great loss in the operationsof the company. Pretax income dropped from 15.1B to 13.41B. thistranslates to a percentage loss of 11.1%

Assumptions

Inthese projection, it is assumed that the business environment willremain unaffected by other factors such as government policies,company acceptability and a steady workforce. These projections arein line with the mission and vision statements of the organization asthey aim at making the company deliver its best to its clients.

References

Agoglia,C. P., Doupnik, T. S., &amp Tsakumis, G. T. (2011). Principles-basedversus rules-based accounting standards: The influence of standardprecision and audit committee strength on financial reportingdecisions. TheAccounting Review, 86(3),747-767.

GE.com| imagination at work. (2016). Ge.com. Retrieved 26 June 2016, fromhttp://www.ge.com

Gist,W. E., Goedde, H., &amp Ward, B. H. (1996). The influence ofmathematical skills and other factors on minority student performancein principles of accounting. Issuesin Accounting Education,11(1), 49.

Needles,B. E., Powers, M., &amp Crosson, S. V. (2013). Principlesof accounting.Cengage Learning.

Nobes,C. W. (2005). Rules-based standards and the lack of principles inaccounting. AccountingHorizons,19(1), 25-34.

Schipper,K. (2003). Principles-based accounting standards. Accountinghorizons,17(1), 61-72.