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Wednesday, January 24, 2018

The Problem With GE is that Its Too Big to Manage

Large organizations have economies of scale that make them efficient in their purchasing power and transactions. However, when those internal transactions become more difficult to manage, or expensive, the company begins to lose its competitive edge. Being too large may be GE's biggest problem and they may not be able to untangle.

The problem with GE is that it got really big and all of the different components such as aircraft divisions and electricity are so intertwined it may not be possible to break them apart. Why would breaking them apart be helpful?

Typically there is a healthy spot in size where efficiency is possible but not so large that it begins to look more like a bureaucratic institution.

As size increases beyond the helpful size it becomes more expensive to run. There are inefficiencies in management decision-making, large costs in facilities, lack of innovation, and general slow down in capacities. This makes them ripe for either a major shack-up and revamp, breaking apart, or continuing to decline. Some of the less profitable parts are likely to be sold off.

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