In 1890, Thomas Edison established a company named Edison General Electric Company. In 1892, General Electric was formed by merger of Edison General Electric and Thomson-Houston Company. In 1896, General Electric was one of the original 12 companies listed on the newly-formed Dow Jones Industrial Average. The early company products are lighting, power transmission transportation, and industrial products which their produce today. General Electric started produce aircraft engine in 1917 and now one of the biggest aircraft engine companies in the United States today.
Not only aircraft engine, but also General Electric produces lot of different products such as energy, appliances, media, and even finance. However, the former leader of General Electric Jack Welch has strong vision that General Electric should be “Either number 1 or 2 in any business it is in”. In 2001, Jeff Immelt became the ninth chairman of General Electric. He brought ecomagination into business and Imagination at work. This project started the same way many research projects do, with a key word search in the infamous website Google.
However, after several attempts of looking for the General Electric’s mission and vision statements we discovered it was going to take some work and deep thought because this company has none. Well, none so easily defined. At first, we thought it was unusual that a company of this size would not have a vision and mission statement outlined. Yet, after doing hours of research it gradually became clear. This is a company that does not follow the trend; in fact, one couldn’t call GE a pacesetter either. That would be too restraining.
The truth is General Electric about actualizing what no one else can see, realizing products or services that no company thought was possible. GE has a mission, and they certainly have a vision. As we embarked link after link on the General Electric website, the pieces of the puzzle started to make sense, yet we still couldn’t put them together. Then slowly as if a light bulb went off in our minds we realized that the GE’s vision is to solve the world’s biggest problems through imagination and innovation.
They believe they can accomplish this vision by exploring one idea at a time. Diversity in products and services lends itself to support the big picture of solving the world’s problems through unique innovations that start with thinking of the impossible. Now that this core vision, this core philosophy is clear, it takes the complexity out of the picture and reveals the company’s simple yet powerful way of approaching its business. How does a General Electric achieve this level of success and sustainability?
Through a mission that balances defined framework and a healthy imagination. Structure in GE can be found in the three distinct areas of global infrastructure, finance, and media. The infrastructure includes work in energy, health, transportation, and technological infrastructure, while the finance block includes an array of products and services aimed at bettering one’s future. Of course the media includes developing, producing and marketing film, television, and sports events to a global market. One the other side of the scale is the work in Healthymagination and Ecomagination.
These areas explore new ideas and innovation in two critical areas: healthcare and the environment. If Vision is regarded like what the company wants to become, it has been defined by GE’s corporate vision like ‘to bring good things to life’ , setting the goal of becoming number one or number two in every market it serves. If Mission is regarded of how it desires to serve individuals and groups, GE has defined different missions for five strong businesses that are included in the three distinct areas of global infrastructure, finance, and media that we mentioned before.
In Technology Infrastructure, desires to serve individuals and groups, helping to build the healthcare, transportation, and technology infrastructure of the new century. In the business of Energy Infrastructure, it want to do it leading the field in the development, implementation, and improvement of the products and technologies that harness resources such as wind, oil, gas, and water. In GE’s Capital businesses, enabling commercial, businesses and consumers worldwide to achieve their dreams.
In media and entertainment companies, developing, producing and marketing film, television, news, sports and special events to a huge global audience. Finally, in Consumer & Industry businesses, the mission of GE is to serve individuals and groups changing innovations that improve the quality of life of millions of them everywhere. General Electric’s external opportunities and threats General Electric has a lot of business diversity such as electricity, energy, finance, and health care.
The company’s growth platform is Ecomagination which they focus on green product. General Electric has great opportunity to grow those green products today. The president Obama’s cabinets try to meet its 2020 greenhouse gas emissions reduction target by supporting alternative energy sources such as sun, wind, and bio gas power. He promised to make $150 billion available for renewable and alternative energy over the next 10 years. On Monday, October 5th, 2009, President Barack Obama signed an Executive Order to launching the GreenGov Challenge.
The main purpose of this order is to focus to reduce greenhouse gas emission. Those regulations from the U. S government are external opportunity for the General Electric. As I mentioned about the General Electric’s platform is Ecomagination and the company supplied twenty 1. 5 MW wind turbines to the Kaheawa Wind Farm on Maui. By this activity, it reduces greenhouse gas emissions by 160 million pounds and save 163,000 barrels of oil in every single year. General Electric has a great opportunity to grow when they keep focus on alternative energy.
Among GE’s external opportunities there are those related to technology and infrastructure. The company plans to launch at least 100 innovations by 2015. It is going to invest $3 billion in research and development for it. GE wants to increase people’s access to its products and processes by 15% and increase quality by 15% by then. In the Healthcare business there is the opportunity of the ‘Healthy imagination’ initiative that is under the ‘Ecomagination’ project launched in 2005. GE continues to invest in new leading tools that are going to cure disease.
Traditionally GE had focused on high-tech and high-cost products (like scanners), but the company will place greater emphasis on lower cost products, that deliver only what is needed (ultrasound machine, “low dose” scanner,…) More opportunities could come from creating a more valuable portfolio of businesses. GE wants to restructure low-return businesses and it wants to achieve a long term growth through dispositions and acquisitions. With a focus on core operations and the new portfolio, GE Capital’s competitiveness, as a smaller and more focused finance company, can be achieved.
Emerging markets with orders from third world countries for the next ten years are another external opportunity. But this opportunity is already a two-way street for GE, with some products exporting from the US to China and India, where healthcare business is booming, but other products designed and built in the developing world and coming to the west or US local market. External threats in these emerging markets are related to reducing the barriers of entry into GE, allowing emerging countries competitive pressure, like in the copying area, that can undercut and undermine these emerging opportunities.
Competitors act producing alternatives in these emerging countries without common standards, especially in markets like China and India, where intellectual property and recognized standards are not the same. The threat is that GE could submit to ‘undo’ products to meet price, volume, value,… , due to intense growth pressure. Products could be not often built around the strong and sound business care they should be. ?? ( I AM NOT SURE IF THE FOLLOWING IS AN EXTERNAL OR INTERNAL OPPORTUNITY ?? ) : Capturing an optimal share of government expending on EHR‘s.
Electronic Health Record (EHR) is a collection of electronic health information about individual patients or population. Such records include demographics, medical history, radiology images, and so on. The threats of capturing government expending could be related with the problem that it is unclear how many health care providers (doctors) will want to use GE’s EHR’. Besides, GE’s current hospital product it is not among top 10 EHRs. GE has the opportunity of making contributions that can potentially benefit the environment.
It is producing new products like wind turbines, energy-efficient products and services like engines for commercial jets, and fuel cells. It can also solve needs related to access to clean water. There are several external threats like rising costs for energy, water, global warming, emission standards, and other ‘green’ trends that need to be addressed. However, there is not only one company to focus on the alternative energy in the world. In every business area, there are many competitors. Siemens is the major competitor of General Electric. A competitor has operated same market, produce similar products, and customers.
Alstom is the second largest one. Competitors, like Siemens and Alstom , are is an external threat to General Electric. General Electric’s internal strengths and weaknesses According to a Wall Street Journal analysis, “Major U. S. companies are cutting jobs and wages; however, many are still spending on research and development”. Big R&D spenders say they’ve learned from past downturns that they must invest through tough times if they hope to compete when the economy improves. GE Global Research has been the cornerstone of GE technology for more than 100 years.
General Electric Company is one of the world’s largest and most diverse industrial research labs with a presence that spans the globe. General Electric has close to 2,800 of the best and brightest researchers spread out at four multi-disciplinary facilities around the world. The global research center located in Niskayuna, New York; also General Electric has facilities in Bangalore, India; Shanghai, China; and Munich, Germany. Having a strong R&D is one of the internal strengths of General Electric Company. (Centralized technological Research) Yet the strengths of GE don’t stop there.
Below is a list of additional strengths, as well as weaknesses that we have identified. INTERNAL STRENGTHS: •Companies, like GE, implementing the ‘related linked diversification’ strategy, constantly adjusts the mix in their portfolio of businesses as well as constantly make decisions about how to manage their businesses in order to improve strategically for the long term profit of company’s shareholders. So, the company has long term survivability by effectively managing its portfolio of resources. •Competence in financial services (since Jack Welch leadership), through the integration of newly acquired businesses.
GECC may account for about a third of GE’s earnings in 2009–or less if worse-than-expected credit losses further reduce GECC’s earnings. Even with its current standalone credit profile of ‘A+’, GECC remains one of the world most profitable and highly rated financial institutions. The ratings on GE reflect its excellent business risk profile, the minimally leveraged balance sheet for its industrial operations, its significant cash flow and liquidity, its strong corporate governance, and management’s commitment to maintaining the highest credit quality.
GECC is a core entity within GE, and financial services have historically contributed a substantial amount of consolidated earnings. Despite current U. S. and developing international economic weakness, it’s expected that GE’s broad business and geographic diversity to allow for continued generous cash flow alongside a strong financial risk profile and maintenance of adequate capital at GECC. GE has strong leadership positions across its global business platforms. Its diversity is unparalleled, customer concentration is negligible, sales are geographically dispersed, and its end markets run the gamut of economic activity.
•GE’s operating culture emphasizes Six Sigma principles, a celebrated methodology, that promotes low-cost manufacturing, good-working capital management, superior product quality, and customer satisfaction. Introduced by former CEO Jack Welch it was a way to improve productivity and cut costs by identifying and eliminating defects in manufacturing processes and other business areas. Six Sigma’s strength is to improve efficiency, and cut down on failure rate and errors. This was the process used when Welch reduced the workforce by 31% but increased efficiency by 31%.
•Successful Human Resources Strategy has been mastered by General Electric. Placing the right people in the right jobs is essential because human capital is important in creating Creativity concepts for customer satisfaction. Education and training of its professional employees and their evaluation have been a key factor in GE’s long-term success. GE continues to allocate over $1 billion per year on internal training. At the professional entry level, two to three year training programs are offered in engineering, manufacturing, finance, marketing, and legal.
Business courses are also offered at the superintendent level. The company’s HR system is set up to develop the right people through a system of recruiting, training, mentoring, deploying, evaluating, and rewarding. •Ecomagination, besides playing a role in boosting economic recovery, is supporting the jobs of the future and improving the environmental impact in the company’s operations. GE has reduced greenhouse gas (GHG) emissions and improved the energy efficiency in GE’s operations. GHG emissions from operations in year 2008 have been reduced by about 13% from the 2004 baseline.
GHG and energy intensity have been reduced by 41% and 37%, respectively, compared to 2004. •Increase revenues from Ecomagination products have increased its portfolio from 17 products in 2005 to more than 80 products in 2008. Revenues in 2008 increased 21% over the prior year. •Businesses mutually reinforce one another even in the complex array of GE’s portfolio. Common management philosophies and processes coordinate strategic approaches to customers and suppliers. Types of technologies for different end users, applications, and marketing and advertising synergy are also well synchronized.
INTERNAL WEAKNESSES: •Long term share ownership Market value descended during the present decade. Risk of investors offloading their shares in GE over the past 6 years has been a concern. GE’s share price has tanked in value from 15% to 25% until mid 2008, and lost from 60% to 70% between mid 2008 and today. The Dow Jones and Standard & Poor 500 Index, have gained from 20% to 25% until mid 2008 and lost from 40% to 10% between mid 2008 and today. •Shareholders have evaluated the potential of converting the GE corporation business units into four or more autonomous public corporations.
Shareholders pointed out the “Canadian Pacific” case in 2001, in which the market value of the conglomerate was 30% lower (a ‘discount’) than the value of the parts individually. So, shareholders are suffering from diversification discount. •Current CEO and executives could eventually move to another company, if they were underpaid. There are GE shareholders against dividend equivalent payments to executives, ‘Golden parachutes’exceeding the 200% of the sum of the executive base salary plus bonus.
Some GE shareholders request that GE’s board of directors adopt a policy that the company will no longer pay dividends or equivalent payments on grants of equity compensation to senior executives of the company for shares they do not own. (Companies like Intel and Microsoft ‘never’ pay dividends before full ownership rights have been earned). •According to USA Today, Tuesday, August 4, 2009 the Securities and Exchange Commission charged General Electric with committing accounting fraud spanning several years.
Specifically, the SEC accused GE of inflating its earnings and revenue in 2002 and 2003 so it could beat investors’ expectations, misleading investors as a result. The SEC accused GE of four separate accounting violations involving false bookkeeping for investments, including commercial paper and interest-rate swaps, as well as sales of locomotives and aircraft-engine spare parts. GE agreed to pay a $50 million fee to settle the charges. It neither admitted nor denied any allegations made by the SEC. The company says it corrected errors in regulatory filings between May 2005 and February 2008.
The charges are just the latest embarrassment for the company, which has been one of the most widely held stocks by investors for years. General Electric’s Financial Analysis Before describing the company’s current financial condition let’s know how much the company sell and earn. •General Electric one-year sales: 161. 56 Bil. Difference from the average for the Conglomerates group: 85. 81% •General Electric one-year income: 11. 75 Bil. Difference from the average for the Conglomerates group: 92. 65% Sales & Income (past 12 months)CompanyIndustry
Sales161. 56 Bil 86. 95 Bil Income11. 75 Bil 6. 10 Bil [Income = Revenues – Cost of Sales – Operating Expenses – Taxes ] How fast is the company growing? •General Electric one-year sales growth: -16. 80%. Difference from the average for the Conglomerates group: -0. 10 percentage points. . •General Electric one-year income growth: -49. 10%. Difference from the average for the Conglomerates group: -14. 70 percentage points. Sales & Income Growth (past 12 months)CompanyIndustry Sales Growth -16. 80% -16. 70% Income Growth -49. 10% -34. 40%
How profitable is the company? Investors prefer companies that increase profit margins — the percentage of sales (revenues) that they keep — every year. This is accomplished either by lowering expenses or raising prices. •General Electric one-year net profit margin: 7. 5% Difference from the company’s 5-year average net profit margin: -4. 6 percentage points. Difference from the average for the Conglomerates group: 0. 2 percentage points. Net profit margins (%) Company7. 5% Company 5-Yr Avg. 12. 1% Industry7. 3% How is the company’s financial condition?
The debt/equity ratio (D/E) shows how much a firm has borrowed (or total liabilities) as a percentage of its stock equity (or shareholders equity). The lower, the better. •General Electric debt/equity ratio: 4. 41. Difference from the average for the Conglomerates group: 76. 40%. CompanyIndustry Debt/equity ratio4. 41 2. 50 This high Debt/equity ratio compared to the Industry Average ratio means that the company has been aggressive in financing its growth with debt. This could result in volatile earnings as a result of the additional interest expense.