General Electric – Home Appliances

Introduction General Electric Company (GE) was founded in 1892 and is based in Fairfield, Connecticut. It operates as a technology, media, and financial services company worldwide. Its Consumer & Industrial segment sells and services major home appliances including refrigerators, freezers, electric and gas ranges, cook-tops, dishwashers, clothes washers and dryers, microwave ovens, room air conditioners, and residential water systems for filtration, softening and heating. The aggregate level of economic activity in markets for such products and services generally lags overall economic slowdowns as well as subsequent recoveries.

In the U. S. , industrial markets are undergoing significant structural changes reflecting, among other factors, increased international competition and continued commodity cost pressures(2). Consumer & Industrial segment is particularly sensitive to changes in economic conditions. Reflective of the downturn in the U. S. housing market, Consumer & Industrial revenues have declined over the three-year period. In response to these tough economic conditions, in 2007, Consumer & Industrial began a restructuring plan focused on reducing manufacturing capacity and transferring work to lower-cost countries.

Despite these cost reduction efforts, segment profit declined on higher material and other costs(3). Situation Analysis In order to profitably satisfy customer needs, GE must understand its external and internal situation, comprising of the company, collaborators, customer, context and competitors. Customer The customers of Home Appliances products are earning adults who own a house, restaurants or small businesses. Children or non-working adults are not the customers of home appliances market. The following demographic factors can have an effect on the buying behavior of consumers: 1.

Age of the consumer: Typical home appliances buyer is earning member of a family. According to Consumer Expenditure Survey in 2007, the average income after taxes of people under 25 years is $30,802. High income people are between ages 35 and 65 (Ref: http://www. bls. gov/cex/#data). 25-34 years35-44 years45-54 years55-64 years $55,765$74,051$77,075$67,965 2. Gender: General customers of home appliance market are Females. From the Consumer Expenditure survey in 2007, it appears that higher percentage of people in the categories shown below own houses and pay mortgages.

These segments would be the target customer for the home appliances market. Factors25-34 years35-44 years45-54 years55-64 years $55,765$74,051$77,075$67,965 Male48464949 Female52545151 With mortgage41605947 Without mortgage691634 3. Education and race: As majority of consumers is becoming educated more and more social aware, they look into the details on the impact of the usage of appliance to its environment. For example a common customer nowadays looks at energy savings, noise level reduction etc. The potential customer segment to tap into clearly is “White, Asian and other races”.

Factors25-34 years35-44 years45-54 years55-64 years $55,765$74,051$77,075$67,965 Male48464949 Female52545151 Elementary (1-8)4444 High school (9-12)30333333 College66636263 Black or African-American15141211 White, Asian, and all other races85868889 4. Interests: Customers are segmented by interests that appeal to their senses. Urban customer needs should be catered by introducing modern appliances. Customer’s income plays a role in that too. A chef would prefer the counter-top of higher end whereas a house wife would prefer smaller and lower end appliances.

High end home appliances are purchased by families of higher end incomes. GE has managed to introduce different brands to capitalize on this behavior by various segments of income. Item All consumer unitsOutside urban areaUrban consumer units TotalLess than 100,000100,000 to 249,999250,000 to 999,9991,000,000 to 2,499,9992,500,000 to 4,999,9995,000,000 and more Number of consumer units (in thousands)120,17124,22895,94418,1169,85020,01415,51117,01215,439 Income after taxes$60,858$56,058$62,070$45,666$57,851$59,589$62,481$72,731$75,068 Homeowner678363616565646359

With mortgage434643374543474839 Without mortgage233720242121181520 Renter331737393535363741 Factors25-34 years35-44 years45-54 years55-64 years $55,765$74,051$77,075$67,965 Average annual expenditures$47,510$58,934$58,331$53,786 Household furnishings and equipment$2,034$2,198$1,933$1,944 Consumer buying behavior is influenced and depends on various factors. Industrial or business buyers are more predictable and they mostly rely on acumen and logic and are most influenced by quality and price. Home appliance buyers are price sensitive, especially in these economic situations.

Consumers of home appliances will show complex buying behavior because the product is expensive, risky, purchased infrequently, and highly self-expressive. Typically, the consumer has much to learn about the product category because of significant differences among brands. And the customers of home appliances are mostly women. They care about the cost and durability and need complete psychological satisfaction which can be accomplished through individual customer service representative discussions.

Some of GE’s higher end models fair well in the Customer satisfaction. But overall GE Appliances do not fair well in the customer satisfaction compared to its competitors (4). There are a variety of reasons why non buyers don’t buy GE home appliances. Some of them are higher satisfaction ratings for competitors’ products, better customer service, lower cost etc. Company The Consumer and Industrial segment generated sales of $11,737 million, accounting for 6. 4% of the company’s total revenue in 2008. Brands are GE Monogram®, GE Profile™, GE®, Hotpoint® and GE Cafe™.

The product categories offered in home appliance segment are washers & dryers, refrigerators, freezers, ranges, ovens, dish washers and other major home appliances. As we have seen above home appliances are costly to purchase and as a company GE is well positioned in this area as it could use it financing arm to help customer buy what they need. When it comes to reducing the cost of products, GE leverages its Six Sigma process. Six Sigma is a highly disciplined process that helps GE to focus on developing and delivering near-perfect products and services.

GE has efficient internal processes setup to reduce the cost of production, improve the quality of products and provide excellent customer service to gain customer satisfaction. The company currently has more than 2,000 Six Sigma projects going, and reportedly GE is able to save $4 billion per year thanks to cost reductions and other streamlining efforts (http://logisticstoday. com/logistics_services/outlog_story_6287/). Context Strong global competition rarely permits premium pricing, so cost control, including productivity, is key.

Despite pricing pressures on many of GE’s products, it also invests in the development of differentiated, premium products that are more profitable. While some Consumer & Industrial products are primarily directed to consumer applications (major appliances, for example), and some primarily to industrial applications (switchgear, for example), others are directed to both markets (lighting, for example). GE manufactures certain products, and also source finished product and component parts from third-party global manufacturers. A large portion of GE’s appliances sales are through a variety of retail outlets for replacement of installed units.

Residential building contractors installing units in new construction is its second major U. S. channel. It offers one of the largest original equipment manufacturer (OEM) service organizations in the appliances industry, providing in-home repair, aftermarket parts and warranty administration. It also manufactures and sells a variety of lamp products for commercial, industrial and consumer markets, including full lines of incandescent, halogen, fluorescent, high-intensity discharge, light-emitting diode, automotive and miniature products(2).

The aggregate level of economic activity in markets for such products and services generally lags overall economic slowdowns as well as subsequent recoveries. In the U. S. , industrial markets are undergoing significant structural changes reflecting, among other factors, increased international competition and continued commodity cost pressures. Reflective of the downturn in the U. S. housing market, Consumer & Industrial revenues have declined over the three-year period.

In response to these tough economic conditions, in 2007, Consumer & Industrial began a restructuring plan focused on reducing manufacturing capacity and transferring work to lower-cost countries. Despite these cost reduction efforts, segment profit declined on higher material and other costs. Collaborators Collaborators for GE home appliances are the retailers who sell its products, the suppliers who supply the raw materials and necessary components, service centers that services the machines, financiers etc. In the USA home appliance customers usually prefer retailers such as Best Buy, Lowes, Home Depot, Wal-Mart etc.

As population is concentrated in the urban areas, having a strong supplier, distributor and retailer relationship in these areas are vital to capture urban market. “GE’s goal is to drive digitalization throughout the supply chain process to better collaborate with is supply base and to digitize traditional manual processes,” says Lee Garbowitz, manager of the company’s Corporate Initiatives Group. The GE Global Supplier Network (GSN) allows for electronic auctioning, invoicing and demand forecasting, and provides a real-time collaboration tool for GE and its suppliers.

Twelve of the company’s businesses use the online marketplace with over 35,000 suppliers, making it one of the largest private exchanges in the world (http://logisticstoday. com/logistics_services/outlog_story_6287/). Competitors Bosch, Kenmore Elite, LG, Samsung and Whirlpool are the major competitors of GE in the home appliances segment. GE has tough competitors in the home appliances division. Its competitors such as Whirlpool and Bosch rank better in many home appliance products according to J. D. Power and Associates reports.

Also the competitors have superior access to distribution channels. One major weakness of the competitors is they don’t have a private network to market their products directly to the customers. They do not have a financial arm to finance the customers to buy the products. In contrast GE can offer its finance and warranty products to the buying customers. As a company GE has a bigger presence in international market offering a wide variety of products which also results in a huge number of competitors in each product market.