Abstract General Electric is a worldwide manufacturer and supplier of an extremely wide spectrum goods and services. From an investor’s standpoint to a student’s standpoint, it is crucial for someone to be able to thoroughly complete an effective and accurate analysis on a company, especially on such a company like General Electric. There are several elements to such an analysis.
These elements include the following: identifying the company’s strengths and weaknesses through such tactics as a SWOT analysis, forecasting, and benchmarking; understanding the financial situation and limitations of the company by actively looking where revenue and cost streams are coming from; knowing what environmental factors influence and limit the company in reference to such components as technology, demographics, and consumer tastes and preferences; locate potential growth opportunities such as expansions into untapped markets, and, of course, know what lies ahead for the company in the future…success or failure.
Introduction General Electric (GE) is a diversified industrial corporation. The company’s products and services range from aircraft engines, power generation, water processing, and household appliances to medical imaging, business and consumer financing and industrial products. The company primarily operates in North America, Europe, Asia, South America, Australia and Africa. It is headquartered in Fairfield, Connecticut, and GE employs around 287,000 people (Datamonitor pg. 4). The company recorded revenues of $150,211 million in the financial year ended December 2010, a decrease of 3.
3% compared to financial year of 2009. The operating profit of the company was $30,191 million in financial year 2010, an increase of 6. 7% over financial year 2009. The net profit was $11,344 million in FY2010, an increase of 5. 8% over FY2009 (Datamonitor pg. 4). The history of the company began with the merger of Thomson-Houston Electric and Edison General Electric in 1892, and this resulted in General Electric. Its early products included light bulbs, motors, toasters, elevators, and other appliances.
In the following years, the company acquired a number of companies such as Siemens & Halske’s branch in Chicago during 1900, and Stanlet Electric during 1903 (Datamonitor pg. 8). The company continued to expand, and by 1980, its products ranged from plastics and consumer electronics to nuclear reactors and jet engines. Through the 1990’s and 2000’s, General Electric continued to grow and continues to grow in the international industry. More recently, during November, 2011, GE Capital Aviation Services delivered two new Airbus A320 aircrafts to China Southern Airlines. It also delivered a new Boeing 737-800 aircraft to Jet Airway.
Also, during the same month, the company signed an agreement with Newcom to supply advanced technology wind turbines to power Mongolia’s first wind farm. The Bently Nevada business of GE Measurement & Control Solutions opened a new remote condition monitoring center in Fot, Hungary. In addition, GE Healthcare and Neste Jacobs formed a strategic alliance to assist countries worldwide to become self-sufficient in the manufacturing of blood plasma products. GE Healthcare also introduced MAVRIC SL, a magnetic resonance imaging technique for imaging the joints of patients with metallic implants.
Furthermore, it announced an additional $300 million investment of low-dose technologies and unveiled an array of radiation-dose management offerings at RSNA 2011. GE Healthcare also introduced the Innova IGS 630 biplane cardiovascular and interventional imaging system (Datamonitor pg. 21). Strengths and Weaknesses General Electric has various competitors because they are spread out into several different industries; as a result from being in healthcare and jet building, it makes them more susceptible to competition. Some of their big competitors are Hitachi Ltd.
, Siemens AG, and Honeywell International. Also, some of their other big competitors are Mitsubishi Corporation, Textron Inc. , United Technologies Corporation, and 3M. The company is all about Research and Development when it comes to target market and product mix. A general motor innovates on a large scale. More than half the planes in the world have GE engines. Jet engines are a technical and manufacturing masterpiece. They have invested more than $10 million in R&D over the past decade to serve the military and commercial aviation customers.
The new engines are substantially more fuel-efficient than the ones that they are replacing. They track thousands of engine performance parameters while they are in service, and they use that information to improve performance standards. Their ability to execute large-scale innovation is based on GE’s technical depth and scale. The capability is unmatched and creates customer satisfaction, employee pride, and financial performance. There are very few companies on earth who do what General Electric does (Datamonitor pg. 49). General Electric is a diversified industrial corporation.
The company’s product range includes aircraft engines, power generation, water processing, and household appliances to medical imaging, business and consumer financing, media content, and industrial products. The company is strongly recognized in the industry; it is one of the leading firms in most of the major market industries in which it belongs to. Strong industry recognition enhances the brand image of the company and gives it a competitive advantage. However, compliance with environmental and other government regulations could increase the operating costs of GE (Datamonitor pg. 39. )
General Electric is strongly recognized in the industry. The company is one of the leading firms in most of the major industries in which it participates. In the energy infrastructure business, the company is a leader in the field of development, implementation, and improvement of products and technologies that harness resources such as wind, oil, gas, and water. It is a leading provider of integrated gasification combined with cycle technology design and development. The company’s GE capital is a strong, focused business model with leading positions in several mid-market, corporate, and consumer financing segments.
The company is also one of the world’s leading providers of aircraft engines and services (Datamonitor pg. 39). GE’s diversified product portfolio, and balanced revenue streams are both major strengths of General Electric. GE has one of the most diversified technology, media, and financial services corporations in the world. It operates through five segments including GE Capital, technology infrastructure, energy infrastructure, NBC Universal, and home and business solutions. A broad product portfolio enables the company to provide end-to-end solutions and tap high value customers.
In addition, it also helps the company to balance revenues in the face of a ‘slowdown’ in a particular segment (Datamonitor pg. 40). Furthermore, another great example of its strengths is the strong presence it has in growth markets. The company has a fortified existence in the growing markets worldwide. As of December 2010, the company had generated $30 billion of industrial revenue from growing markets, which includes regions such as Middle East, Africa, Canada, Australia, Russia, Latin America, China, and India.
In addition, this source of revenue expanded by more than 10% annually over the last decade. These markets are investing trillions of dollars in infrastructure, thus favoring a multi-business company that can bring solutions such as GE. This allows the company to form a ‘company-to-country’ approach in countries where a government and business can work together to solve infrastructure needs (Datamonitor pg. 41). Their most important strength in our opinion is their extensive research and development capabilities.
GE has robust R&D facilities. It operates its R&D facilities mainly through GE Global Research. It is the hub for technology development for all of GE’s businesses – with 10 global laboratories organized by scientific disciplines all focused on leveraging the company’s technological breakthroughs across multiple GE platforms. Moreover, the center is focused on developing breakthrough innovations in areas such as molecular imaging and diagnostics, energy conversion, nanotechnology, advances propulsion, and security technologies.
Also, there are approximately 36,000 technologists working across its businesses and global research centers to solve some of the world’s toughest problems. Some of the company’s research and development plans include the development of the next generation’s baggage screening systems for security, the development of medical imaging, the development and application of aerodynamics, and the development of carbon composite technologies to find new solutions to scale up wind power; not to mention, the advancement of drawing expertise that is used in its biology labs to develop molecular medicine.
Robust R&D capabilities, such as these, enable the company to have an edge over its competitors. Additionally, it also helps the company to develop more efficient products and technologies, and serve its customers more efficiently throughout (Datamonitor pg. 41). Weaknesses for General Electric are substantially less than their strengths, which, in turn, make them very successful overall. However, any company that is as big as General Electric is going to have legal proceedings that are likely to hamper the company’s corporate image.
Also, the dependence on third parties for raw materials is another weakness. Also, one weakness that they possess is the high debt burden that they have incurred. General Electric is involved in various lawsuits, claims, and legal proceedings. For instance, during May, 2010, Mitsubishi Heavy Industries filed antitrust and patent-infringement lawsuits against GE. In addition, the Environmental Protection Agency (EPA) issued a notice of violation against GE alleging non-compliance with the Clean Air Act at the power cogeneration plant in Homer City, PA.
These types of series of litigation against the company indicate that there is a lack of internal control, which may hamper its image in the market (Datamonitor pg. 42). GE is reliant on third-party suppliers, contract manufacturers and service providers, and commodity markets to secure its raw materials, parts, components, and sub-systems that are used in its products. This reliance exposes GE to volatility in the prices and availability of these materials, parts, components, systems, and services.
Quality issues experienced by third-party providers can also adversely influence the quality and effectiveness of the company’s products and services, which can result in unnecessary liabilities and reputational harm. GE has a high level of indebtedness, which could adversely impact its financial condition and future operations. The company’s total debt amounted to $411,282 in FY2010; at the same time, the shareholder equity of the company stood at $118,936 million, therefore representing a debt equity ratio of 3. 5% – a significantly high statistic according to the industry standards.
As a result of the high debt, the interest burden of the company could increase during the period of rising interest rates. The company’s substantial debt limits its ability to obtain additional financing to fund future working capital, capital expenditures, and other general corporate requirements, which is a disadvantage to any company. Financial Analysis My Financial analysis on General Electric shows that they are a very productive company, and when compared to their competitors, they appear to be much more successful. 2011 Financial Year Company| Revenue| Gross Profit| Net Income|
General Electric| $147,300| $79,002| $14,151| Hitachi| 112,413. 843| 28,337. 829| 2,882. 432| Textron Inc. | 11,275| 1,967| 242| Mitsubishi Corporation| 67,641. 556| 5,577. 862| 5,515. 627| Note: Amounts are in billions. Note: Showing the major competitors in the same table shows that General Electric did a lot better than any other one of competitors. Investment Statement| 2011| 2010| 2009| Revenue| $147,300| $150,211| $156,783| Gross Profit| 79,022| 78,498| 80,862| Operating Income| 20,098| 14,208| 10,344| Net Income| 14,151| 11,644| 11,025| Diluted EPS| 1.
23| 1. 06| 1. 01| Note: The Investment Statement shows that General Electric has gains in net income in the last three years, and there is no reason that they shouldn’t continue to show gains. Environmental Threats Many companies have numerous environmental threats ranging from being technology inefficient to lacking natural resources. Although, General Electric has done an extremely fascinating job by diversifying their revenue streams in such ways to include technological research and development, expanding into new markets, and globalizing their workforce.
As discussed above, GE’s R&D department is revolutionizing many technological components in the world, which, as a result, significantly reduces many threats in today’s market place since technology is the primary cause for globalization: the number one business driver. Whether it is involving alternate energy sources or is in relation to healthcare technology, GE has a part. GE’s success with turbine engines has allowed them to become a dominant manufacturing leader by more than doubling any other manufacturer for wind turbines.
(See reference table below). Moreover, “the company received an order from Mesa Power for 667 wind turbines capable of generating 1,000 megawatts of electricity. In addition, GE Energy’s fuel-flexible turbine technology was selected for the expansion of the world’s largest COREX combined-cycle power plant at the Baoshan Iron & Steel complex in Baoshan District, Shanghai, China” (General Electric , p. 10). Also, as the world becomes more and more populated, healthcare practices continue to grow. The technological demand for healthcare
advancement is second to none. Their healthcare business “includes medical imaging and information technologies, medical diagnostics, patient monitoring systems, disease research, drug discovery and biopharmaceutical manufacturing technologies” (General Electric , p. 5). Also, their “healthcare manufactured technologies include patient monitoring, diagnostic cardiology, ultrasound, bone densitometry, anesthesiology and oxygen therapy, and neonatal and critical care devices” (General Electric , p. 5).
The services that GE provides also expand into remote diagnostic and repair services for medical equipment, which much of the equipment is also manufactured by GE; nonetheless, they also have the capabilities to repair other company’s equipment as well (General Electric , p. 5). This also includes “computerized data management and customer productivity services” (General Electric , p. 5). GE has diversified their company beyond belief when it comes to the areas of technology it has engaged in. The new markets that GE continues to explore, take part in, and be successful in seem boundless.
GE has found a home in more than “100” countries, including the “219” plants located in the U. S. (General Electric , p. 5). The markets that GE has a firm control of include “technological advancements, financial services, aviation, power generation, water processing, security, and healthcare” (General Electric ). Through their vast efforts at diversifying their companies to include numerous markets, GE has been able to respond and adapt to environmental threats such as the rising costs of resources, raw materials, and various market pressures (Tarigopula, 2012).
Other environmental threats such as consumer tastes and preferences have declined significantly over the years. Their revenue sources don’t rely on consumer products the way that they used to. Healthcare will always be in demand. Water purification and processing is essential, especially when considering the amount of potable water in the world. People complain endlessly about gas prices but never stop to think that they pay more per ounce for bottled water than they do gasoline, which is another area that GE has excelled in – alternate energy sources. Growth Opportunities
As it already has been established, GE has a proven ability to adapt to market demands. As for the future opportunities, GE’s outlook only gets brighter. Globalization is revolutionizing the world. Companies are taking advantage of developing countries as they are able to produce the same products and services for a fraction of the cost, which, in turn, is bolstering the world economy, not even to mention market expansion. GE is no different than these companies as they are at the ‘front of the line. ’ China’s economy has grown at such a rapid pace it has become the world’s leading exporter and importer.
Mark Hutchinson, the CEO of GE Greater China, expects the revenue stream from China to nearly triple from the “$7 billion” it is at now to “$20 billion in the next 10 years” (GE China’s Growth Stems from China’s massive infrastructure investment , 2012). Also, China is looking to expand its efforts to achieve reliable clean energy sources by investing in the technology to make it happen. “China is looking to add 1,000 gigawatts of electrical generating capacity – equivalent to the current capacity of the USA” (GE China’s Growth Stems from China’s massive infrastructure investment , 2012).
GE is currently forming many partnerships with local manufacturers and is looking to increase a large portion of China’s energy demand through wind powered turbines (GE China’s Growth Stems from China’s massive infrastructure investment , 2012). Mark Hutchinson also mentioned China’s need for healthcare and aircraft improvements – two more markets that GE has cornered (GE China’s Growth Stems from China’s massive infrastructure investment , 2012).
China is looking to add over “90,000” hospitals in the coming years, all of which GE is looking to supply with medical technology (GE China’s Growth Stems from China’s massive infrastructure investment , 2012). Furthermore, this is just one country. GE is located in over 100 countries, which many are beginning to have a need – not to the same level as China but – to expand their energy consumption, healthcare capabilities, and aviation technology. Then, as a result of developing countries, GE is able to fund its financial services through the revenue stream that is generated by such growing economies.
GE’s revenue source from financial lending equates to about “30 percent” of all its revenue (GE China’s Growth Stems from China’s massive infrastructure investment , 2012). While many might not think of GE as a financial juggernaut, through all of their successes, they have been able to turn their profits into profits by letting their money do the work for them. GE has recently funded numerous growth opportunities and engaged in several joint ventures. Two well-known manufacturers, Honda and Rolls-Royce, were among them; as well as, Pratt and Whitney (General Electric , p. 6).
Furthermore, GE also signed agreements with several Russian companies that will “help modernize the country’s healthcare and power generation sectors by localizing technology, manufacturing and expertise. [In addition,] GE Healthcare completed the tender offer by GE’s wholly owned subsidiary, Crane Merger Sub, for all outstanding shares of common and preferred stock of Clarient, a leading player in the fast-growing molecular diagnostics sector” (General Electric , p. 14). Russia is planning on replacing around “$30 billion” in healthcare equipment in the next three years, of which GE is looking to be supplying (General Electric , p.
42). Also, in the next 10 years, Russia is planning to replace and expand their aging generation equipment, which GE is also engaged in (General Electric , p. 43). Another aspect that is allowing GE to continue to grow is their ability to be innovative. GE has numerous growth opportunities, but that doesn’t persuade them to stop thinking and start being contempt with where they are at. Instead, they launch into another market: small business software technology. GE Capital recently released a web software tool, GE Smart Chart, to help small business owners be more competitive (Roe, 2012).
While they are increasing in size and expanding into new markets, they are still finding ways to help small businessmen; as a result, GE is able brand themselves with a positive public image – something that any company can benefit from, especially one as large as GE. Assessment, Prospects, and Suggested Future Direction GE has been growing rapidly since the 1980’s. Despite a few environmental violations and setbacks, there is very little to insinuate that anything is going to change otherwise, especially since GE is so diversified and has the ability to adjust to, and dictate market trends.
Whatever the aspect that is being analyzed, GE is far ahead of its competition – thus, resulting in a permanent competitive advantage. GE’s financial data, estimated growth, and diversification have led it to being one of the leading companies in the world; it is currently 6th overall on the Fortune 500 list of companies (Fortune 500, 2011). In addition, GE is one of several companies that have been ‘coined’ as the fastest growing industrial companies with the best yield (9 Fastest Growing Industrial Stocks With Best Yields, 2012). Below, it lists GE’s common stock growth since the 1960’s.
While GE took a hit during the recent recession, GE was quick to recover – much faster than others, and GE is projected with all the recent investments and joint partnerships to continue to rise and surpass its peak in the early 2000’s (9 Fastest Growing Industrial Stocks With Best Yields, 2012). For future endeavors, GE has it covered. In the years to come, clean energy sources and water purification / processing will be colossal revenue streams for any company that has a part. GE is a major player in both fields. Technology will always be a money maker, and GE is a leader in that field as well in relation to aviation and healthcare.
Moreover, financial investments are great ways to make money as long as the risk level is appropriate, which just happens to GE’s largest revenue stream. Pablo Picasso once said, “Action is the foundational key to success” (Picasso). GE is doing just that – acting. Their success is linked directly to their aggression towards their respective markets in which they belong. GE isn’t waiting for others to show them the way; instead, GE is blazing the way for others to follow them, thus making them successful throughout. Works Cited Fortune 500. (2011). Retrieved from CNN Money: http://money. cnn.
com/magazines/fortune/fortune500/2012/snapshots/170. html 9 Fastest Growing Industrial Stocks With Best Yields. (2012, Febuary 16). Retrieved from iStock Analyst: http://www. istockanalyst. com/finance/story/5671877/9-fastest-growing-industrial-stocks-with-best-yields GE China’s Growth Stems from China’s massive infrastructure investment . (2012, November 16). Retrieved from Johnson Cornell University: http://www. johnson. cornell. edu/Emerging-Markets-Institute/News-Events/Speakers/Speakers-Detail/ArticleId/5258/GE-China-s-Growth-Stems-from-Chinas-massive-infrastructure-investment. aspx General Electric . (n. d. ). Retrieved from