-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. -the company’s NBC Television Network is one of the four major commercial broadcast television networks. 2011, Fortune Magazine ranked GE as the sixth largest firm in the US, as well as the 14th most profitable.
-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. -The company has a strong presence in the growing markets worldwide. As of December 2010, the company had generated $30 billion of industrial revenue from growing markets. this revenue expanded by more than 10% annually over the last decade.
-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 technology breakthroughs across multiple GE businesses. | -The company is involved in various lawsuits, claims and legal proceedings. In 2010, Mitsubishi Heavy Industries filed antitrust and patent-infringement lawsuits against GE.
-in 2008, shareholders filed complaint against the company and its Chief Executive Officer for making false and misleading statements that artificially inflated the stock price-The company is reliant on third-party suppliers, contract manufacturers and service providers and commodity markets to secure its raw materials, parts, components and sub-systems used in its products. This reliance exposes GE to volatility in the prices and availability of all these. -GE has a high level of indebtedness, which could adversely impact its financial condition and future operations.
The company’s total debt (short and long term) amounted to $411,282 million in 2010. At the same time, the share holder equity of the company stood at $118,936 million, representing a debt equity ratio of 3. 5%, which is significantly high according to the industry standards. As a result of high debt, the interest burden of the company could increase in the period of rising interest rates. In 2010, the interest coverage ratio of the company declined to reach 1. 9, as compared to 2. 5 in 2007. | Opportunities| Threats|
-The US healthcare sector is providing positive growth opportunities for the company. According to the industry sources, the total US healthcare expenditures increased from $738 billion in 2005 to $1,097. 9 billion in 2011. -The demand for commercial airplanes worldwide increases the demand for the aircraft engines and jet engines manufactured by GE. The company’s aviation business provides jet engines, turboprop, turbo shaft engines, and related replacement parts for use in commercial aircraft. -The company is expanding its business to various geographies to enhance its business reach.
The company is establishing new joint ventures in fast growing markets such as Russia, Brazil and China. e. g. 2011, the company has entered into joint ventures in energy and healthcare markets in Russia valuing at approximately $15 billion. | -GE faces several environmental and other governmental regulations. It is subject to various federal, state, local and foreign environmental laws and regulations in all of the jurisdictions in which it operates. These laws and regulations cover the discharge, treatment, storage, disposal, investigation and remediation of some materials, substances and wastes.
-GE is a diversified industrial corporation. Its products and services. Competition for these products and services is impacted by various factors which include technological competence and innovation, excellence in design, high product performance, quality of services, and competitive pricing. -GE conducts its operations globally in over 100 countries. In 2010, more than 53% of its revenues were generated from activities outside the US. The company’s international operations are influenced by local economic environments, including inflation, recession and currency volatility.
They are also impacted by political changes, some of which may be disruptive, can interfere with the company’s supply chain, customers and all of GE’s activities in a particular location. | * Technology constitutes is one of the factor that need a closer look. Technology is advancing at a very high pace globally. Multinational companies like General Electric must therefore be on the lookout to ensure that their technology is up-to-date when new forms are introduced in the market. Some economic factors such as global crises which lead to increase in interest rates and decrease in bank lending capacity are also universal.
More over GE has used co-branding to market its products, including Culligan, Calphalon and Lenox. GE’s business portfolio is diversified and the products are in many different spheres: Oil & Gas, Energy Management, Appliance, Aviation, Capital, Healthcare, Lightning, Mining, Power & Water, Software and Transportation. They are spread all over the world and are facing different problems, growth, political or economic crisis or environmental regulations globally. GE’s global presence can be another positive aspect, especially its entering of rapidly growing emerging markets.
The presence in these emerging markets is also increasing GE’s growth and covers the turn-down in other markets. GE is balancing the risk and taking advantage of the current world situation which gives advantages to shareholders. There are surely some risks that shareholders or potential investors, can’t ignore. Most of these risks are not directly connected with the company. For example Governments’ decisions in different countries for different market regulations and environmental regulations, some of which are globally accepted or at least intended to be as greenhouse gas emission regulation for downsizing the greenhouse gases.
Some of these factors can’t be predicted and are applicable to every market player, not just GE. As a global player, GE can be in potential risk because of political instabilities in some developing regions and countries – but this is something GE can offset with its global presence and diversified portfolio. In my opinion, one of the biggest problems of GE might be the emerging negative opinion about GE brand in public thanks to its global power and negative influence on the environment. This criticism may lead to loss of investor confidence and can be bad news for the company.
My general evaluation of GE through SWOT analysis shows that the company is well-managed and it is successfully dealing with the current situation and world crisis and treats. GE is repelling the risks making its stock a safe investment choice despite all the negative opinions. More over GE wants to select suppliers whose quality, price and service are competitive, and further more, to implement in-depth cooperation and provide relevant training. As a monopoly enterprise, GE strictly requires the overall strength of suppliers what include their quality, technology and capacity.
Suppliers, however, can use these stringent requirements to improve themselves so that push their products into the world with GE. In a word, the bargaining power of suppliers is limited for fixing this situation. Buyers influence the profitability of existing enterprises in the industry through the ability of lower prices and higher required on the product or service quality. However, GE not only has multiple businesses in various industries, but also stays on the leading position of most industries. What is more, the bargaining power of buyers is restricted due to the great control power of GE.
Because of the diversity of GE’s businesses, the competitors are also from various industries. However, the abilities and strength of these competitors are far less than GE. What is more, the competitive power of GE is continuously increased due to its diversification and innovation. As we know, the businesses of GE are in the high-tech industries, the entry barriers for the new entrants are higher than other industries. Obviously, the barriers can decrease the threat of new entrants to GE. 5 porters: New Entrants: GE NBC has little threat of new entrants imposing competition.
In the world of broadcast and entertainment there is also a great deal of monetary value that must be expended in order to even have hopes of competing with such networks as NBC. Technology is yet another industry that requires large capital and expense. It would be difficult for new entrants to obtain the cash and development that is essential in this industry. The threat of new entrants in all aspects of GE is low due to the repeating trends of the market requirements that GE employs. Threat of Substitute Products: The financial segment of GE is not as susceptible to a threat of substitutes as other units of GE.
A consumer is not as likely to switch their financial provider, as they are their light bulb brand. GE NBC is one segment that could be prone to substitutes. Substitution for GE NBC is as easy as viewers switching a channel and advertisers switching networks. This creates a high level of competition that promotes companies to continually have the edge over their competitors. The technology industry is also an at-risk industry to threats of substitutions. From their consumer products to their healthcare technologies, everything has the ability to be taken over by a newer technology or a more efficient product.
GE advantage in this field is their strength of brand name. With new products coming out all of the time, consumers may be reluctant to switch due to their loyalty to the GE brand nameBargaining Power of Buyers: For many of their companies, the switching cost for buyer is extremely high. This is true with the financial, broadcasting and technology industry. For many companies, such as GE Healthcare, the volume per buyer is very large in both quantity of goods and cost of goods. This makes the switching cost for buyers high, giving GE yet another advantage over their buyers.
This is true for most of their companies, but not all. Some of General Electric’s companies, such as GE Consumer and Industrial, the switching cost of buying a different product is minimal. In these few scenarios, GE must stay competitive in the price wars with their competition Current Competitors: GE’s main competitor is Siemens. Siemens' is one of the largest markets in the world, with thirteen worldwide businesses and annual sales of $97 billion. Siemens’ most closely mirrors GE’s size and structure, making it their largest competitor.
Each separate venture of GE has its own degree of competition. While all eleven segments of the company are important, the largest and most profitable areas of business are GE’s finance, media, and technology businessesBargaining Power of Suppliers:The bargaining power of suppliers is relatively low for GE many industries. Due to the shear volume of goods that GE buys from their suppliers, the suppliers have no ability to bargain with GE. Most of GE's suppliers could not survive if they lost GE's business.
GE is also very flexible in who they choose to be their suppliers. This gives them the fight for their business. | Strategic development (organic and inorganic) Key Success Factors of internal development : Competitive Advantage There are several factors that enable GE to have its advantage, GE’s service quality and their ability to maintain customer satisfaction. Quality of service & it invests in multiple programs. GE has devoted a large part of Nuclear Power for over fifty years. ’ Customer support and satisfaction has been a stronghold for GE.
Support programs, such as Remedy's Customer Service Solutions. Having the capability to track defects and new request features increase the effectiveness of GE’s development and quality assurance processes, responsiveness to customers, and shorten time to market. Customers General Electric’s array of business segments, products, and services create an extremely large and expansive customer base. From light bulbs to jet engines, financial services to plastics, and medical imaging to news and information customer diversity is endless and unclassifiable.
All of the 11 divisions of GE businesses supply products and services to both individual consumers of all ages and creed and industries of all shapes and sizes. This enormous span of customers helps to create and sustain the company’s success. More over the International market is very important in today’s business. The growth of technology has established the world as a global village and has given businesses a perfect opportunity for reaching to the previously unreachable markets. GE has a well established capital base that ensures that it can reach to more regions than it has done.
The strategy that needs to be adopted by this company in these efforts must be based on exploiting the immediate internal market which would effectively open room for wider penetration in the external market. The international market presents great potential for the company since it would assist in expanding production facilities for the company which would effectively help in maximizing the company profitability. One of the challenges facing this company is the adoption of flexible strategies that can be adopted fast and effectively.
The company should hence work towards developing working solutions that would help develop strategies that would address this weakness. My Recommendations: GE is a global company. The achievements made by the company over the last couple of decades show the firms commitment to achieving global presence in all corners of the world. Since the company has a wide capital base, it has potentials to reach a wider market than it has currently achieved It is recommended here that; The company should invest in high level business surveys in upcoming markets to expand its market base.
The company should engage local professionals in their targeted regions who would help actualize the real customer needs in such markets. The company should adopt up to date technology to help fast track its services and product logistics in its wide markets. This calls for adequate training for employees on ways and modalities with which new technology should be used. Such technology could be in the area of communication, international money transfer, shipping and logistics and effective diplomacy necessary to maintain budding foreign relations.
Strategic development direction ( ansoffs’ matrix) MARKET| | PORODUCT/ SERVICE| | | PRESENT| NEW| | PRESENT| CORE BUSINESSFor over 60 years, GE has successfully innovated in its core businesses, such as aircraft engines, turbines, and diagnostic imaging healthcare equipment. undergirding this traditional innovation strength is deep domain expertise in materials science, manufacturing processes, devices, components,sub systems, and engineering tools, along with experience in applications and supply chain.
New technologies in core businesses take, on average, from five to ten years to develop. An example is GE’s strategy in its core aviation business, to develop lower-weight, higher-temperature materials for jet engines. | Product DevelopmentCompetitive advantage in technology is based on robust investment, an innovative team and ability to create a low-cost position. In 2010, GE was spend about 5% of their industrial revenue on R&D. they have filed 20,000 patents this decade. They have nearly 40,000 engineers and scientists around the world.
” With the core strengths in infrastructure, good partnerships with leading companies and deep relationship with emerging market governments, GE can grow their business to achieve their strategic goals. They can make a difference by using their innovation to produce more and more great products to resolve problems in energy, health care, transportation, water, aviation sectors. | | NEW| Market Development | Diversification GE had used the Lateral Diversification Strategy or Conglomerate Diversification Strategy as its growth strategy.
By consistently increasing in performance objectives beyond past levels of performance, GE has been able to raise its dividends consistently for the past 32 years and has displayed its focus on growth. GE has taken advantage of Globalization trends and has penetrated into the emerging market aggressive. It has successfully continued to improve the bottom line. It has been the only original member of Dow component, but lately GE has been struggling with managing a number of its business unit’s profitability.
GE try to leverage economy of scope, their branding strength and sometimes their size market capitalization to penetrate new markets globally, manufacture and service new products. Success in Lateral Diversification Strategy depends on capital allocation. The process that allocates capital so as to maximize the return on that capital is an indicator that the company is successfully implementing the Lateral Diversification Strategy. | My Recommendation I feel that because of GE’s diversification and past trends, it will continue to grow at a steady rate, and in the near future, GE’s stock price should stay between $32.
50 and $37. 40. Given this information. Since the company has a wide capital base, it has potentials to reach a wider market. The company should invest in high level business surveys in upcoming markets to expand its market base.. The company should engage local professionals in their targeted regions who would help actualize the real customer needs in such markets.. The company should adopt up to date technology to help fast track its services and product logistics in its wide markets. This calls for adequate training for employees on ways and modalities with which new technology should be used.
Such technology could be in the area of communication, international money transfer, shipping and logistics and effective diplomacy necessary to maintain budding for eignrelations. The GE- McKinseys’ nine-box matrix offers a systematic approach for the decentralized corporation to determine where best to invest its cash. Rather than rely on each business unit’s projections of its future prospects, the company can judge a unit by two factors that will determine whether it’s going to do well in the future: the attractiveness of the relevant industry and the unit’s competitive strength within that industry.
According to McKinsey article on Enduring Ideas, placement of business units within the matrix provides an analytic map for managing them. With units above the diagonal, a company may pursue strategies of investment and growth; those along the diagonal may be candidates for selective investment; those below the diagonal might be best sold, liquidated, or run purely for cash. Sorting units into these three categories is an essential starting point for the analysis, but judgment is required to weigh the trade-offs involved.
For example, a strong unit in a weak industry is in a very different situation than a weak unit in a highly attractive industry. Using this matrix, GE has been successful in allocating its resource in an attractive industry where it can leverage its business unit’s competitive strength. It has divested and continues to divest from industries that are less attractive and where it does not have any competitive advantages. E. g. GE has divested from manufacturing TVs and currently looking to get out of consumer lending business.
Although this matrix enables the company to correctly allocate capital it does not prevent GE or any other company is from failing to understand the ‘real’ attractiveness of the industry. Past few years, GE has been wrong (along with all banking and finance companies) in categorizing finance as an attractive industry and GE capital has been responsible for more than 50% of revenue and income growth. The nine-box matrix does not prevent a company from differentiating a bubble from a real growth story.
That has been the problem with GE share price decline lately. Although GE is in the middle of this new global turmoil, I think they will emerge out successfully in the long run. They can continue to successfully use nine-box matrix to allocate resource, but personally I believe that they will also need to invest in a new process (or processes) to identify the real ‘attractiveness’ of a sector and not get carried away by hype like in the past.