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Strategic Management of General Electric


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Strategic Management of General Electric

  2. 2. INTRODUCTION General Electric Company or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States. The history of General Electric Company is a significant part of the history of technology in the United States. General Electric (GE) has evolved from Thomas Edisons home laboratory into one of the largest companies in the world, following the evolution of electrical technology from the simplest early applications into the high-tech wizardry of the early 21st century.
  3. 3. ….. The company has also evolved into a conglomerate, with an increasing shift from technology to services, and with 11 main operating units: GE Advanced Materials GE Consumer & Industrial GE Energy GE Equipment Services, GE Healthcare GE Infrastructure, GE Transportation, NBC Universal (80 percent owned by GE), GE Commercial Finance GE Consumer Finance; GE Insurance
  4. 4. ….. The staggering size of General Electric, which ranked fifth in the Fortune 500 in 2003, became even more evident through the revelation that each of the companys 11 operating units, if listed separately, would qualify as a Fortune 500 company. GE operates in more than 100 countries worldwide and generates approximately 45 percent of its revenues outside the United States. Over the course of its 110-plus years of innovation, General Electric has amassed more than 67,500 patents, and the firms scientists have been awarded two Nobel Prizes and numerous other honors.
  5. 5. CORPORATE RECOGNITION ANDRANKINGS In 2011, Fortune ranked GE the 6th largest firm in the U.S., as well as the 14th most profitable. Other rankings for 2011 include the following: #7 company for leaders (Fortune) #5 best global brand (Interbrand) #82 green company (Newsweek) #13 most admired company (Fortune) #19 most innovative company (Fast Company). For 2010, GEs brand was valued at $42.8 billion.
  6. 6. JACK WELCH Mr. Welch served as Chairman and CEO of GE from 1981-2001. When Jack Welch took over GE in 1981 and became the youngest CEO in GE’s history. Welch was a strategic thinker, business teacher, corporate icon and management theorist. As CEO of GE, Mr. Welchs management skills became almost legendary. He had little time for bureaucracy and archaic business ways. Managers were given free reign as long as they followed the GE ethic of constant change and striving to do better. During his 20 years of leadership in this position, Welch increased the value of the company from $13 billion
  7. 7. Vision and Mission ofGE
  8. 8. Vision‘We bring good things to life’
  9. 9. Mission"PassionateCuriousResourcefulAccountableTeamworkCommittedOpenEnergizingAlways With Unyielding Integrity"
  10. 10. What we incur? They Are a Company to Believe In. Imagine. Build. Solve. Lead.
  11. 11. Transnational index
  12. 12. Why did GE Intrnationalize ? The Enron collapse > raised questions on american companies corporate governance and corporate finance The 2001 terror attacks : uncertain environment > GE energy sales fall > fall in the demand of aerospace products in the U.S > either they cancelled their orders of gas turbines or placed very few new orders . > GE’s insurance subsidiary, Employers Reinsurance Corporation, was one of the insurers of the World Trade Center which had to pay out on liability claims. > GE Capital had financed aircraft Falling sales in the GE energy and GE Capital ( profit margins stood at 9.6%)it had Immlet wanted to invest more in GE healthcare ( margin : 20% ) and thus bought Amersham International, the British medical research and bioscience company, was part of the strategy to strengthen research and innovation.
  13. 13.  The ecenomic weekness in europe 1989-95 >$17.5 billion> to purchase 50 companies. In 1995 the value of peso (mexican currency)collapsed > ecenomic uncertainity > bought companies in latin america. in 2004, GE moved the head office of its health care business from the United States to London, the home of Amersham, a company GE had just bought. Executives at GE Health Care like London because it allows easier flights to anywhere in the world. Internationalization of R&D center : shanghai and bangalore > because MRI scanners manufacturing in U.S cost $ 1.5 million and in china cost $0.5 million. Global competitors like seimen of germany and philips of netherlands were internationalizing their R&D centres to tap the broad range of scientific expertize of the mid western and eastern countries
  14. 14. GE ENERGY IN CHINA 1997 : Asian Currency Crisis > reduced FDIs in china WTO membership in 2001 2008 Bejieng Olympic> high demand for infrastructure investments : electricity lighting water WORLDS 2ND LARGEST EMMITTOR OF GREENHOUSE IN 2007. > inviting green technology solutions : GE Energy’s competative advantage > double the energy it gets from natural gas > Green olympic Rural to Urban movement is MAXIMUM > fueling infrastruscture developent > greater electricity.
  15. 15. GE HARBIN JOINT VENTURE wind turbine market : fastest growing in the world. 13.8 GW of new installations compared to out of 38.3 GW installations globally > expected growth of 500 % in next decade Strong Govt support Chinas electricity demand : 12% growth per year High Cost of shipping wind turbines > a windturbine can weigh 400 tons- 800 assembled parts > fuel and port costs have risen by 15 % in last 3 years. Job creation in the U.S
  16. 16. CHALLENGES Corruption in china > rule of law> change in legislation policies. > INVEST IN US CHINA LEGAL COPPERATION FUND. Getting govt support > 335 products for olympic games accounting for $500m revenue. Intellectual Property rights > GE is known for innvative products > not immitable nor perfectly substituitable
  17. 17. CO-OPERATION STRATEGY Meaning. MERGERS AND ACQUISITIONS. Merger and acquisition is often known to be a single terminology defined as a process of combining two or more companies together.1. Backward vertical integration.
  18. 18. ABOUT GE ENERGY Division of GE, headquartered in Atlanta, Georgia, United States. Formation – Reorganization. Revenue – $37.1 bn. Employees – 82,000. Divisions1. GE energy management.2. GE oil and gas.3. GE power and water. ABOUT CONVERTEAM• electrical engineering company based in France.• Key components1. Motors and generators.2. Variable speed drives.3. Automation and process controls.• Employees – 5,300.
  19. 19. THE DEAL When – March, 2011. What – GE Energy’s acquisition of Converteam. How much – 90% stake for $3.2bn. Parties involved – Senior management , Barclays equity finance and LBO France.
  20. 20. WHY ? FACTORS LEADING TO THE DEAL  Growth of converteam – 36%  Market for converteam’s products - $30 bn in 2010.  Demand for steady power in Brazil and China.  Diversification from nuclear power to renewable energy.
  21. 21. ADVANTAGES TO GE Adds products to GE portfolio. Enhances ability in emerging economies and key growth economies. Earnings boost – $250 million annually. Cost advantage - $239 million EBITDA. Expansion into marine and mining industries. Edge over competitors – ABB ltd. Of Switzerland and Siemens of Germany.
  22. 22. Retrenchment StrategyCorporate Level Strategies Retrenchment Strategy DivestmentGE Plastics divestment to Saudi Basic Industries Corporation (SA GE Plastics
  23. 23. About GE Plastic About SABIC Global supplier of  Largest public co. in plastic resins Middle East Major player in PC  Largest petrochemical market - LEXAN co. by market value Integrated both ways –  Composed of six SBU’s forward & backward  4th largest polymer Plastics for automobile producer industry  Employs about 19,000 Spans over 20 countries people Employs about 10,300 people
  24. 24. The DealGE Plastics’ will sell its Plastics’ division to Saudi Arabia’s SABIC in a $11.6 billion cash deal, including $8.7 billion of its liabilities.
  25. 25. Reasons for GE to sell PlasticDivision High Cost of Raw Material Reducing Sales & Profit Margins Source : GE
  26. 26. Reasons for GE to sell PlasticDivision High Competition Source : Frost & Sullivan
  27. 27. Reasons for GE to sell PlasticDivision Environmental Obligation Changing Business Line GE Healthcare GE Aviation GE Energy
  28. 28. Advantages for GE High Price Received Buy Back Shares Acquisitions
  29. 29. Advantages for GE Saudi Arabia Market & Right Buyer GE Healthcare Corporate Image
  30. 30. Disadvantages for GE High demand for Engineering Plastics High Profits
  31. 31. Disadvantages for GE Glorious Past To Conclude
  32. 32. SWOT Analysis A SWOT analysis is typically represented by a 4-box model that lists the Strengths, Weaknesses, Opportunities, and Threats in the following order:
  33. 33. STRENGTH GE is the market leader Diversified business portfolio Strong research & development (R&D) A number of acquisitions made in the previous few years. Strong management & culture in terms of people, systems, technology and measures
  34. 34. WEAKNESS GE is the 4th largest producer of air and water pollution. Weak revenue growth of industrial segment. Underperforming in Asian markets. GE energy segment is under performing. Generates more than half of its profits from GE capital services, hard hit by the
  35. 35. OPPORTUNITY Focus on Corporate Social Responsibility Invasion of China market Aviation industry growth Increasing global exploration and production Servicing and regeneration of commercial airplanes around the world customer services initiative
  36. 36. THREAT Senior management – weak performance by GE has put doubts on Jeff Immelts ability to be the next Jack Welch. Currency fluctuations. Intense competition in the industry. Recession in majority companies. Exposure to financial markets. Government regulation on environmental concerns World economic slowdown in the US and Eurozone, two of the most important markets
  37. 37. Conclusion GE consists of diversified technology and is a giant is the field of financial services. Amidst a number of strategies undertaken, co- operation and retrenchment stand out. GE excels in playing on strengths and capitalizing opportunities. Over a decade, a slight ignorance towards the weaknesses has been observed. GE has a set of well planned strategies which lands them amongst one of the most successful global firms.