PPT on growth of GEMS

1. General Electric Medical
Systems, 2002

2. Healthcare systems across the globe
• US- Funding comes from government (45%),
private insurance (33%), out of pocket (17%) and
the rest from private.
• Japan has universal health coverage, with around
27% population above 65+
• France has universal health insurance, with 75%
being government sponsored.
• India has hardly any health insurance with 75%
out of pocket expenses
• 50% urban Chinese has health insurance, with
hospitals being government run and underpriced
• Trends in Healthcare

3. The industry
• Market share-50%, Siemens, Philips & Toshiba-
30% (2002)
• Siemens- $4bn, with 50% of its sales from USA,20%
Germany (leader). Profit margin is 10%. Equipment
-3% & Services- 15%
• Philips- $5bn, with 50% of its sales from USA,30%
Europe, 15% Asia. Profit margin is 3%. Equipment
-3% & Services- 10%
• Toshiba- $2.3bn, second largest player in Asia and
strong in CT and ultrasound, 5% margin.

4. General Electric Medical Systems
(GEMS)
• $8bn dollar division within GE, with operating margin
at 18% and growing at around 16% annually, mkt share
is 50%
• Leadership (Exhibit 3 & 4)
• Immelt bought an initiative called GPC.
• Manufacturing was handled by COE.
• 7to 9 % of sales was spent on R&D
• Sales and marketing were local operation
• 60% of revenue came from equipment sales, and 40%
from services.
• Used equipment market was at $1bn with 15% growth
with GEMS share of around 30%.
• China imbroglio!!!!

5. International Structural Stages
Model
Foreign Sales as Percentage of Total Sales
Foreign
Product
Diversity
Global Matrix
Worldwide
Product
Division
Area Division
International
Division

6. International Product Life Cycle
Raymond Vernon

7. Multinational Organization
Decentralized federation
Key assets, responsibilities
and decisions decentralized
Informal HQ-sub relationships
overlaid with financial control
Management regards
overseas operation as a
portfolio of independent
business
Characteristics of
mainly European
companies that
ventured aboard
pre World war

8. International Organization
Assets, resources, decisions
decentralized but controlled
from HQ
Formal Management
planning and control for
tighter HQ-Sub Linkage
Management regards
overseas operation as a
appendages to a central
domestic corporation
Characteristics of
mainly US
companies that
ventured aboard
post World war

9. Global Organization Model
Centralized Hub
Strategic Assets, resources,
responsibilities and decisions
centralized
Tight Control of Decisions,
resources & information
Management treats overseas
operations as delivery
pipelines to a unified global
market
Characteristics of
mainly Japanese
companies that
ventured aboard
during 1980s

10. Integration-Responsiveness Grid
Low High
Integration
Low High
Responsiveness
Global
Company

11. Organizational Characteristics of
the Transnational
Organizational
Character tics
Multinational Global International Transnational
Assets &
capabilities
Decentralized
and self
sufficient
Central &
Globally scaled
Centralized and
HQ centered
Dispersed,
interdependent
and specialized
Role of
subsidiaries
Sensing and
exploiting
opportunities
Implementing
parent
company
strategies
Adapting
parent
company
competencies
Differentiated
contributions
by national
units
worldwide
Diffusion of
knowledge
Developed &
retained in
subsidiary
Developed and
retained at the
centre
Developed at
center and
transferred
Knowledge
jointly
developed and
shared
worldwide

12. The Pharmaceutical Industry Value
Curve

13. Stan Shih’s smiling curve

14. Learnings from the case
• How do MNC create value?
Adapting to the
context
Changing the
context
• Can MNC survive without creating value?