Corporate & Business Strategy: GE

Akash Jauhari IMT Ghaziabad

Raghav Agarwal

Akash Jauhari Alok Mishra

Karan Verma Lokesh Chaudhary

Varun Sehgal

Corporate & Business Strategy For GE


Key Findings

• Major Spinoff of business portfolio required.• Geographic redistribution of focus and resources

required.

• It will be more viable to introduce with current business in emerging markets than getting into a break through industry altogether.

• Internal Strategies should not conflict with – shareholder wealth maximization principle in long run.

2006US(54%)

Europe(21%)

Pacific Basin(12%)

Americas(8%)

Middle East & Africa(4%)

Others(2%)


Recommendations

• Divest from Insurance Business

• Divest from Consumer & Industrial Business

• Key focus areas – Energy, Healthcare and Consumer Finance Geographic Redistribution : China, India, Brazil, South Africa

• Invest in Alternative Energy Sector (Solar & Wind) in India

• Invest in Healthcare Sector (Medical Equipment) in China

• M&A opportunities with financial verticals of crisis hit companies in United States like Merrill Lynch.


Classification of Businesses - BCG Matrix

Relative Market Share

MarketGrowth

InsuranceConsumer & Industrial

Plastics

EnergyOil & Gas

Healthcare

Aviation, Transportation,

Finance, GE Money,

NBC

Energy Financial Services,Aviation Financial Services,

IT Solution, Real Estate,Enterprise Solution


Divestment• Divest from Insurance Business - Expected Income through the divestment

to be around $10 billion

• Divest from Consumer & Industrial Business - Expected Income through the divestment to be around $2 billion

(The above businesses are a drag for GE, affecting its cash flows and profits. GE stock is under valued and among poor performers in-spite of solid foundations.)

Profit (million $) 2005 2006 2007Insurance 159 57 145

Principal Pension Plans (329) (877) (755)Unabsorbed Overhead (426) (266) (437)

(Million $) 2005 2006 2007

Revenue 13606 13790 13332

Profit 764 981 783

Return 5.6% 7.1% 5.8%


Competitive Rivalry•Immense Opportunities•Few Indian Players – Titan, Mosarbaer, HVV•Huge Investment & Tie-up with Global players required

Bargaining Power of Suppliers• Low due to supply-demand Mismatch• Low prices of Polysilicon in Global Mkt.•Scope in Backward Integration

Bargaining Power of Customers•Limited Variation in Prices•PPA by Govt. of India•No role of competition on price mechanism

Threat of New Entrants• Sector untouched in India• Gaining first mover advantage•Huge potential with supply less than demand

Threat of substitute products• No real substitute•Govt. protected sector• Continuous Innovation & breakthrough Technology required

Enter Alternative Energy Sector in India: Porter’s 5 Forces


Alternative Energy Sector in India: Porter’s 5 Forces

Forecast:• Thin film to be $ 1380 million industry by 2020.• Total industry size to exceed $ 11300 million by 2022

(Garter Sector Research).

Conclusion:• Competition Intensity: Low• Profitability: High• Core Competency: Need to develop• Strategy: M&A, Collaborations and Tie-Ups


Enter Medical Equipment Industry in China

GE Strength:• GE Healthcare is the market leader with $17 billion revenue and

more than 46,000 employees in over 100 countries .

Market Size:• China is World’s 4th largest & fastest growing healthcare market • Healthcare expenditure to be $ 220 billion for 2007 (only 6.5% vs. 15.6% for US) • Annual Revenues around $20billion in 2009 for medical equipment • Strong growth in tier II cities - increasing purchasing power • Large (1.2 billion) and ageing population • People moving from conventional to advanced medical sciences


Medical Equipment Industry in China

Government Policies:• NRCMCS started in 2005 • Govt Spending on healthcare to be $ 47 billion annually after 2005

• Focus on advanced technology medical equipments

Key Success Factors:• 85-90% of advanced equipments are imported in china (as of 2004-05) • Company, if, sets up a manufacturing plant in China, will get major market

share & high margins

Competitors:• Abott Labs, Backman Coulter, Philips

Product Range:• Diagnostic, Hematology Analyser, Biochemistry Analyser, Ultrasonic Imaging


Strategic Initiatives within Business

Core Competency

Technology

Commercial

Business Process

• Quality (Six-Sigma)• Green Technology

• Customer Centric• Leadership

• Innovation• Performance Recognition


Quality: Six Sigma

Six Sigma

Delighting Customer• Performance, Reliability

Process• Adding Value to Business wrt Customer

Employee• Training in DFSS, Green Belt, Black Belt

Pros Cons

Cost Saving Need for Infrastructure

Value Growth Continuously Monitoring & Updating Business Operations

Higher ROI Conflict with TQM

Customer Satisfaction NA for Open Ended Projects


Ecomagination

Investment• GE plans to invest $1.5 billion by 2009 in Ecomagination R&D

Revenues• By 2009, expected revenues from Ecomagination projects to increase by

more than 5% to $18 billion

Greenhouse Gas Emission (GGE)• Between 2002-07, GE cut GGE by over 20% and increased energy efficiency

by over 30%

Water Consumption• It reduced by 30% between 2003-07

Eg: Flexefficiency 50 - A 510 MW power plant based on Natural gas with a efficiency of 61% in France


Corporate Structure in 2002


Corporate Structure in 2007


Legacy of GE

Corporate & Business Strategy: GE

Business

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