GE Industry Analysis
Descripción: porter's model, competitor's analysis of gd and industry brief too...
Industry Analysis The Diversified Industrials Industry consists of many large companies that operate in a number of diversified fields. Many companies competing in this industry are constantly looking for new acquisitions that will be profitable in the long run. Synergy is important to many competitors in deciding which additions to the company will be the most beneficial. Today's successful companies focus on their own strengths and tend to have very focused, capable management teams that are knowledgeable in distributing available cash throughout the organization. Companies in this industry are generally large in scale and have overlapping segments with each other. GE, which accounts for over one-third of the entire market capitalization in the industry, is the largest. On average, the Diversified Industrials industry has experienced steady growth since early 2003.
PEST Analysis of General Electric Company GE Analysis a) Political As a multinational company, General Electric has to deal with political systems of different nations. In spite of some of the countries presenting favorable environment for business survival and growth, others present difficult conditions. Tax systems and regulations also differ across countries and so does the level of government intervention in business activity. For example, in United States, the Internal Revenue Authority requires companies to submit tax returns annually on April 15 (Dibb & Lyndon, 2004). Government intervention is minimal and the business environment is much favorable. Political stability can also be said to be reasonable so that business survival is highly probable. These conditions may not apply in other countries such as China and Singapore where government control over businesses is high. b)
Fluctuations in interest rates, exchange rates and money value greatly affect activities and operations of General Electric. Factors such as deflation and inflation as well as government spending in different countries in which General Electric has ventured often influence business
productivity and profitability. The economic impacts caused by the current economic crisis are being felt all over the world. General Electric has recorded decreased sales mostly due to lower lending rates by banks. In addition to that, prices of inputs have also risen considerably. c) Social-Cultural Norms, culture, religion and social set-ups often determine how a business should conduct itself in a particular country or environment. In the different countries which General Electric has ventured into, the company is faced by different social-cultural challenges which influence its corporate culture to a very large extent. The culture in a particular country determines the working hours, employment policies, procedures for appointing managers and the type of goods to be produced. Similar to other multinational companies, General Electric has to contend with such issues and deal with them effectively. d)
Technology in the modern world is advancing at an enormous pace. Innovative products are always being introduced using more advanced technology each day. Older technology is therefore getting outdated at a very high rate across all sectors in the economy. Aimed at outdoing competitors, many companies have turned to innovation, research and development which have brought about improved levels of technology. The rate of technology advancement globally varies with each country that General Electric has invested in as they vary in terms of resources available. Among the countries with the highest rate of technology advancement are United States and Japan which General Electric has ventured into (General Electric, 2009).
Conclusion As a result of multinational companies having to deal with different sets of political, economic, social-cultural and technological aspects, designing a PEST analysis exclusive to General Electric was almost impractical. It is however notable that there are some factors that are universal among countries. Technology constitutes one of these factors and a closer look at the PEST analysis reveals that 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. Conducting a PEST analysis aids a company in understanding the business environment better so as to facilitate the better planning and resource allocation to maintain high productivity and profitability.
Porter’s 5 Forces
Five Forces Model • Current
General electric is one of the world's largest and most diversified companies. With eleven different segments of the company, ranging from General Electrics' main competitor on a conglomerate level consists of Siemens. Siemens AG (SI) is a leading diversified company offering products and services in information and communications, automation and control, power, transportation, medical, water and wastewater treatment, lighting, financing, real estate, and home appliances. Siemens' is one of the largest markets in the world, with thirteen worldwide businesses and annual sales of $97
billion. Siemens companies in the U.S. employ approximately 70,000 people and 430,000 people globally. Siemens’ most closely mirrors General Electric’s size and structure, making it their largest competitor. Breaking GE down into individual segments reveals a more accurate depiction of the company’s competition. 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 businesses. GE’s Consumer Finance and Commercial Finance are GE’s most lucrative businesses producing 39 billion dollars in revenue for 2004. These financial institutes offer a wide array of services and products such as commercial loans, home loans, bank cards, auto loans, leasing and financing inventory, debt consolidation loans, and home equity loans. Citigroup, a GE competitor, provides financial services for more than 200 million people in over 100 countries with revenues of over 66 billion. Citigroup competes with General Electric’s financial service business segment with their four business groups in the financial services. These segments consist of Global Consumer Group, Global Corporate & Investment Banking Group, Global Investment Management, and Global Wealth Management. The competition in this area is high between GE and Citigroup. GE NBC Universal is one of the worlds leading media and entertainment companies owning a television network, world-renowned theme parks, motion picture company and other various media outlets. While GE NBC produces a lower revenue than its competitors, such as Disney and Time Warner Inc., GE maintains a relatively competitive profit. Another large competitor GE faces is Koninklijke Philips Electronics competing on more of a technological battlefield. Phillips is a global company that generates more than 39 billion in sales and employees 161,000 people in over 60 countries. Phillips is one of General Electric’s smaller competitors though Philips Medical Systems is increasingly creating more competition in that business segment of General Electric. General electrics main advantage is the fact that they are so diversified. The competition is steep in each of their individual companies, but there are few companies that can compete with General Electric as a whole.
The threat of new entrants for General Electric is small due to the vast size of the company. Many of GE's companies require a great deal of brand recognition to stay successful. The scale of economy that GE operates in places a hardship on new entrants to any of the three major segments of GE. The financial services industry would require an extremely large amount of start up cost and capital making it difficult for small companies to compete. The finance industry also hinges on an established and trusted name for success. The threat of new entrants to the finance industry competing on the scale that GE competes in is very small. GE NBC also 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. New entrants must also face the legal barriers licensing regulations created by the government to limit entry into the broadcast industry. Not only must new entrants have a mass amount of capital and legal issues but they must also compete with the NBC name. 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. Also, new companies must take into realized the channels of distribution for the production of technologies are difficult to achieve without an already established relationship. The threat of new entrants in all aspects of GE is low due to the repeating trends of the market requirements that GE employs. People already have a solid relationship with the brand name GE, and it would be very expensive for a new company to try and compete with it. It would require a great deal of capital in advertising to get a new companies brand name out to the public. All of GE's companies are in very large-scale economies, which are difficult to break into. • Threat
of Substitute Products
Every company has to worry about the threat of new products being created which would make their product obsolete. GE is no exception. Just about every product that General Electric creates has the 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. General electrics 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 name.
• Bargaining Power of Buyers Due to the size of General electric, they have considerable bargaining power for most of their products. 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. - 15 -
Power of Suppliers
The bargaining power of suppliers is relatively low for General Electrics 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. General Electric is also very flexible in who they choose to be their suppliers. This gives them the advantage of having suppliers fight for their business.
Competitor’s Analysis Competitors
The nearest competitors of General Electric Company (NYSE:GE) are Siemens AG (NYSE:SI), DuPont, Honeywell International Inc. (NYSE:HON) and Danaher Corporation (NYSE:DHR). The General Electric is a huge company compared to any of these with a market capitalization of $222 billion. The market capitalization of Siemens is $95.1billion; DuPont has $43.1 billion worth of market capitalization. General Electric has broadened its competitive scope in the global market. The company has done this through its diversified operations and product innovation. Some promising progress has been made by the company in terms of revenue growth and has also expanded its share in the global market by targeting new profitable opportunities in the emerging market. The factors, which by and large contributed to the recent success of GE, are a sequence of smart investment decisions, a series of fresh technological innovations and the signing of new profitable contracts. General Electric has recently invented the Serial FPDP, a state-of-the-art high-speed data transfer module, which provides a brilliant total bandwidth of 1.4 Gbps. Both commercial, as well as military applications of this ground-breaking technology are marvelous and should allow the business to enjoy greater revenues and higher cash flows. Siemens AG (NYSE:SI) has been a close rival of GE. The company has performed exceptionally well over the previous years. It has also given steady returns to the investors. Siemens AG Capital Market Day was organized in London, in which acknowledged financial analysts talked about the company’s impressive performance in the first fiscal quarter of 2012. The future plans of the company were also discussed in detail, most importantly regarding the innovations in the healthcare sector. Siemens looks forward to devise wide ranging plans and strategies to enhance its share in the global market. In the last year alone, Siemens has recorded an impressive income growth of a 67% while sales and revenues have also grown significantly.
References Dibb, S. & Lyndon, S. (2004). Marketing briefs: A revision and study guide. Oxford: ButterworthHeinemann. General Electric, (2009). Our company. Retrieved July 6, 2009 from http://www.ge.com