LE 07: General Electric

GENERAL ELECTRIC

1.     INTRODUCTION

 

General Electric Company, or GE (NYSE: GE), is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States. The company operates through four segments: Energy, Technology Infrastructure, Capital Finance and Consumer & Industrial. In 2011, GE ranked among the Fortune 500 as the 6th largest firm in the U.S. by gross revenue, as well as the 14th most profitable. However, the company is currently listed the 3rd largest in the world among the Forbes Global 2000, further metrics being taken into account.

2.     HISTORY

By 1890, Thomas Alva Edison had brought together several of his business interests under one corporation to form Edison General Electric. At about the same time, Thomson-Houston Electric Company, under the leadership of Charles Coffin, gained access to a number of key patents through the acquisition of a number of competitors. Subsequently, General Electric was formed by the 1892 merger of Edison General Electric of Schenectady, New York and Thomson-Houston Electric Company of Lynn, Massachusetts and both plants remain in operation under the GE banner to this day. The company was incorporated in New York, with the Schenectady plant as headquarters for many years thereafter. Around the same time, General Electric's Canadian counterpart, Canadian General Electric, was formed. In 1896, General Electric was one of the original 12 companies listed on the newly formed Dow Jones Industrial Average and still remains after 116 years, the only one remaining on the Dow index. However, GE has not been on the DOW continuously. 23 Ton diesel electric locomotive made at the General Electric Corp. plant in Schenectady, New York.

In 1911 the National Electric Lamp Association (NELA) was absorbed into General Electric's existing lighting business. GE then established its lighting division headquarters at Nela Park in East Cleveland, Ohio. Nela Park is still the headquarters for GE's lighting business.

GE's long history of working with turbines in the power-generation field gave them the engineering know-how to move into the new field of aircraft turbo superchargers. Led by Sanford Alexander Moss, GE introduced the first superchargers during World War I, and continued to develop them during the Interwar period.

Superchargers became indispensable in the years immediately prior to World War II, and GE was the world leader in exhaust-driven supercharging when the war started. This experience, in turn, made GE a natural selection to develop the Whittle W.1 jet engine that was demonstrated in the United States in 1941. Although their early work with Whittle's designs was later handed to Allison Engine Company, GE Aviation emerged as one of the world's largest engine manufacturers, second only to the well-founded and older British company, Rolls-Royce plc, which led the way in the design and manufacture of innovative, reliable, efficient, high-performance, heavy-duty jet engines.

In 2002, GE acquired the wind power assets of Enron during its bankruptcy proceedings. Enron Wind was the only surviving U.S. manufacturer of large wind turbines at the time, and GE increased engineering and supplies for the Wind Division and doubled the annual sales to $1.2 billion in 2003. It acquired Scan Wind in 2009.Some consumers boycotted GE light bulbs, refrigerators and other products in the 1980s and 1990s to protest GE’s role in nuclear weapons production.

3.     AQUISITIONS

·         In 2002 Francisco Partners and Norwest Venture Partners acquired a division of GE called GE Information Systems (GEIS). The new company, named GXS, is based in Gaithersburg, Maryland. GXS is a leading provider of B2B e-Commerce solutions. GE maintains a minority ownership position in GXS.

·         Also in 2002, GE Wind Energy was formed when GE bought the wind turbine manufacturing assets of Enron Wind after the Enron scandals.

·         In 2004 GE bought 80% of Universal Pictures from Vivendi. Vivendi bought 20% of NBC forming the company NBC Universal. GE then owned 80% of NBC Universal and Vivendi owned 20%. As of January 28, 2011 GE owns 49% and Comcast 51%.

·         In 2004 GE completed the spin-off of most of its mortgage and life insurance assets into an independent company, Genworth Financial, based in Richmond, Virginia.

·         Genpact formerly known as GE Capital International Services (GECIS) was established by GE in late 1997 as its captive India based BPO. GE sold 60% stake in Genpact to General Atlantic and Oak Hill Capital Partners in 2005 and hived off Genpact into an independent business. GE is still a major client to Genpact getting its services in customer service, finance, information technology and analytics.

·         GE Plastics was sold in 2007 to SABIC.

·         In May 2007, GE acquired Smiths Aerospace for $4.8 billion.

·        In May 2008, GE announced it was exploring options for divesting the bulk of its Consumer and Industrial business

·         On December 3, 2009, it was announced that NBCUniversal will become a joint venture between GE and cable television operator Comcast. The cable giant will hold a controlling interest in the company, while GE retains a 49% stake and will buy out shares currently owned by Vivendi.

·         Vivendi will sell its 20% stake in NBCUniversal to GE for US$5.8 billion. Vivendi will sell 7.66% of NBCUniversal to GE for US$2 billion if the GE/Comcast deal is not completed by September 2010 and then sell the remaining 12.34% stake of NBCUniversal to GE for US$3.8 billion when the deal is completed or to the public via an IPO if the deal is not completed.

 

·         On March 1, 2010, General Electric (GE) announced that the company is planning to sell its 20.85% stake in Turkey-based Garanti Bank.

·         In August 2010, GE Healthcare signed a strategic partnership to bring cardiovascular Computed Tomography (CT) technology from start-up Arineta Ltd. of Israel to the hospital market.

·         In October 2010, General Electric acquired gas engines manufacture Dresser Inc. for a $3 billion deal and also bought a $1.6 billion portfolio of retail credit cards from Citigroup Inc. This is the first major deal since the start of the financial crisis.

·         On October 14, 2010, GE announced acquisition of data migration & SCADA simulation specialists Opal Software.

·         December 2010: For the second times of this year (after Dresser acquisition), General Electric Co. buy oil sector company British Wellstream Holding Plc. an oil drilling pipe maker for 800 million pounds ($1.3 billion).

·         February 2011: The company has agreed to buy the well-support division of John Wood Group Plc for about $2.8 billion. It is another aggressive moves recently of GE Oil & Gas made GE's acquisition was the largest of oil-service unit world wide in 2010.

·         March 2011: GE announced it has completed the acquisition of privately held Lineage Power Holdings, Inc., from The Gores Group, LLC. 

·         GE Capital sold its $2 billion dollar Mexican assets to Santander for $162 million and exit the business in Mexico. Santander will additionally assume the portfolio debts of GE Capital in the country. The transaction will be finished at first half of 2011. GE Capital will focus in the core business and will shed its non-core assets.In June 2012,CEO and President of GE said that the company would invest 300 crores to accelerate its businesses in Karnataka.

4) Vision Statement

       

              “We bring good things to life”

             

               5) Mission Statement

 

General Electric mission statement from their core values:”passionate, curious, resourceful, accountable, teamwork, committed, open, energizing, always with unyielding integrity.”

6) Product and Services

      GE's divisions include GE Capital, GE Energy, GE Technology Infrastructure,and GE Home & Business Solutions

                   Through these businesses, GE participates in a wide variety of markets including the generation, transmission and distribution of electricity (e.g. nuclear, gas and solar), lighting, industrial automation, medical imaging equipment, motors, railway locomotives, aircraft jet engines, and aviation services. It co-owns NBCUniversal with Comcast. Through GE Commercial Finance, GE Consumer Finance, GE Equipment Services, and GE Insurance it offers a range of financial services as well. It has a presence in over 100 countries.

a)     GE Capital

GE Capital is the financial services unit of General Electric, one of five major units. Its various divisions include GE Capital Aviation Services, GE Capital Real Estate, GE Energy Financial Services and GE Money.GE Capital provides commercial lending and leasing, as well as a range of financial services for health care, media, communications, entertainment, consumers, real estate and aviation. GE Capital focuses primarily on loans and leases that it underwrites to hold on its own balance sheet rather than on generating fees by originating loans and leases, then selling them to third parties. Most of GE Capital's commercial loans are to small and mid-sized companies, spread across multiple industries and geographies and secured by tangible assets. More than 70% of GE Capital’s loans are under $100 million. GE Capital's consumer lending activities are also diversified by product and geography, and include operations in 55 countries.

b)    GE Energy

GE Energy is a division of General Electric and is headquartered in Atlanta, Georgia, United States. Its revenue is $37.1 billion.It has the following divisions.

c)      GE Technology Infrastructure

GE Technology Infrastructure is a business group of General Electric composed of three GE companies: GE Aviation, GE Healthcare, and GE Transportation. John G. Rice is president and CEO. A company-wide reorganization prompted by staggering financial losses led to the unit's formation in 2008 from companies within GE Infrastructure.

d)   GE Home and Business Solutions

                   GE Home & Business Solutions has three primary sub businesses: GE Appliances, GE Intelligent Platforms, GE Lighting. On 1 August 2007 GE announced the formation of GE Enterprise Solutions, consisting of the various GE Industrial businesses other than GE Consumer & Industrial, as well as GE Power Quality. The company says the new unit will help its "global customers increase their productivity through superior information management and automation solutions." Charlene T. Begley has been named president and CEO of the division.

                 7) GE Culture

                  Operating with Integrity

          GE seeks to lead in workplace and marketplace integrity by respecting the human rights of everyone touched by our business, and by enforcing legal and financial compliance. These commitments are detailed in their integrity policy, The Spirit & The Letter, which every employee supports with a signed pledge. They are further enabled by our ombudsperson process, which encourages any employee to report integrity concerns without fear of reprisal

GE Volunteers

                             GE coordinates volunteer efforts company-wide by keeping a close eye on societal needs and inviting all employees to build stronger communities where we live and work. Our employees volunteer over 1 million hours of community service every year, discovering opportunities through our online Volunteer Portal or in their own neighborhoods. And during Global Community Days, we coordinate our efforts company-wide to address urgent projects around the world.

 

                     Leadership

              GE's Corporate Entry-level Leadership Programs offer recent college graduates prized development opportunities that combine real-world experience with formal classroom study. Through a series of rotating assignments — typically over a period of two years — young professionals receive accelerated professional development, world-class mentors, and global networking that cuts across GE's businesses. Experienced professionals who wish to accelerate their careers find fitting opportunity in Experienced Leadership Programs. The programs position high-potential talent in collaboration with some of the top innovators in their fields, offering intensive on-the-job development in the areas of Corporate Audit, Human Resources and Sales and Marketing.

8) Organizational Chart

                   

9) GE Round the globe

              With its accelerated growth rate and migration of population to urban areas, China is a market of tremendous opportunity for GE - particularly for our infrastructure businesses. GE's "Company to Country" strategy for China means localizing our business to China, building on local capabilities and developing local resources.GE has long been a vital part of the Southeast Asian economies.

                 Today GE is supplying cutting-edge technology to hospitals in Malaysia; helping to build the infrastructure of Indonesia; providing clean energy and water solutions to the Philippines; building aircraft engines in Vietnam; and much more.

                The story of GE in Australia began in 1902 when GE installed an electric motor for raising Sydney's Pyrmont Bridge over the harbour.

                 GE's presence in New Zealand began more recently in 1982. Today, GE is making new and sizable investments in New Zealand, with the recent purchases of AGZ (NZ) Ltd. and the commercial property portfolio of AMP.

                Together, the two countries are home to more than 6,000 employees who serve across four businesses.

10) Awards and Recognition

     In 2011, Fortune ranked GE the 6th largest firm in the U.S., as well as the 14th most profitable. Other rankings for 2012 include  7 company for leaders (Fortune) 5 best global brand (Interbrand) 82 green company (Newsweek) 15 most admired company (Fortune) 19 most innovative company (Fast Company). For 2010, GE's brand was valued at $42.8 billion.CEO Jeffrey Immelt had a set of changes in the presentation of the brand commissioned in 2004, after he took the reins as chairman, to unify the diversified businesses of GE. The changes included a new corporate color palette, small modifications to the GE logo, a new customized font (GE Inspira), and a new slogan, "imagination at work" replacing the longtime slogan "we bring good things to life", composed by David Lucas. The standard requires many headlines to be lowercased and adds visual "white space" to documents and advertising to promote an open and approachable company. The changes were designed by Wolff Olins and are used extensively on GE's marketing, literature and website.

GE tops the 2010 Global 100, ranking 1 in a comprehensive report analyzing corporations which have been most proactive in managing environmental, social and governance issues. With over 20,000 patents filed over the last decade alone, Business Week rank.GE among the world's most inventive companies.Fortune ranks GE among the world's top companies for leaders, recognizing a company-wide commitment to developing leadership talent.

11) Corporate Social Responsibility

GE has said that it will invest $1.4 billion in clean technology research and development in 2008 as part of its Ecomagination initiative. As of October 2008, the scheme had resulted in 70 green products being brought to market, ranging from halogen lamps to biogas engines. In 2007, GE raised the annual revenue target for its Ecomagination initiative from $20 billion in 2010 to $25 billion following positive market response to its new product lines.

In 2010, GE continued to raise its investment by adding $10 billion into Ecomagination over the next five years.GE (General Electric) Energy's renewable energy business has expanded greatly, to keep up with growing U.S. and global demand for clean energy. Since entering the renewable energy industry in 2002, GE has invested more than $850 million in renewable energy technology.

 In August 2008 it acquired Kelman Ltd,a Northern Ireland company specializing in advanced monitoring and diagnostics technologies for transformers used in renewable energy generation, and announced an expansion of its business in Northern Ireland in May 2010.

In 2009, GE's renewable energy initiatives, which include solar power, wind power and GE Jenbacher gas engines using renewable and non-renewable methane-based gases, employ more than 4,900 people globally and have created more than 10,000 supporting jobs. GE Energy and Orion New Zealand Limited (Orion) have announced implementation of the first phase of a GE network management system to help improve power reliability for customers. GE's ENMAC Distribution Management System is the foundation of Orion's initiative. The system of smart grid technologies will significantly improve the network company's ability to manage big network emergencies and help it to restore power faster when outages occur. GE unveiled a 40W replacement Energy Smart LED bulb, to be available late 2010 or early 2011. The company claims that the new LED bulb will provide a 77% energy savings and produce nearly the same light output as a 40W incandescent bulb, while lasting more than 25 times as long.

In May 2005 GE announced the launch of a program called "Ecomagination," intended, in the words of CEO Jeff Immelt "to develop tomorrow's solutions such as solar energy, hybrid locomotives, fuel cells, lower-emission aircraft engines, lighter and stronger durable materials, efficient lighting, and water purification technology”

12) SWOT Analysis

STRENGTHS

Global recognition: General Electric has ventured into the world market thus gaining global recognition for its unique goods and services.  In the year 2009, Forbes magazine ranked GE as the world's largest company.  Hurbert (2007) notes that General Electric's brand is the world's most recognized brand.  This kind of recognition has given it a competitive edge over other companies due to its ability to attract more customers.

Global strength and competitiveness: The Company’s products have been recognized for their quality and the company is known for meeting customer-specific needs (General Electric, 2009).  As a result, it has attracted numerous clients including corporations and government agencies and its competitive position is quite favourable.  GE is the biggest lender in many of the countries where it invests with exception of the United States (Hurbert, 2007).  Its power generation equipment generates a quarter of the world's electricity every day. 

Excellent Management: GE utilizes a unique management style, whereby business operations are divided into business units.  Each business unit plays a distinct role within the company and has its own independent management.  Examples include GE Commercial Finance, GE Equipment Services, GE Energy, GE Insurance, and GE Consumer Finance among others.  This kind of management style increases productivity due to the high level of accountability and efficiency that business unit managers are expected to maintain. 

 

Diversified lines of operation: GE has invested in a wide range of products under its units.  These activities range from technology, energy, automotives, and aviation and home appliances to financial services and insurance services among other undertakings.  This kind of diversification shields the company from risks in case of misfortunes.

Environmental initiatives:  GE has ventured into environmental initiatives as it embraces the green economy and increased social responsibility.  Its 'Ecoimagination' program is undertaking the production of environmentally friendly technologies, energy sources such as solar, low emission engines for airplanes, hybrid locomotives and water purification (Makower, 2005).  This has earned a good reputation for the company which is considered socially and environmentally responsible. 

                     WEAKNESSES

Under-performing energy sector: Following the global crisis and the serious fluctuations in fuel prices, the energy sector is not performing as expected (Hurbert, 2007).   Fluctuations in prices of oil and gas have mostly been caused by supply shortages and this has threatened the company's profitability. 

Threat to flexibility: Too much diversification is often considered dangerous for a company.  This is because it results in over-stretching which usually slows down decision making.  At GE, the numerous units require attention and could prove hard to manage if excessive diversification occurs. 

                    OPPORTUNITIES

Mergers and acquisitions: GE has performed several mergers in the recent past. These not only help the company to expand globally but to diversify its activities into new areas thus increasing productivity. Some of the companies include Interbanca S.P.A, Whatman Plc, VetcoGrey and Turbomecanica Combustor Products (General Electric, 2009). The merger of NBC with Vivedi opens better opportunities for GE in the media business.

Research and development:Intensified research and development characterize the company's activities as it seeks to maintain a competitive edge over others in the same industry.  A substantial amount of resources are committed in the company's relentless efforts to ensure the production of innovative products which meet current customer demands (Hurbert, 2007). 

                    THREATS

Competition: Operating in an environment where stiff competition is present is a threat in itself.  Just like any other company, GE risks losing its customers to competitors. Competition could be intensified by better production techniques and technology among competitors such that the company's goods may be outdone in the market.

Information security: When it comes to information security, every company faces a threat of losing important information through hackers, natural disasters and employee dishonesty.  Loss of information could greatly affect the company's activities and cause a slow-down in production. 

Financial crisis: The global financial crisis has had an effect on most companies in the world today.  The rises in prices and shrinking bank lending rates have deprived businesses of the much needed profits and capital respectively. 

Media depictions: Depictions put forth by the media on certain occurrences about a company could ruin its operations.  GE has been a victim of media deception and was associated with the Enron scandal which brought a lot of criticism and loss of investor confidence.  The documentary named 'deadly deception' aired in 1991 displayed GE as a threat to human life for participating in testing and building of nuclear weapons (Chasnoff, 1991).  Such depictions could be used by competitors to tarnish the company's name.

13) Evaluation and Analysis

                      It is notable that GE has a number of strengths that work to its advantage by enhancing profitability.  Its global recognition, strengths and competitiveness put GE at a favorable position as compared to other companies in the same sector.  The use of business units for management presents an effective way to manage the expansive company.  This not only reduces the possibility of overwhelming senior management with work but also promotes productivity based on accountability expected from the business unit managers.  The company undertakes numerous activities which highly contribute to profitability.  This is enhanced by the mergers and acquisitions that have diversified the company's product range and in turn leading to improvement on profits incurred. 

The strengths and opportunities however have not come without constraints.  Various threats and weaknesses threaten the performance of the company by presenting constraints on the company's management.  High levels of competition, financial crises and threat of information loss are a threat to the company’s survival.  Weaknesses within the company including the poor productivity of the energy sector and flexibility threat could impact negatively on the company. 

In order to reduce the impact of threats and weaknesses, the company could use the strengths and opportunities to mitigate them.  For example, the company's established research and development could be used to curb competition by coming up with innovative products from time to time.  The efficient management can also be used to prevent loss of data through implementing proper control measures and to avoid losses which could exemplify the situation caused by the financial crisis.