Introduction
This research explores how General Electric Company (GE) has achieved its internationalization objectives in the contemporary context.
Overview of the organization and its international objectives
General Electric Company is a highly diversified company that offers services and products, including “aircraft engines, power generation, oil and gas production equipment and household appliances to medical imaging, business and consumer financing and industrial products” (General Electric Company 2014) across various industries. Initially, there were 12 companies, including GE in the first Dow Jones Industrial Average in the year 1986 (Downie & McMurray 2012). Today, however, only GE still exists in the list. GE has survived over a century in business and continues to explore new opportunities, as well as post impressive performances. It boasts of a strong culture, employees that work to change the world and strong leadership.
The company was founded more than 125 years ago and it has remained one of the most admired US firms. It has more than 305,000 employees globally. These employees work across various industries, including GE Software in the US and other countries around the world.
GE’s internationalization strategy has focused on all regions globally. The company aims to solve various problems in different regions. In Northern Asia, GE has concentrated on developing local infrastructures and use massive resources in China to facilitate the ongoing economic growth in the country. In Southeast Asia, GE has focused on building healthcare solutions for local hospitals in Malaysia, providing clean energy and water resources in Philippine and manufacturing aircraft parts for Vietnamese (Sherman 2010).
The company provides investment services and electronic bridges in New Zealand and Australia, respectively, while in Europe, it offers infrastructure services. In the Middle East and Africa, GE’s globalization strategies focus on developing oil and gas sectors, promoting good governance, infrastructures, the aviation industry, and the healthcare sector. GE promotes the development of transport systems in Latin America while it emphasises leadership and innovation in North America.
GE has an eye for new ventures and trends. As a result, today, the company has introduced a new subsidiary that focuses on software. GE Software aims to “harness the power of the Industrial Internet, building off its powerful mix of industrial machine expertise, historical perspective and software innovation to manage and maximise global economic output” (GE Software 2013). The company wants to capitalise on big data technologies by collecting information from industrial critical machines that communicate in real time. Through analytics techniques, GE Software will provide critical customer insights that were never before possible.
GE software has worked with Pivotal to develop the Industrial Internet. It has over 10,000 software professionals from various parts of the world. GE Software refers to these new models as “GE’s Predictivity™ solutions designed to save customers time, energy and money” (GE Software 2013). The company will rely on its global expertise to drive the Industrial Internet.
In the year 2013, GE’s financial performance was $146,231. 05 million in revenues (representing a decline of 0.4% relative to the previous year) while its profit stood at $13,057.0 (a 4.3% decline compared to the year 2012).
Analysis of the internationalization process using internationalization theories in academic sources and in class
Given the diverse nature of GE, the company has unique strategies for its customers in any given country. It has various services and products around the global. GE’s presence around the global has been facilitated by various entry modes, such as strategic alliances, aggressive acquisition, Greenfield ventures, licensing and exporting.
GE believes in creating value through globalization. As a result, the company claims that internationalization is its core competency. For the last century, GE has provided products and services across the global. According to Sheila Lam, GE has focused on creating growth outside the US by setting up its Global Growth and Operations (GGO) business unit, which covers “Canada, Latin America, Russia, Germany, Rest of Europe, the Middle East/North Africa/Turkey, the sub-Sahara region, India, China, Korea, Japan, Southeast Asia and Australia/New Zealand” (Lam 2012). The GGO model strives to create a scalable, cross-business model globally with local transformations.
For a long time, GE has always preferred acquisitions or Greenfield ventures as entry modes because it wanted to have full control of its subsidiaries and retain all profits. In recent years, however, GE has changed to joint ventures with the latest case being the issue of Alstom of France (Clark & Jolly 2014) because of several reasons. First, GE fears possible overpayment due to high bid prices. Second, GE aims to avoid underlying problems in acquired firms.
Third, GE uses joint ventures in areas it lacks local knowledge. Fourth, it aims to benefit from political connections, contacts, local expertise, and business relations from the partner, particularly in Russia and China, where governments have greater control of the economy. Fifth, GE notes that joint ventures are great ways of sharing risks, which it cannot get from acquisition or Greenfield investments. Finally, GE aims to facilitate its international expansion strategies through joint ventures. The company could have preferred joint ventures, especially after observing risks associated with Greenfield investments or acquisitions and the impacts of 2008 global recession and economic downturns in Europe. Hence, joint ventures would help the company to mitigate investment risks.
In some instances, GE must forgo complete control and ownership in a joint venture, more so when it is the minority shareholder. Control issues have been major challenges for the company (Clark & Jolly 2014). Many partners are willing to form a joint venture with GE because of knowledge transfer, innovative management techniques and excellent management development programs. At the same time, GE also brings resources, technologies, and expertise to partnership deals.
GE understands the complexity and controversies associated with globalization. Critics have criticized GE’s globalization efforts as detrimental to the American economy because of job loss and technology transfer (Hoffman 2008; Williford 2011). GE’s globalization strategy considers the world as its marketplace. It focuses on understanding behaviors in every market and provides services and products that meet the needs of its customers. GE also equips its employees with technologies and management training that provide their competitive advantage.
Evaluation
The actions of the organization and lessons learned
Growth Platforms
GE’s internalization strategies show its ability to understand the future, search and locate unstoppable trends, and focus on new ways of creating global business opportunities. For instance, the company has concentrated on high growth potential areas such as security and sensing, oil and gas, water, healthcare information technologies, media, healthcare services, the US consumer finance and lately, the Industrial Internet to exploit big data opportunities. These are areas with massive growth rates and can effectively improve GE’s internationalization efforts.
Entry modes
Previously, GE preferred Greenfield investments or complete acquisitions. These entry modes, however, have changed as the company now focuses on joint ventures globally. While organic growth rates have provided significant returns, GE carefully follows a disciplined growth path that allows it to assess the market, segment it, and embark on small strategy acquisition of the market share. After that, the company launches its model of internationalisation supported by strong financial investments for solid returns. Today, GE has claimed an important spot in global joint ventures.
Technical Leadership
GE relies on its technological and innovative expertise to drive its initiatives. As a result, the company has been able to develop quality products and services, create competitive advantage and acquire new market shares. GE has nearly 2,000 researchers in its Global Research Centres found around the world. The company develops such research centres in high potential areas to promote innovation and development of new solutions. These centres are responsible for providing technical leadership. For instance, it has used nanotechnology to create new materials such nano-metals and nano-plastics among others. These represent a new generation of the company’s products. At the same time, GE focuses on developing super-light materials for jet engines, which would save costs and fuel substantially. Further research concentrates in enhancing energy efficiency in the aviation industry.
Services
GE internationalisation approaches have focused on service provision. The company offers various services in the aviation industry, healthcare, oil and gas, power generation and water industries among others. GE claims that it can offer high-margin services for many decades and realise substantial revenue growth from its subsidiaries and joint ventures. Service divisions are responsible for massive revenues and profit for the company. With regard to service provision, GE aims to meet the needs of its customers. For instance, in rural Tanzania where there are no medical equipment and staff, GE has recognised that the American medical system may not necessarily work in other places. On this note, the company developed a specific pocket-size ultrasound machine called Vscan to test innovation that would change healthcare provision in Africa, help the government to meet the UN’s millennium development goals and transform maternal and newborn health in Africa (General Electric Company, 2014).
Different strategies for different markets
GE recognises that one-size-fits-all model cannot work for its globalisation approach. The company has allowed its regional offices to customise products and services that meet the needs of their customers. This strategy facilitates decision-making at the local levels. The company leverages its existing expertise and eliminates role duplication through research centres by integrating various IT teams, particularly when developing cross-business growth models for specific regions.
The Industrial Internet
As mentioned earlier, GE studies industries and focuses on new trends. As a result, the company focuses on the Industrial Internet to transform nine industries. The Industrial Internet will enhance communication, productivity and save costs in “the transportation, medical, manufacturing and energy fields” (Rich 2012). The company recognises that the Internet has transformed communication and data collection. The company aims to connect intelligent machines, workforce, then use analytics software and big data techniques to change decision-making processes, the way the world works and provide critical insights.
Understanding the GE business models
GE is a highly diversified company with numerous joint ventures. This presents a significant problem to investors and professionals who wish to understand the company. It is difficult to understand inherent risks in such investments, particularly with control and ownership. Given the liquidity that GE experienced during the global crisis, diversification could be risky for firms. GE diversified divisions are not independent from each other, but work together to create synergy.
Internationalisation Criticism
Some critics have faulted GE for taking jobs away from the US through globalisation (Hoffman 2008). At the same time, they claim that by partnering with Chinese companies, GE will transfer technologies and expertise, which Chinese will use later to compete with American companies (Williford 2011). According to Williford, General Motors made these similar mistakes several years ago and suffered setbacks when the Chinese government turned against it and its American executives (Williford 2011).
These critics present the dark side of globalisation pursued by many companies. At the same time, they note that companies are mainly focused on profits rather than the interest of a nation and there is no “signifact, mutual beneficial relationship between companies and the American society” (Hoffman 2008).
Solutions and how to deal with the problems GE has faced
Globalisation has served the interest of GE. Initially, GE focused on organic growth, Greenfield investment and acquisition. Over the years, however, GE has changed its strategies of internationalisation to strategic alliances and joint ventures. Today, GE has many diversified products and services to drive its revenues.
The company has lost control and ownership, particularly when it is the minority shareholder. Nevertheless, GE has always strived for 50:50 or more to give it greater influences on decision-making and profitability.
GE has created competitive advantage throughout the world by focusing on research, product and service improvement and new discoveries (Downie & McMurray 2012). The company overcomes various challenges through technical leadership and customer focus.
While many critics have faulted GE for loss of jobs and technology transfer, the company claims that such events occur in low-tech firms, which lack differentiation in product and service provision to customers. GE internationalisation is based on technical innovation and therefore, internationalisation will create several jobs and wealth for many years (General Electric Company 2014). As a result, GE plans to enhance internationalisation through competitive advantage in various areas of its expertise.
Another major challenge GE faces is hostility from other governments. Jeff Immelt, the CEO of General Electric notes that China has become hostile to foreign firms (Immelt 2010). This implies that the political situation may also hinder efforts of American companies in China. In other words, Chinese government may introduce hostile policies for foreign firms. In addition, other analysts have claimed that “U.S. companies with operations in Russia should prepare for growing tensions by reviewing evacuation plans, tightening cybersecurity and being alert for a spike in anti-American sentiment” (Drajem 2014).
GE may find it difficult to coordinate new structures and initiate new projects. On this note, the company has focused on collaboration between IT teams. In addition, it also strives to eliminate possible role and business model duplication through collaboration, ensuring that employees work on the right projects and key priorities (Lam 2012). GE leverages on its existing expertise for competitive advantage to acquire market shares globally.
Overall, while GE has been successful in its internationalisation strategies and efforts, major issues are rather external and mainly originate from host governments and critics of globalisation. GE has little influence over such external factors.
Reference List
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Hoffman, N 2008, ‘Reflections On General Electric’s Global Strategy’, Manufacturing & Technology News, vol. 15, no. 2, p. 1. Web.
Immelt, J 2010. ‘General Electric and China: Immelt blasts China‘, The Economist. Web.
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