General Electric is one of the largest and most well-known corporations in the world. It is a conglomeration of many businesses and hence cannot be slotted into a single market structure. Hence each of its businesses or divisions can be analyzed separately. The company has the following main areas of business namely, aviation, consumer appliances including lighting and electronics, finance, oil and energy, and healthcare. Market structures are usually divided into four according to their characteristics. They are a monopoly, oligopoly, free-market structure, and monopolistic competition. A monopoly is a structure there is only one seller (or manufacturer), whereas in an oligopoly there will be few sellers (or manufacturers). A free market is one where there are a large number of players (both buyers and sellers). Monopolistic competition is “a market structure in which there are many sellers each producing a differentiated product. Each can set its own price and quantity, but is too small for that to matter for prices and quantities of other producers in the industry.” (Deardorff).
The Company’s aviation division is a perfect example of an oligopolistic market with only two other players (Rolls Royce and Pratt & Whitney) operating. This is with regard to engines for passenger and military aircraft. The consumer electronic division is operating in a free market economy. There are a large number of big, medium, and small players operating in this industry. This scenario is the same in the case of the finance division. With regard to healthcare, the company is a manufacturer of sophisticated health equipment like X-rays, ultrasound, and molecular imaging. This sector can be considered to be oligopolic in nature because of the high investment involved. Its other healthcare products operate in a more or less free-market structure. Energy and oil and gas is also an area where large investments are needed. In that sense, the market tends towards an oligopolistic structure. But in the case of oil and gas, the price is controlled by the countries that have rich oil reserves and oil exploration and refining companies do not have much power in the matter of pricing.
Advertisements are not generally needed in a monopolistic market. But it can be done to create product awareness and also an image for the company. An example would be the Indian Railways owned by the Government of India. It is totally monopolistic in nature with regard to rail travel in the country. But the Indian Railways do advertise in order to create a better image of the organization. Advertising is very useful in an oligopolistic market. The two main advantages are to create awareness of product differentiation and also to gain market control. Since only a few suppliers operate in such a market the variety of products tends to be small. Hence if one of the firms creates differences in their product or service, it will be noticed by customers and the best to achieve this is through advertising. Improving market share is also useful in an oligopolistic market because this will lead to having more control over pricing in the market. Heavy advertising can help to increase market share. Advertising is essential in a free market economy because of the competition and sheer variety of goods on offer. Each category of goods will have so many variations and features like in the case of mobile phones. In the case of GE, its consumer electronics division does heavy advertising because it operates in a free market structure. This is also the case with its finances division. The Company need not advertise (especially to the public) in the case of its aviation division except to enhance its public image. For example, the company can inform the public about the quality, high technical capacity, and safety record of its engines. The short-term earnings have been good for the company and it has managed to earn double-digit growth for the whole of the year 2007. The trend has continued in the year up to the third quarter of 2008. The third-quarter growth was 11%. The deviation from expected and actual results in the third quarter was as follows – In the industrial segment estimate was between 10 to 15% and the actual earning was 12%. In its finance sector, the target was 2 billion dollars and the company has touched has managed to achieve the target. In the infrastructure sector, the estimate was 10% growth and actual growth was 9%. (Press Release).
It can be seen that the company is more or less achieving its estimates and targets and the trend can be expected to continue of the next year also. The Company is bound to touch double-digit growth in the next financial year also.
Works Cited
- Deardorff, Alan. Monopolistic Competition. Deardorff’s Glossary of International Economics. 2001. Web.
- Press Release: GE Reports Third Quarter 2008 Earnings of $4.5 billion; Revenues of $47.2 billion, up 11%; Infrastructure Orders of $23 billion, up 9%; On Track to Earn ~$20 billion in 2008. GE.