General Electric
"I never perfected an invention that I did not think about in terms of
service it might give others"
- Thomas Alva Edison, GE Founder
It all started with the flicker of a light
and running…
bulb and soon enough GE was off
– In 1890, Thomas Alva Edison established the Edison General Electric
Company in Menlo Park, New Jersey
– At the same time Charles A. Coffin was growing his business, The
Thompson Company
– It was increasingly difficult for Edison and Coffin to remain competitive
based their own technologies
The two companies united in 1892
and formed The General Electric Company
Key Facts About GE
Headquarters
– Fairfield, Connecticut
Number of Employees
– Over 315,000
Locations
– Over 160 Countries
Symbol on Stock Exchange
– GE
Number of Shareholders
– 4 Million
Number of Shares
Outstanding
– 10 Million
Historical Number of Share
Splits
– 9
Annual Revenue From 1994- 2003
140,000,000
120,000,000
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
GE Stock Price Relative to S&P 500 From 19992004
Reginald H. Jones
Chairman & CEO, 1972 –
1981
Managerial qualities:
‘Intellectual breadth, strategic
capability, social sensitivity,
political sophistication, worldmindedness, and above all, a
capacity to keep their poise
amid the cross-currents of
change.’
Relationship between business
and government
Today…GE spends 7.5MM on
lobbying
Jack F. Welch Jr.
Chairman & CEO, 1981 –
2001
On Six Sigma Welsh
said, “...it is the way
we work.”
Customer-Focused
Methodology to Improve
Quality Through Defect
Reduction
Today…Rigorous Employee
6σ Certification
Jeffrey R. Immelt
Chairman of the Board
and Chief Executive
Officer, 2001 – Present
Today…
New Frontiers & Strategic
Alliances for GE
– NBC-Universal acquiring
interest in Telemundo network
– GE and Honda form GE
Honda Aero Engines LLC,
design small (private) jet
engines
GE is Organized Along 11
Businesses
Growth vs. Cash Generator
Energy
Commercial
Finance
Transportation
NBC Universal
Healthcare
Consumer
Finance
Advanced
Materials
Consumer and
Industrial
Insurance
Infrastructure
Equipment
Services
Perceived Drivers for Change
Globalization
Technology
Innovation
Diffusion of
technological knowhow
Regulatory influences
and government
policy changes
Four Values Translates Into Action
Action At Work:
Six Sigma Product Standard
Must produce no more
than 3.4 defects per
million opportunities.
An "opportunity" is
defined as a chance for
nonconformance, or not
meeting the required
specifications; GE strives
to be flawless in
executing their key
processes.
1.
2.
3.
4.
5.
6.
6 Key Areas
Critical to Quality
Defect
Process Capability
Variation
Stable Operations
Design for Six Sigma
Four Objectives of Work Out
Meetings
– Create a New
Paradigm for GE
– Empower
Employees
– Eliminate
Unnecessary Work
– Build Trust
Action Fosters Business-Wide and
Personal Growth
Toastmasters is an
international organization
dedicated to improve/
facilitate communication
within an organization
4 Goals of Sessions
– Deliver great presentations
– Easily lead teams and
conduct meetings
– Give and receive
constructive evaluations
– Be a better listener
The $1Billion GE Talent Factory
– Program began in 1919—
oldest training program of
its kind
Engineering
Finance
Info Management
Operations
Sales and Marketing
– Several assignments within
discipline
– Acquire broad overview of
GE
– Develop leadership/
professional skills
The Ultimate Driving Machine…
Just Got Better
GE’s Advanced Materials has teamed up with
BMW to design and produce lightweight,
durable, chip resistant fenders for their high
performance 6 Series
GE’s Financial Statements
Revenue By Operating Segment
% of 2003 Total
Revenue
% of 2002 Total
Revenue
% of 2001 Total
Revenue
% of 2000 Total
Revenue
Advanced Materials
5.27%
5.27%
5.59%
6.15%
Commercial Finance
15.51%
14.82%
14.02%
13.46%
Consumer Finance
9.57%
7.76%
7.52%
7.15%
Consumer & Industrial
9.57%
9.75%
10.33%
10.28%
Energy
14.22%
17.88%
16.64%
12.04%
Equipment & Other Services
3.30%
4.19%
6.12%
11.56%
Healthcare
7.60%
6.77%
6.65%
5.58%
Infrastructure
2.29%
1.44%
0.31%
0.37%
Insurance
19.52%
17.62%
18.90%
18.99%
NBC
5.12%
5.41%
4.56%
5.21%
Transportation
10.07%
10.35%
10.98%
10.19%
Corporate items and eliminations
-2.05%
-1.26%
-1.63%
-0.99%
GE’s Revenue Breakdown in
2003
Corporate items and
eliminations, -2.05% Advanced Materials,
5.27%
Transportation,
Commercial Finance,
10.07%
15.51%
NBC, 5.12%
Insurance, 19.52%
Infrastructure, 2.29%
Healthcare, 7.60%
Equipment & Other
Services, 3.30%
Consumer Finance,
9.57%
Consumer &
Industrial, 9.57%
Energy, 14.22%
Revenue Growth 2001-2003
Consolidated Revenue
$136,000
$134,000
$132,000
$130,000
$128,000
$126,000
$124,000
$122,000
2001
**Values in millions of dollars
2002
2003
Profit By Operating Segment
% of 2001 Total
Segment
Profits
% of 2002 Total
Segment
Profits
% of 2003 Total
Segment
Profits
Advanced Materials
7.59%
5.41%
3.10%
Commercial Finance
15.26%
17.89%
19.67%
Consumer Finance
8.49%
9.73%
10.87%
Consumer & Industrial
4.74%
3.07%
2.90%
Energy
25.95%
34.03%
20.67%
Equipment & Other
Services
-1.18%
-2.10%
-2.11%
Healthcare
7.94%
8.36%
8.56%
Infrastructure
0.14%
1.61%
2.32%
Insurance
9.96%
-0.51%
10.57%
NBC
7.46%
8.96%
10.05%
Transportation
13.66%
13.57%
13.39%
Net Earnings Growth 2001-2003
Net Earnings
$15,200
$15,000
$14,800
$14,600
$14,400
$14,200
$14,000
$13,800
$13,600
$13,400
$13,200
$13,000
2001
**Values in millions of dollars
2002
2003
Ratio Analysis
2002
2003
ROE
22.16%
18.95%
Gross Profit
Margin
60.02%
61.84%
Debt-to-asset
Ratio
87.97%
86.88%
Debt-to-Equity
Ratio
794.38%
710.44%
Current Ratio
2.13
2.35
Finances, GE, and its Competitors
GE
ALSTOM
Siemens
Industry
Revenue Growth
1.90%
N/A
4.40%
7.40%
Revenue
140.74B
20.89B
92.78B
6.06B
Gross Margin
61.42%
14.76%
28.70%
34.44%
EBITDA
27.23B
475.67M
9.34B
696.69M
Oper. Margin
13.93%
0.38%
5.32%
10.40%
Net Income
15.74B
-2.24
4.35B
259.44M
EPS
1.544
-4.96
4.719
1.67
PE
21.52
N/A
15.62
21.24
Competitors of GE
Main Competitors
ALSTOM
– specialize in energy, ship buildings
and marine systems and transport
infrastructure.
– Headquarters in Paris, France
– Acquired ABB (Asea Brown Boveri, a
leading competitor to GE)
A force to be reckon with; would be GE’s
ultimate competitor
Main Competitors
Siemens
– electronics and electrical engineering company
6 groups:- Automation and Control, Information and
Communications, Medical, Power, Transportation, and
Lighting
provides industrial automation and control, information and
communications, lighting, medical, power transmission,
and transportation products and services
– Headquarters in Munich, Germany
Subsidiaries headquartered in New York
– Very similar to GE; strong brand name equity, has
business operations in over 190 countries
5 Forces Model
Rivalry among competitors
– ALSTOM and Siemens, in
particular
– Creating competitive
advantages to gain bigger
market share
Acquisitions, mergers and jointventures
Battle for innovation and
technological improvements
5 Forces Model
Potential of New Entrants
– Adaptac (1981) and Adept Technology
(1983)
– Late bloomers, but slowly gaining market
share
– Does not pose too much of a threat to GE,
ALSTOM or Siemens for now
– Tough for new entrants to pinch a sizable
chunk of market share from GE, ALSTOM or
Siemens
5 Forces Model
Suppliers
– Materials, parts, components, other resources
– Vertically integrated (GE Advanced Plastics,
GE Consumer and Industrial Manufacturing)
– Has to be aware of suppliers that might
integrate forward
5 Forces Model
Substitutes
– Has many substitutes that might pose a threat
– Very well-diversified which means that GE is
spreading the risk of failure in every market
– Eg. GE’s NBC-Universal’s substitute are pirated
VCD’s or DVD’s
Buyers
– Similar to its substitutes, GE has a broad line of
buyers, ranging from consumers to large corporations
– Eg. GE Healthcare’s buyers are hospitals and
pharmacies.
Strategic Group Map
Performance/Product Quality
High
General Electric
Adaptac
Alstom
Adept
Technology
Siemens
Low
Less
Diversified
More
Diversified
Product Range
GE’s SWOT Analysis
Strengths
– Global strength and recognition
5th in Fortune 500 list, operating in more than 160 countries
– Excellent management
Proven leadership and business model
Confident investors – raising capital
– Diverse product range
Long Term (GE Aircraft engines)
Short Term (GE Lighting, Plastics, NBC)
Financial Services (contributes to 40% of GE’s revenue)
Spreading the risk of failure in every market and not just one
SWOT Analysis
Weaknesses
– Company size/ acquisition restriction
Eg. GE’s planned acquisition of Honeywell
International, a diversified technology and
manufacturing company, specializing in aerospace
products, was rejected by the EU
– Energy Segment
Underperforming, no signs of near future recovery
– Flexibility
Large and diverse businesses might overstretch
the company and reduce reaction times to shifts in
targeted markets
SWOT Analysis
Opportunities
– Research and Development
Immense capital allows GE to contribute a lot to
R&D for product development and improvement
– Increased geographic growth
Global expansion = more opportunities (Eg. China)
– Merger between NBC and Vivendi
Further opportunities in the media business
– Improved customer services
Adopted a new customer focus initiative
SWOT Analysis
Threats
– Exposure to global economy
Economy slowdown would affect GE, since 40% of the
revenue is generated overseas
Exposed to currency fluctuations
– Intense scrutiny after Enron
More transparency and disclosure; skeptical investors
Public image of all large companies suffered
– Competition
Constant change in technology heats up competition
Very diverse:- tough to be the best in all industry
Weighted Strength Assessment
Ratings Score
Key Success Factors
Importance
Weight
GE
ALSTOM
Siemens
Product/Performance Quality
0.16
9/1.44
8/1.28
7/1.12
Recognition/Brand name
0.11
10/1.1
8/0.88
10/1.1
Managerial Ability/Leaders
0.13
9/1.17
7/0.91
7/0.91
Flexibility
0.13
7/0.91
8/1.04
7/0.91
Customer Service
0.10
6/0.6
7/0.70
7/0.70
Innovation/Technology
0.14
9/1.26
7/0.98
8/1.12
Distribution network
0.11
9/0.99
7/0.77
9/0.99
Financial Resources/Capital
0.12
8/0.96
7/0.84
8/0.96
Sum of importance weights
1.0
8.43
7.40
7.81
Weighted Overall Strength Rating
Key Competencies
Competence
– Great and proven leaders
Eg. Jeffrey R Immelt, Jack Welsh,
Reginald H. Jones
– Expertise
More capital can be invested in R&D
Core Competence
– Innovative
– Desire to strive for perfection (6
Sigma)
Key Competencies
Distinctive Competence
– Ability to respond to the drivers of change by
understanding the important global trends
– Acquisition of rivals and other companies
Recent News
GE’s $900 million acquisition of InVision
Technologies
– March 15, 2004, GE made it public
– September 16, 2004, FTC gave approval but
deal is still not finalize
Recent News
Advertising Campaign
– Genworth, a financial company part
of GE, has signed a 5 year contract
to license the GE logo and use the
slogan, “Built on GE heritage”
– Genworth is planning to allocate $30
million into advertising this coming
year
Recent News
October 11, 2004, Senate
passed a $136 billion corporate
tax package that cuts taxes for
businesses
– Includes $76.5 billion in new tax
relief for the manufacturing sector
– Includes $42.6 billion in tax relief
for multinational companies
– Additional capital from the tax
break could be used for
reinvestment, increase dividends,
etc
Conclusion
GE recognizes that part of being successful
and well-respected is being socially responsible
as well
Has huge potential to remain successful without
any major threats from competitors
– “Staying Power”
Will only continue to expand
Questions and Answers
Session