General Electric Company (GE) is a multinational company that operates in more than 116 countries in North America, Europe, and Asia. The company specializes in the production of diversified industrial products, and is organized along 11 businesses such as Energy, Transportation, Infrastructure, Commercial and Consumer Finance, Equipment Service, etc. Over the years, GE has recorded financial success. In 2011, Fortune ranks General Electric as the 7th largest company globally, 13th most admired company, and 14th most profitable company. The company key competence lies in its great proven leaders who combine the company resources to achieve financial success.
The objective of this report is to present a competitive environment analysis of General Electric. The paper uses SWOT model, PESTEL model and five Porter forces to provide analysis of GE.
SWOT Analysis of General Electric
SWOT model refers to Strength, Weakness, Opportunity and Threat. SWOT model is a tool that analysts use to evaluate the strength and the weakness of a company.
Strength: The strength of GE lies in its excellent management. Over the years, the company has demonstrated high proven leadership and excellent business model that make several thousands of investors to be attracted to the company. The strength of GE also lies in its financial success. At the end of the 2010 fiscal year, the company recorded approximately $151 billions of total revenues and net profits of $11.6 billions and the total assets of $751 billions. The key competence of the company is its ability to respond to diverse changes and acquisition of rival companies. The strength of GE also lies in the diverse range of products that the company produces. GE produces long-term aircraft engines and short-term lighting and plastics. The financial service that the GE provides contributes to the 40% of the company revenues. Thus, the company is able to spread its risks over the range of products it produces. (GE Annual Report (2010).
The weakness of General Electric lies in its inability to deliver value to the shareholders in the last few years. The company has recorded the decline in the financial performances in the last few years. The company total revenue and total assets have declined. Between 2009 and 2010, the company total assets declined from $781 billions to $751 billions. The total revenue also declined from $781 billions to $751 billions between 2009 and 2010. The company total sales also declined from $154 billions in 2009 to $149 billions in 2010.
General Electric operates in different geographical locations. Thus, the company enjoys large market opportunities in several part of the world. Generally, General Electric leads in the growth markets that make GE to record $30 billion of industrial revenue. The company also has the opportunity to increase its global expansion by taking the advantages of Chinese market. The research and development (R&D) that the company has focused over the years give GE the opportunities to produce high quality products. From 2008 and 2011, the company expenditure on R&D increases by 54%. In addition, GE has large number of skilled personnel. At present, the company could boast of 40,000 talented engineers and scientists. With the number of skilled personnel working with the GE, the company has been able to drive innovation to its products as well as providing high quality products and services for its customer. With the company huge financial resources, GE has been able to take advantages of economic of scale to implement mass production thereby enjoying costs reduction.
GE is operating under competitive market forces. The company top competitors include Fannie Mae, and Freddie Mac. Other competitors include International FCStone, Marsh & McLennan, Ameriprise Financial, Aon etc. The stiff competition that the company is facing serves as threat to its market advantages. Fannie Mae is a major competitor of General Electric, and is ranked by Fortune as the 5th biggest and fifth most profitable company in the world. Fannie Mae has total revenues of $153 billions compared to General Electric that has recorded the revenue of $151 billions. Thus, the stiff competitions that General Electric is facing lead to the decline in the company global market shares. For example, between 2008 and 2010, the company recorded approximately 27% decline in sales.
General Electric is also facing current exchange and interest rate risks. With volatility in foreign exchange which may make U.S. dollars to decline against other foreign currencies without notice, General Electric may record loss of revenue due to the volatility in foreign exchange and interest rates.
The paper also conducts PESTLE analysis of GE to provide analysis of the company external environment.
PESTLE Analysis of General Electric
PESTLE model analyzes the external environment that the company is operating. PESTLE refers to Political, Economic, Social-Cultural, Technological, Legal and Environmental factors
Political: General Electric is operating in more than 116 countries and the company faces challenges to operate under different government policies. In the advanced countries such as U.S., Japan and the EU countries, General Electric is operating under peaceful political environment. However, in many emerging markets, the governments are always interfering in the activities of the multinational companies. In these countries, the government policies may affect the production of goods and services of General Electric. In China and Singapore the political intervention over the company activities is very high.
Economical: General Electric is operating under the turbulent economic environment. The economic development and GDP of different countries that General Electric is operating normally affect the company sales. Recent economic crisis that is facing the U.S. economy and the economy of European countries also affect the business operations of General Electric. With current recession that is affecting many countries, the company has recorded the decline in sales between 2008 and 2010.
In addition, General Electric is also being affected by fluctuation in currency rates since the company is operating in multiple countries. When there is a decline in the value of U.S. dollars against other major currencies such as Euro, UK Pounds and Japanese Yen, General Electric may record decline in revenues.
Social-Cultural: In Europe and the United States, the working population is ageing, and this factor may affect the company to retain the experience and qualified workers since some of the workers may decide to voluntarily retire. In addition, the company is faced with different socio-cultural challenges which may affect the company corporate culture. The culture of a country will determine the wage rates, working hours, employment policies, and the type of goods a company should produce. Thus, General Electric is facing challenges to manage these issues to achieve organizational efficiencies.
Technological: General Electric is operating in the U.S., Japan, and other European countries and these countries are endowed with high level of technology. United States, Japan, German and many countries in Europe where General Electric is operating have high technological endowment. Thus, the company has the opportunities to tap the latest technology in these countries to develop high quality products for customers. In addition, General Electric has been able to tap the technological development in the U.S. And Japan to invest in R & D. To develop innovative products.
Moreover, the company is also operating in some emerging countries and developing countries. Since these countries do not have technological endowment compared to the advanced countries, the company does not have the opportunities to tap technology in these countries to develop its products.
Legal Factor: General Electric is operating under different legal environments. Thus, General Electric must comply with the legal environments that the company operates. For example, the U.S. legal policy requires all publicly-held companies to comply with the Sarbanes-Oxley Act (SOX). The SOX Act requires all publicly-held companies to comply with financial reporting. In Europe and the U.S., the General Electric also has to comply with the regulation such as consumer law designed to protect consumers against unfair practice of corporate organizations such as misleading consumers about the description of the products. Moreover, the company needs to comply with regulations such as employment law and health and safety regulations.
Environmental Factors: Many countries are now forcing organizations to comply with environmental regulations such as law against environmental pollution. In Canada, U.S. And many other countries in Europe, businesses ought to comply with regulations against air and water pollution and global warming. To avoid being prosecuted, General Electric should comply with the environmental regulations in the countries that it is operating. (Oxford University Press 2010).
The paper also uses Porter five forces to analyze GE competitive environment.
PORTER FIVE FORCES
The Porter five forces is a business strategy designed to analyze an organization business unit and the competition the company is facing within an industry. The Fig 1 reveals Porter five forces.
Fig 1: Porter Five Forces
The GE competitive analysis using Porter five forces is as follow:
Bargaining Power of Supplier: GE has advantages over its suppliers because the company has several suppliers that distribute the company essential materials. The company could switch from one supplier to the other.
Bargaining Power of Buyers: GE does not have power…