General Electric's expansion strategy: Ukraine versus Philippines

Ukraine and Philippines

Over the last several years, a variety of firms have been focusing on diversifying their energy consumption and usage needs. This is because high prices are leading to a change in the focus of corporations. As they want to reduce their dependency on fossil fuels and decrease costs. This helps these organizations to increase their productivity and profit margins.

(Hunt, 2009)

In the case of General Electric, the firm has been aggressively concentrating on addressing these needs through a division called GE Energy. They are focusing on providing companies with a number of solutions in meeting these objectives to include: energy management, oil / gas and power / water solutions. The combination of these factors is helping customers to decrease their costs and diversify their energy needs. ("GE Energy Management," 2012)

However, in order to reach out to a variety of organizations requires establishing operations in locations that will give them a strategic advantage. Two countries they are considering include: the Ukraine and the Philippines. At the moment, executives believe that the Ukraine can provide them with the greatest benefits in achieving different benchmarks. To fully understand which location offers the most advantages requires: conducting a political evolution, looking at stability, the direction of government systems and it infrastructure considerations. Together, these elements will provide specific insights that will highlight how the Ukraine can provide the firm with more benefits.

Political Evolution

Politically speaking, the Ukraine has been making strides towards enhancing their democracy. This is following a series of challenges between pro-Western and Russian leaning officials. However, in spite of these differences the country has been able to conduct fair elections based upon international standards (which are respecting the will of the people). This is adding a sense of legitimacy to the process by improving transparency and openness. ("Ukraine," 2012)

In the case of the Philippines, the country has been dealing with issues of corruption at the highest levels. This has caused many people to lose faith in the process. At the same time, the nation is fighting a Maoist insurgency throughout various regions. They have also been simultaneously fighting an Islamic insurgency in South. Recently, there was a peace agreement signed between this group and government. However, this accord is fairly new and untested. Furthermore, Maoists continue to conduct operations and attacks throughout the Philippines. These elements are showing how the Philippines have more political problems in contrast with the Ukraine. ("Philippines," 2012)

Stability

In the Ukraine there are greater amounts of stability. This is because the country is making strides towards joining the EU and wants to become a member of NATO. Moreover, the leadership has maintained close ties with Russia. These factors are allowing them to have more balanced policies despite political differences. ("Ukraine," 2012)

Evidence of this can be seen with observations from the CIA which said, "In August 2010, Ukraine, reached a new agreement with the IMF for a $15.1 billion Stand-by Agreement to put the country on the path to fiscal sustainability, reform the gas sector, and shore up the country's banking system. Economic growth resumed in 2010 and 2011, buoyed by exports." This has resulted in an increase in per capita income (which is illustrated in the below table).

Ukraine's Per Capita Income from 2009 to 2011

Year

Amount

2009

$6,500

2010

$6,800

2011

$7,200

("Ukraine," 2012)

These figures are showing how the Ukraine has tremendous amounts of stability and is making strides to improve their economic / political situation. This is following a severe decline in GDP growth of -15% for 2009 (in the face of the global financial crisis). ("Ukraine," 2012)

In the Philippines, the economy has been experiencing uneven amounts of growth. This is because many polices are focused on meeting the needs of foreign-based corporations who are outsourcing. However, this has caused the underlying amounts of poverty to increase from 2001 to 2010. At the same time, the insurgency and corruption are impacting economic development. This is resulting in GDP growth experiencing a series of starts and stops. For instance in 2010, the nation was able to realize an increase of 7.6% for 2010. Then, in 2011 GDP growth decreased to 3.7%. ("Philippines," 2012)

These factors are showing how the country is less stable economically. Evidence of this can be seen in the below table (which is highlighting their per capita income).

Philippines Per Capita Income from 2009 to 2011

Year

Amount

2009

$3,800.00

2010

$4,000.00

2011

$4,100.00

("Philippines," 2012)

These figures are showing how the Philippines unstable. This is because the economy is experiencing uneven amounts of growth. Moreover, any kind of improvements will have little impact on dealing with issues such as poverty. In many ways, one could argue that this is a primary factor which is contributing to the insurgency and a lack of faith in governmental institutions. ("Philippines," 2012)

From an economic perspective, the Ukraine is more stable than the Philippines. This is because the government is focused on implementing reforms that will address long-term social challenges (which are hindering growth and reducing the standard of living). Over the course of time, this allows the nation to experience improving levels of per capita income (despite having a major decline in the GDP in 2009). This is a sign that these changes are helping to bring the country closer towards acceptance in the EU and NATO. However, there are still considerable benchmarks that must be reached in achieving these objectives. This is indicating that Ukraine has the potential to become a modern nation based upon the reforms that have been enacted. ("Ukraine," 2012)

Conclusion

Clearly, the Ukraine is the most logical choice for GE Energy. This is because the country is considered to be: politically stable, they have been implementing sound economic reforms and their government has been embracing the basic ideals of democracy. Moreover, they are making sizeable investments in it infrastructure. Whereas the Philippines is dealing with an insurgency, there are tremendous amounts of corruption and they are not updating the infrastructure. The combination of these factors is showing how the Ukraine is the best choice for GE Energy to set up its operations.