General Electric’s Joint Ventures
General Electric’s Joint
Ventures
Executive Summary
-This is an individual assignment in which I need to make a word report based
on a case study which is selected from Hill, CWL 2015, and International
business: competing in the global marketplace. I have choose General Electronic
Corporation for analysis if the case as topic of “General Electric’s Joint
Ventures, textbook pages 483-484” .The detailed
report will discussed the core problems identified in recent global business environment
and how it affected to the business strategy of the company, with that a
theoretical implications of the business strategy also being discussed which
the company have used and based on such analysis recommendations suggested for
the future strategy of the company. In
the whole research and analysis of General electric we have analyzed the
problem to the GE and their implication on current business and solution of the
problem as well for discuss the whole issue.
Table of Contents
Introduction of the company:
General Electric is one of the digital industrial companies
in the world which operate their business on software basis with the help of
transforming whole business of industry in the software to operate their
business. One can share the business idea with GE by way of GE store expanded
over globally. GE store share the business idea, technology, market and
intellect structure of the market. GE’s continuous invention and research in
the service sector and technology sector generate better outcome to deliver
best kind of service to the customer and other stakeholders by way of best
technology scale. General Electric founded in the year 1892 with the small
business in the field of financial service and diversified infrastructure.
Company is in the business of power generation, aircraft engines, oil and gas
manufacturing equipment, business and consumer financing, household appliances
and other industrial products. General Electric running their whole business in
8 different segments over the 175 countries of the world. Technology of the
General Electric is used for the brighter future if the industries. (Reuters)
General Electric has$ 37.1 billion brand value over the world in the year 2015.
GE placed on the sixth rank forbs list of most valuable brand in the word with
the brand value of $37.1 Billion in the world. (Sam Lehman, 2014) GE tries to
change the world by four way i.e. building, curing, moving and powering. In the
whole research of the General electric joint venture we will discuss the joint
venture of General Electric with the strength and weakness of the company,
analysis of the company strategy and recommendation to resolve the issue of the
case topic.
Joint Venture Strategy of General Electric –
Like every other company General Electric also tried to enter into global
market but for enter into global market required huge amount of investment for
the company with also required development of customer in unknown market for
the organization. In that case General Electric have only two option to enter
in global market i.e. either acquisition of existing firm in the local market
of the hence less efforts for development of market are needed or to establish
the subsidiary on alone as General Electric is less interested to make the
joint venture with the local company of the expected market. Even joint venture
with local company is one of the beneficial options for the General Electric
but GE has fear of risk. But from the year 2000 onwards GE initiated to enter
in all the market by joint venture with the local organization of the country
and joint venture strategy become one of the powerful tools for the General
Electric. Joint venture is proved as one of the best strategy against the
acquisition strategy due to saving of money for over paying for acquisition of
the organization and enters in to local market with fewer efforts. GE make the joint venture with the company
which is operating in the problem due to financial needs hence GE have to incurred
less amount to take joint venture with the companies. Joint venture also
benefit to the organization in way that existing established organization have
market experience and skilled staff which will become strength for the
organization in expansion plan. In joint venture risk also shared between both
the organization hence risk of loss can be reduced at lower level and political
support also can be gain by the organization due to stake of the local company.
Some of the country has prohibition for the foreign company to enter in to the
local market which becomes barriers for the General Electric to enter in to the
market of other country but with the joint venture strategy General Electric
can enter into the market of company in easy way. General Electric has objective to achieve the
aggressive growth goal which can be achieved by way of joint venture as joint
venture become fuel for the goal of the GE. Joint venture strategy become
successful tool for the GE and in the year 2007 GE has majority of the revenue
of the firm had from foreign operation.
For GE, joint venture strategy becomes entry tool in the foreign market.
Partner of joint venture with GE is also happy with the joint operation due to
reputation and innovative skills of GE. Hence Innovative idea of GE providing
gaining advantage to the partner to earn higher revenue and also it may support
them to enter in the global market. GE preferred as joint venture in 50-50
split or majority stake but some time for enter in global market GE settle joint
venture with minority interest with veto power. Hence in order to enter into the foreign
market GE has tried every way which is appropriate for him but he found best
way for enter in global operation. (Claudia H Deutsch, 2007)
Interest of the GE towards joint venture can be seen
from their agreed -ness to take minor interest in the joint venture as well, as
main target of the GE is to reach in the global market and for that purpose GE
can sacrifice their interest. From the few year market seems that GE is agreed
to minority position as well for joint venture with the organization. Chief
executive of GE said that it is better to formed joint venture with tinny
company against the joint venture with giant company. As small company are
eager to successful in the local market.
General Electric’s Joint Ventures – General Electric
enter into the global operation by use of joint venture with the local company
of the country where they start their operation. In this manner General
Electric has presence in more than 175 countries of the world. General Electric
has joint venture in the every segment in which they working. Some of the joint
ventures of the general Electric are given below-
·
General Electric enter into joint venture with
the south Korean company for enter into the local market of South Korea in the
business of financial service by taking stake of 43% with Hyundai for provide
mortgage loan, credit card service and auto loan.
·
In the same manner GE formed joint venture in
Spain with the local bank of Spain name as BAC-Credomatic for provide credit
card and consumer loan to the Spanish people. BAC- Credomatic is one of the
largest banks of Spain.
·
GE has 50-50 joint venture with German Company
Snecma for production of Engine of commercial jet is successful joint venture
in the industry as it will bring order and commitment of $36 million over the
world from aviation industry. (Geaviation, 2014)
·
GE has a venture in Turkey with the Garanty bank
of Dogus group for banking venture where both the venture own the 25.5% stake
of the company and remaining stake is owned by the outsiders. But now GE held
one third stake of the company and they are performing well in Eastern Europe.
They also initiate construction operation in Romania.
·
GE also held 15% stake of the Titagarh Wagons
limited ( Producers of Car in India) but though joint venture of Hyundai and GE
is going in well manner.
·
GE has joint venture with Japanese company Fanuc
for production of electric equipment.
·
GE and Britain Company SeaCo formed joint
venture to provide the sea container on leasing. Joint venture formed before
nine years is become one of the leaser of shipping container over world.
·
GE also have joint venture with Microsoft for
health industry in US. GE and Microsoft joint venture provide the healthcare
and related information of health care with centricity health care and it
solution.
·
Joint venture of GE with MSNBC is formed by
purchasing stake of Microsoft in MSNBC. Joint venture with MSNBC of GE perfumed
the digital operation in the industry. (Claudia H Deutsch, 2007)
·
GE and Indian company Triveni enter into 50-50
joint venture with the name of GE Triveni in the year 2010 for production of
turbine plan where GE support in terms of innovation.
Today’s era is of
expansion of the company over world. In order to enter in global market General
electric also tried to acquire some of the existing company in the other
country of world. Also in second option General Electric initiate opening of
subsidiary in the global market where opportunity for acquisition is not
available. But when we look at the both the option available to the company
than both the option have some loopholes. If company going to take acquisition
of any other company than generally company who is selling their stake will use
the bidding procedure where most of the company bid with the high amount, Hence
if GE acquire any company by way of bidding procedure than GE have to pay over
amount against the value of company is whereas return of the company cannot be
achievable up to the investment they use for the acquisition of the company.
Hence GE should think on the second option available to them. Second option for
enter in the global market is to open subsidiary in the country where going to
initiate operation. But in second option also company have to face many problem
as open of subsidiary in the new location cause loss to the GE due to marketing
problem and lack of knowledge about the local market, culture. Also GE does not
have idea about the taste of the local market. In order to understand whole the
things about the local market GE have to incurred high amount of expense on
research and survey and even after incurring of that much expense on survey and
analysis of the market some time company may fail to achieve goal decided by
the company. Hence to develop market in
the local area company should face this kind of disadvantage. One more problem
is about the local law and political pressure of the country as some of the
country prohibits the formation of new venture with full stake in the country
hence if GE tries to initiate business in the country in which local law does
not permit foreign company in that case also GE has to face problem for
formation of the business. In order to overrule all the problem GE has only one
option i.e. to enter in joint venture with the local company which save the
marketing and survey expense, surpass the law of the country due to stake of
domestic company and also over payment for the acquisition of the local company
can be saved by this way. By using joint venture strategy GE can mitigate all
the problem which is barriers for entrance of the company in the global market.
Prior to initiating joint
venture from the local company GE is not much interested to formed joint
venture with the local company due to company have fear of non controlling
power of GE over the company as local company demanded to take majority
interest over the company hence GE can receive only veto power in the stake of company. In that case GE demanded majority stake in the
business but local organization is not ready to share their majority of share
with GE due to their control over the local market of the venture. Hence due to
this kind of risk GE is not ready for joint venture with the local company. But gradually GE understands the benefit from
joint as GE received the many of positive response from the joint venture in much
country. Now, joint venture is become on e of the important financial tool for
GE as currently GE has more than 47 joint venture in different segment of their
business. And maximum revenue of the GE
is from foreign operation now. Hence decision of GE to initiate joint venture
for global presence becomes right decision over the period of time. Now GE is
most interested to form joint venture with the foreign company which support to
both the companies.
General Electric is eager to enter in the global
market but he is facing some of the problem hence it is not possible to enter
in the global market by way of Greenfield alone hence General Electric
identified the middle way to enter in the global market. By way of joint
venture with the local company of the country GE can enter in the global market
in the global market with lower investment. As joint venture of the GE with
other company help to both the venture company. GE have benefit of the global
presence at low investment and taking interest on the other company, whereas
other venture company have benefit to take advantage of the GE image for
increase their revenue in the market. Some
of the other venture has benefit of the financial need fulfilled by the GE.
Also other venture can also take advantage by entering their presence in the
global market with the help of GE. From the joint venture of the foreign
company GE surpass the revenue in 2007, as from the year 2007 onwards GE have
maximum portion of revenue are from the foreign operation.
Most of the small scale company are operating their
business in local presence but one more problem to the small industry is
inability to research and innovation due to high amount of expenditure on
innovation. Hence cost of production of that industry is higher compared to the
big organization as big organization is using updated technology for production
of product. in that case GE formed joint venture with the tinny industry to
provide support for technology innovation by way of research and design of the
product which improved the quality of product of the small industry with
reduction of the cost. With that small organization also have entered into
global market with GE and deal with big organization which synergies the
business of local leader. Hence small industries are ready to share stake with
GE for name, reputation, technology, research, development and increase in
revenue. Whole analysis reveals that from the joint venture both the venture of
the joint venture gaining as business in form of joint venture provide fuel to
the small organization.
Segment of business of GE from joint venture – Joint venture from
the different company provide opportunity to work in different segment of
industry to GE. Currently GE operating their business in 8 different segment of
industry and successfully provides their service to the people. By way of joint
venture GE entered in more than 175 countries of the work with the support of
tinny organization. Currently most popular working segments of GE are –
Power
and water –
Company provides service in the field of power and
water segment in some of the countries with the support of local venture. In
this sector GE provide service of designing, maintenance, installation,
operation of the product sold by GE in the global market. For the power generation
GE provides Gas, nuclear reactor, steam engine and other products related to
the power and water. With this product GE also serve water purification,
chemical treatment and distillation service.
Oil
and Gas –
In the global market in the segment of oil and gas
GE provides the LNG, pipeline compression, downstream procession, pipeline
inspection service to the big organization.
Energy
Management -
Energy management section of GE provides the
conversation, management, and technology
to the electric industry. It also provides the plant automation by way of
hardware, software and other tools to the industries.
Aviation
– In this segment company sold aircraft and airlines to the government
agencies. Also GE provides the product related to the airlines and aviation to
the company of the industry.
Healthcare
– In the health care industry also have GE have many products like X-Ray
machines, nuclear imaging, radiology machine, drug discovery and other machine
related to the health care industry.
Finance
–
GE provides their number of service in finance sector with the help of joint
venture of different banks and company. In this segment company provides auto
loan, credit card and other loan to the user.
Hence in all the segment of industry GE perform well
with the support of venturer. Joint
venture is proved as best option for the GE.
Recommendation – GE is entered in to the joint venture
with organization in new industries. Now for GE we recommended to expand their
every area of business with the supportive venturor as some of the venturor
join GE with intent to expansion but they cannot globalize their business hence
to long term relation with the joint venture GE has to support to the venture
with them.
Conclusion
- From the whole analysis and research we conclude that joint venture is one of
the better options for the GE. From the jointure strategy GE perform well and
revenue of the organization is increased rapidly and global presence of the
organization also impacted with the joint venture operation. Joint venture operation
of the GE increase the reputation of the company in the global market also
brand value of the GE also reaches to 6th place in Forbes ranking.
References –
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<http://www.ge.com/in/about-us/building>
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12th December, 2015 http://www.nytimes.com/2007/10/04/business/worldbusiness/04iht-venture.5.7759031.html?_r=0
Geaviation, ND, “GE joint Venture” Accessed on 12th December, 2015 <http://www.geaviation.com/press/other/other_20140717.html>
Claudia H Deutsch, 2007, “GE brings Ventures to life” Accessed on
12th December, 2015 <http://www.nytimes.com/glogin?URI=http%3A%2F%2Fwww.nytimes.com%2F2007%2F10%2F04%2Fbusiness%2Fworldbusiness%2F04iht-venture.5.7759031.html%3F_r%3D0>
Economist, 2014, “ A hard act to follow by GE” Accessed on 12th December,
2015 <http://www.economist.com/news/business/21605916-it-has-taken-ges-boss-jeffrey-immelt-13-years-escape-legacy-his-predecessor-jack>
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