MGT 3301 - GE Presentation

General ElectricGeneral Electric

""I never perfected an invention that I did not think about in terms of I never perfected an invention that I did not think about in terms of service it might give others"service it might give others"- Thomas Alva Edison, GE Founder- Thomas Alva Edison, GE Founder

It all started with the flicker of a It all started with the flicker of a light bulblight bulb and soon enough GE was off and running… and soon enough GE was off and running…

– In 1890, Thomas Alva Edison established the Edison General Electric Company in Menlo Park, New In 1890, Thomas Alva Edison established the Edison General Electric Company in Menlo Park, New JerseyJersey

– At the same time Charles A. Coffin was growing his business, The Thompson CompanyAt 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 technologiesIt was increasingly difficult for Edison and Coffin to remain competitive based their own technologies

The two companies united in 1892 The two companies united in 1892

and formed The General Electric Companyand formed The General Electric Company

Key Facts About GEKey Facts About GE

HeadquartersHeadquarters– Fairfield, ConnecticutFairfield, Connecticut

Number of EmployeesNumber of Employees– Over 315,000Over 315,000

LocationsLocations– Over 160 CountriesOver 160 Countries

Symbol on Stock ExchangeSymbol on Stock Exchange– GEGE

Number of ShareholdersNumber of Shareholders– 4 Million4 Million

Number of Shares Number of Shares OutstandingOutstanding– 10 Million10 Million

Historical Number of Share Historical Number of Share SplitsSplits– 99

Annual Revenue From 1994- 2003Annual Revenue From 1994- 2003

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

GE Stock Price Relative to S&P 500 From GE Stock Price Relative to S&P 500 From 1999-20041999-2004

Reginald H. JonesReginald H. Jones

Chairman & CEO, 1972 – Chairman & CEO, 1972 – 19811981

Managerial qualities:Managerial qualities: ‘Intellectual breadth, strategic ‘Intellectual breadth, strategic capability, social sensitivity, capability, social sensitivity, political sophistication, world-political sophistication, world-mindedness, and above all, a mindedness, and above all, a capacity to keep their poise capacity to keep their poise amid the cross-currents of amid the cross-currents of change.’change.’Relationship between business Relationship between business and governmentand government

Today…GE spends 7.5MM on Today…GE spends 7.5MM on lobbyinglobbying

Jack F. Welch Jr.Jack F. Welch Jr.

Chairman & CEO, 1981 – Chairman & CEO, 1981 – 20012001

On Six Sigma Welsh On Six Sigma Welsh said, “...it is the way said, “...it is the way we work.” we work.” Customer-Focused Customer-Focused Methodology to Improve Methodology to Improve Quality Through Defect Quality Through Defect ReductionReductionToday…Rigorous Employee Today…Rigorous Employee 66σσ Certification Certification

Jeffrey R. ImmeltJeffrey R. Immelt

Chairman of the Board Chairman of the Board and Chief Executive and Chief Executive Officer, 2001 – PresentOfficer, 2001 – Present

Today…Today…

New Frontiers & Strategic New Frontiers & Strategic Alliances for GEAlliances for GE– NBC-Universal acquiring NBC-Universal acquiring

interest in Telemundo networkinterest in Telemundo network

– GE and Honda form GE GE and Honda form GE Honda Aero Engines LLC, Honda Aero Engines LLC, design small (private) jet design small (private) jet enginesengines

GE is Organized Along 11 GE is Organized Along 11 BusinessesBusinesses

GrowthGrowth vs. vs. Cash GeneratorCash Generator

Energy Commercial Finance

Transportation Infrastructure

NBC Universal Healthcare ConsumerFinance

Advanced Materials

Consumer andIndustrial

Insurance EquipmentServices

Perceived Drivers forPerceived Drivers for ChangeChange

GlobalizationGlobalizationTechnologyTechnologyInnovationInnovationDiffusion of Diffusion of technological know-technological know-howhowRegulatory influences Regulatory influences and government and government policy changespolicy changes

Four Values Translates Into ActionFour Values Translates Into Action

Action At Work:Action At Work: Six Sigma Product StandardSix Sigma Product Standard

Must produce no more Must produce no more than 3.4 defects per than 3.4 defects per million opportunities. million opportunities.

An "An "opportunityopportunity" is " is defined as a chance for defined as a chance for nonconformance, or not nonconformance, or not meeting the required meeting the required specifications; GE strives specifications; GE strives to be flawless in to be flawless in executing their key executing their key processes.processes.

6 Key Areas 6 Key Areas

1.1. Critical to Quality Critical to Quality

2.2. DefectDefect

3.3. Process CapabilityProcess Capability

4.4. VariationVariation

5.5. Stable OperationsStable Operations

6.6. Design for Six SigmaDesign for Six Sigma

Four Objectives of Work Out Four Objectives of Work Out MeetingsMeetings

– Create a New Create a New Paradigm for GEParadigm for GE

– Empower Empower EmployeesEmployees

– Eliminate Eliminate Unnecessary WorkUnnecessary Work

– Build TrustBuild Trust

Action Fosters Business-Wide and Action Fosters Business-Wide and Personal GrowthPersonal Growth

Toastmasters is an Toastmasters is an international organization international organization dedicated to improve/ dedicated to improve/ facilitate communication facilitate communication within an organizationwithin an organization

4 Goals of Sessions4 Goals of Sessions– Deliver great presentations Deliver great presentations – Easily lead teams and Easily lead teams and

conduct meetings conduct meetings – Give and receive Give and receive

constructive evaluations constructive evaluations – Be a better listenerBe a better listener

TheThe $1Billion$1Billion GE Talent FactoryGE Talent Factory– Program began in 1919—Program began in 1919—

oldest training program of oldest training program of its kindits kind

EngineeringEngineering

FinanceFinance

Info ManagementInfo Management

OperationsOperations

Sales and MarketingSales and Marketing– Several assignments within Several assignments within

disciplinediscipline– Acquire broad overview of Acquire broad overview of

GEGE– Develop leadership/ Develop leadership/

professional skillsprofessional skills

The Ultimate Driving The Ultimate Driving Machine… Just Got BetterMachine… Just Got Better

GE’s Advanced Materials has teamed up with GE’s Advanced Materials has teamed up with BMW to design and produce lightweight, BMW to design and produce lightweight,

durable, chip resistant fenders for their high durable, chip resistant fenders for their high performance 6 Seriesperformance 6 Series

GE’s Financial StatementsGE’s Financial Statements

Revenue By Operating Revenue By Operating SegmentSegment

% of 2003 Total % of 2003 Total RevenueRevenue




Advanced MaterialsAdvanced Materials 5.27%5.27% 5.27%5.27% 5.59%5.59% 6.15%6.15%

Commercial FinanceCommercial Finance 15.51%15.51% 14.82%14.82% 14.02%14.02% 13.46%13.46%

Consumer FinanceConsumer Finance 9.57%9.57% 7.76%7.76% 7.52%7.52% 7.15%7.15%

Consumer & IndustrialConsumer & Industrial 9.57%9.57% 9.75%9.75% 10.33%10.33% 10.28%10.28%

EnergyEnergy 14.22%14.22% 17.88%17.88% 16.64%16.64% 12.04%12.04%

Equipment & Other ServicesEquipment & Other Services 3.30%3.30% 4.19%4.19% 6.12%6.12% 11.56%11.56%

HealthcareHealthcare 7.60%7.60% 6.77%6.77% 6.65%6.65% 5.58%5.58%

InfrastructureInfrastructure 2.29%2.29% 1.44%1.44% 0.31%0.31% 0.37%0.37%

InsuranceInsurance 19.52%19.52% 17.62%17.62% 18.90%18.90% 18.99%18.99%

NBCNBC 5.12%5.12% 5.41%5.41% 4.56%4.56% 5.21%5.21%

TransportationTransportation 10.07%10.07% 10.35%10.35% 10.98%10.98% 10.19%10.19%

Corporate items and eliminationsCorporate items and eliminations -2.05%-2.05% -1.26%-1.26% -1.63%-1.63% -0.99%-0.99%

GE’s Revenue Breakdown in GE’s Revenue Breakdown in 20032003

Advanced Materials, 5.27%

Commercial Finance, 15.51%

Consumer Finance, 9.57%

Consumer & Industrial, 9.57%

Energy, 14.22%Equipment & Other

Services, 3.30%

Healthcare, 7.60%

Infrastructure, 2.29%

Insurance, 19.52%

NBC, 5.12%

Transportation, 10.07%

Corporate items and eliminations, -2.05%

Revenue Growth Revenue Growth 2001-20032001-2003

$122,000

$124,000

$126,000

$128,000

$130,000

$132,000

$134,000

$136,000

2001 2002 2003

Consolidated Revenue

**Values in millions of dollars

Profit By Operating SegmentProfit By Operating Segment

% of 2001 Total % of 2001 Total Segment Segment ProfitsProfits



Advanced MaterialsAdvanced Materials 7.59%7.59% 5.41%5.41% 3.10%3.10%

Commercial FinanceCommercial Finance 15.26%15.26% 17.89%17.89% 19.67%19.67%

Consumer FinanceConsumer Finance 8.49%8.49% 9.73%9.73% 10.87%10.87%

Consumer & IndustrialConsumer & Industrial 4.74%4.74% 3.07%3.07% 2.90%2.90%

EnergyEnergy 25.95%25.95% 34.03%34.03% 20.67%20.67%

Equipment & Other Equipment & Other ServicesServices -1.18%-1.18% -2.10%-2.10% -2.11%-2.11%

HealthcareHealthcare 7.94%7.94% 8.36%8.36% 8.56%8.56%

InfrastructureInfrastructure 0.14%0.14% 1.61%1.61% 2.32%2.32%

InsuranceInsurance 9.96%9.96% -0.51%-0.51% 10.57%10.57%

NBCNBC 7.46%7.46% 8.96%8.96% 10.05%10.05%

TransportationTransportation 13.66%13.66% 13.57%13.57% 13.39%13.39%

Net Earnings Growth Net Earnings Growth 2001-2001-20032003

$13,000

$13,200

$13,400

$13,600

$13,800

$14,000

$14,200

$14,400

$14,600

$14,800

$15,000

$15,200

2001 2002 2003

Net Earnings

**Values in millions of dollars

Ratio AnalysisRatio Analysis

20022002 20032003

ROEROE 22.16%22.16% 18.95%18.95%

Gross Profit Gross Profit MarginMargin 60.02%60.02% 61.84%61.84%

Debt-to-asset Debt-to-asset RatioRatio 87.97%87.97% 86.88%86.88%

Debt-to-Equity Debt-to-Equity RatioRatio 794.38%794.38% 710.44%710.44%

Current RatioCurrent Ratio 2.13 2.13 2.35 2.35

Finances, GE, and its Finances, GE, and its CompetitorsCompetitors

GEGE ALSTOMALSTOM SiemensSiemens IndustryIndustry

Revenue GrowthRevenue Growth 1.90%1.90% N/AN/A 4.40%4.40% 7.40%7.40%

RevenueRevenue 140.74B140.74B 20.89B20.89B 92.78B92.78B 6.06B6.06B

Gross MarginGross Margin 61.42%61.42% 14.76%14.76% 28.70%28.70% 34.44%34.44%

EBITDAEBITDA 27.23B27.23B 475.67M475.67M 9.34B9.34B 696.69M696.69M

Oper. MarginOper. Margin 13.93%13.93% 0.38%0.38% 5.32%5.32% 10.40%10.40%

Net IncomeNet Income 15.74B15.74B -2.24-2.24 4.35B4.35B 259.44M259.44M

EPSEPS 1.5441.544 -4.96-4.96 4.7194.719 1.671.67

PEPE 21.5221.52 N/AN/A 15.6215.62 21.2421.24

Competitors of GECompetitors of GE

Main CompetitorsMain Competitors

ALSTOMALSTOM– specialize in energy, ship buildings specialize in energy, ship buildings

and marine systems and transport and marine systems and transport infrastructure.infrastructure.

– Headquarters in Paris, FranceHeadquarters in Paris, France– Acquired ABB (Asea Brown Boveri, a Acquired ABB (Asea Brown Boveri, a

leading competitor to GE)leading competitor to GE)A force to be reckon with; would be GE’s A force to be reckon with; would be GE’s ultimate competitor ultimate competitor

Main CompetitorsMain Competitors

SiemensSiemens– electronics and electrical engineering companyelectronics and electrical engineering company

6 groups:- Automation and Control, Information and 6 groups:- Automation and Control, Information and Communications, Medical, Power, Transportation, and Communications, Medical, Power, Transportation, and LightingLighting

provides industrial automation and control, information provides industrial automation and control, information and communications, lighting, medical, power and communications, lighting, medical, power transmission, and transportation products and servicestransmission, and transportation products and services

– Headquarters in Munich, GermanyHeadquarters in Munich, GermanySubsidiaries headquartered in New YorkSubsidiaries headquartered in New York

– Very similar to GE; strong brand name equity, has Very similar to GE; strong brand name equity, has business operations in over 190 countriesbusiness operations in over 190 countries

5 Forces Model5 Forces Model

Rivalry among competitors Rivalry among competitors – ALSTOM and Siemens, in ALSTOM and Siemens, in

particularparticular– Creating competitive Creating competitive

advantages to gain bigger advantages to gain bigger market sharemarket share

Acquisitions, mergers and joint-Acquisitions, mergers and joint-venturesventures

Battle for innovation and Battle for innovation and technological improvementstechnological improvements


Potential of New EntrantsPotential of New Entrants– AdaptacAdaptac (1981) and (1981) and Adept TechnologyAdept Technology

(1983)(1983)– Late bloomers, but slowly gaining market Late bloomers, but slowly gaining market

shareshare– Does not pose too much of a threat to GE, Does not pose too much of a threat to GE,

ALSTOM or Siemens for nowALSTOM or Siemens for now– Tough for new entrants to pinch a sizable Tough for new entrants to pinch a sizable

chunk of market share from GE, ALSTOM or chunk of market share from GE, ALSTOM or Siemens Siemens


SuppliersSuppliers– Materials, parts, components, other resources Materials, parts, components, other resources – Vertically integratedVertically integrated (GE Advanced Plastics, (GE Advanced Plastics,

GE Consumer and Industrial Manufacturing)GE Consumer and Industrial Manufacturing)– Has to be aware of suppliers that might Has to be aware of suppliers that might

integrate forward integrate forward


SubstitutesSubstitutes– Has many substitutes that might pose a threatHas many substitutes that might pose a threat– Very well-diversified which means that GE is Very well-diversified which means that GE is

spreading the risk of failure in every market spreading the risk of failure in every market – Eg. GE’s NBC-Universal’s substitute are pirated Eg. GE’s NBC-Universal’s substitute are pirated

VCD’s or DVD’sVCD’s or DVD’s

BuyersBuyers– Similar to its substitutes, GE has a broad line of Similar to its substitutes, GE has a broad line of

buyers, ranging from consumers to large corporationsbuyers, ranging from consumers to large corporations– Eg. GE Healthcare’s buyers are hospitals and Eg. GE Healthcare’s buyers are hospitals and

pharmacies.pharmacies.

Strategic Group MapStrategic Group Map

High

Low

LessDiversified

MoreDiversified

Adaptac

AdeptTechnology

General Electric

Siemens

Alstom

Product Range

Per

form

ance

/Pro

duct

Qua

lity

GE’s SWOT AnalysisGE’s SWOT Analysis

StrengthsStrengths– Global strength and recognitionGlobal strength and recognition

55thth in Fortune 500 list, operating in more than 160 countries in Fortune 500 list, operating in more than 160 countries

– Excellent managementExcellent managementProven leadership and business modelProven leadership and business model

Confident investors – raising capitalConfident investors – raising capital

– Diverse product rangeDiverse product rangeLong Term (GE Aircraft engines)Long Term (GE Aircraft engines)

Short Term (GE Lighting, Plastics, NBC) Short Term (GE Lighting, Plastics, NBC)

Financial Services (contributes to 40% of GE’s revenue)Financial Services (contributes to 40% of GE’s revenue)

Spreading the risk of failure in every market and not just oneSpreading the risk of failure in every market and not just one

SWOT AnalysisSWOT Analysis

Weaknesses Weaknesses – Company size/ acquisition restriction Company size/ acquisition restriction

Eg. GE’s planned acquisition of Honeywell Eg. GE’s planned acquisition of Honeywell International, a diversified technology and International, a diversified technology and manufacturing company, specializing in aerospace manufacturing company, specializing in aerospace products, was rejected by the EUproducts, was rejected by the EU

– Energy SegmentEnergy SegmentUnderperforming, no signs of near future recovery Underperforming, no signs of near future recovery

– Flexibility Flexibility Large and diverse businesses might overstretch Large and diverse businesses might overstretch the company and reduce reaction times to shifts in the company and reduce reaction times to shifts in targeted marketstargeted markets


OpportunitiesOpportunities– Research and Development Research and Development

Immense capital allows GE to contribute a lot to Immense capital allows GE to contribute a lot to R&D for product development and improvementR&D for product development and improvement

– Increased geographic growthIncreased geographic growthGlobal expansion = more opportunities (Eg. China)Global expansion = more opportunities (Eg. China)

– Merger between NBC and VivendiMerger between NBC and VivendiFurther opportunities in the media businessFurther opportunities in the media business

– Improved customer servicesImproved customer servicesAdopted a new customer focus initiativeAdopted a new customer focus initiative


ThreatsThreats– Exposure to global economyExposure to global economy

Economy slowdown would affect GE, since 40% of the Economy slowdown would affect GE, since 40% of the revenue is generated overseasrevenue is generated overseasExposed to currency fluctuationsExposed to currency fluctuations

– Intense scrutiny after EnronIntense scrutiny after EnronMore transparency and disclosure; skeptical investors More transparency and disclosure; skeptical investors Public image of all large companies sufferedPublic image of all large companies suffered

– CompetitionCompetitionConstant change in technology heats up competitionConstant change in technology heats up competitionVery diverse:- tough to be the best in all industryVery 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

Weighted Overall Strength Rating 8.43 7.40 7.81

Key Key CompetenciesCompetencies

CompetenceCompetence– Great and proven leadersGreat and proven leaders

Eg. Jeffrey R Immelt, Jack Welsh, Eg. Jeffrey R Immelt, Jack Welsh, Reginald H. Jones Reginald H. Jones

– ExpertiseExpertiseMore capital can be invested in R&DMore capital can be invested in R&D

Core Competence Core Competence – Innovative Innovative – Desire to strive for perfection (6 Desire to strive for perfection (6

Sigma)Sigma)

Key CompetenciesKey Competencies

Distinctive CompetenceDistinctive Competence– Ability to respond to the Ability to respond to the drivers of changedrivers of change by by

understanding the important global trendsunderstanding the important global trends– Acquisition of rivals and other companiesAcquisition of rivals and other companies

Recent NewsRecent News

GE’s $900 million acquisition of InVision GE’s $900 million acquisition of InVision TechnologiesTechnologies– March 15, 2004, GE made it publicMarch 15, 2004, GE made it public– September 16, 2004, FTC gave approval but September 16, 2004, FTC gave approval but

deal is still not finalize deal is still not finalize


Advertising CampaignAdvertising Campaign– Genworth, a financial company part Genworth, a financial company part

of GE, has signed a 5 year contract of GE, has signed a 5 year contract to license the GE logo and use the to license the GE logo and use the slogan, “Built on GE heritage” slogan, “Built on GE heritage”

– Genworth is planning to allocate $30 Genworth is planning to allocate $30 million into advertising this coming million into advertising this coming yearyear


October 11, 2004, Senate October 11, 2004, Senate passed a $136 billion corporate passed a $136 billion corporate tax package that cuts taxes for tax package that cuts taxes for businessesbusinesses– Includes $76.5 billion in new tax Includes $76.5 billion in new tax

relief for the manufacturing sectorrelief for the manufacturing sector– Includes $42.6 billion in tax relief Includes $42.6 billion in tax relief

for multinational companies for multinational companies – Additional capital from the tax Additional capital from the tax

break could be used for break could be used for reinvestment, increase dividends, reinvestment, increase dividends, etc etc

ConclusionConclusion

GE recognizes that part of being successful GE recognizes that part of being successful and well-respected is being socially responsible and well-respected is being socially responsible as wellas well

Has huge potential to remain successful without Has huge potential to remain successful without any major threats from competitorsany major threats from competitors– ““Staying Power”Staying Power”

Will only continue to expandWill only continue to expand

Questions and Answers Questions and Answers SessionSession

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MGT 3301 - GE Presentation