General Electric Five Forces Analysis

 Five Forces Analysis of General Electric

General Electric is one of the most notable names globally in the field of high technology. Its business is spread across 8 main segments. From power and aviation to energy as well as oil and gas, the brand is a well known name in all these business areas. The rise of disruptive innovation has forced the brand to focus on new and more sources of competitive advantage. Incorporated in 1892, the brand has created a global presence and is found in 180 countries. Its advanced technologies are its major source of competitive advantage. Apart from that a large product portfolio and smarter business structure are also notable sources of advantage for the brand. Its industrial segments have become the biggest source of revenue for the brand creating around 45 to 90% of its revenue.

This is a five forces analysis of GE analyzing how competitive the brand is and its position respective to important forces in the business world. The Five forces model was developed by Michael E Porter and helps analyze how competitive and attractive a brand’s position is. These five forces are there in every industry and market and can be analyzed to understand the market or business’ attractiveness and profitability. It is also an important strategic tool that managers can use to understand the viability of projects in specific markets.

 

Key Points: Bargaining power of suppliers: low Bargaining power of buyers: high Threat of Substitutes: Moderate Threat of new brands: low Competitive rivalry among existing brands: High

 

Bargaining power of suppliers:

The pressure on suppliers of big brands has increased in the 21^st century. It is because while the number of suppliers is high, there size is small and they are scattered globally. All these things reduce their bargaining power. The big companies are always looking for suppliers that can provide satisfactory quality and follow the rules set by the company for them. GE’s suppliers are also located globally and because of their small size do not hold much bargaining power. However, their role in the supply chain is critical and GE provides them all the tools required to make them more efficient. Still, due to the financial clout of the brand and its global presence and brand image, it gains the upper hand. The suppliers’ clout remains limited and low.

 

Bargaining power of buyers:

 

The bargaining power of buyers has grown in this era which is because of several factors. Apart from the heavy competition in the industry, the other factors which limit business’ clout are the availability of information and substitutes. Due to the increased proliferation of IT and computers , the modern consumer is well informed and van access all the information it needs to make its buying decisions. Brand loyalty is now even difficult to build.  Some of the factors that moderate the bargaining power of the customers are the excellent technological capabilities of the brand and other important strengths like global presence. These factors moderate the bargaining power of customers which is otherwise high.

 

Threat of substitute products:

The threat of substitute products for GE is moderate. The number of direct and real competitors is limited to just a few. Siemens, 3M, Hitachi and United Technologies are some of its direct competitors of the brand. The main threat of substitutes comes from the products made and sold by these competitors. The factors that limit the threat from products by the competing brands are GE’s technological capabilities, product quality and brand image. Based on all these factors the threat from substitute products remains moderate. In 2017, while GE’s revenue rose across some business areas, it fell across the others and one reason behind it could be competition.

Threat of new entrants:

The threat of new entrants is low. It is because apart from a very large investment there are other barriers to market entry. There is a large investment in erecting a global brand. Apart from the large technological infrastructure, there is a large investment required for marketing, R&D and labor. The legal and political barriers have also grown larger making market entry of new brands difficult. So, the overall threat of new market players adding to GE’s competitive pressures is low.

Competitive rivalry among the existing brands:

With time the competitive rivalry among the existing brands has grown intense. Apart from the large and direct competitors like Siemens, 3M, Hitachi or United Technologies, there are more competitors in the local markets globally. These competitors too provide matching products and services in various categories from healthcare to power and other industrial businesses. The competitive rivalry among these brands has kept growing intense.

Sources:

https://www.gepower.com/about/suppliers

https://www.forbes.com/sites/narrativescience/2012/01/17/forbes-earnings-preview-general-electric/#3e28ec5a68d7