General Electrical SWOT Analysis
Highlights of the SWOT:
- Strengths: –
- Global Market Presence.
- Advanced Technology.
- Large Business Portfolio.
- Smart Business Structure for better management.
- Strong financial position.
- Investment in disruptive innovation.
- Strong presence outside US.
- Strong backlog.
- Heavy Investment in R&D.
- Weaknesses:
- Falling Revenue across some business segments.
- Increased pension related liabilities.
- Opportunities:
- Entry into new business segments.
- Expansion through mergers and acquisitions.
- Faster expansion in middle eastern markets.
- Threats
- Higher tax related liabilities.
- Geopolitical changes.
- Competitive Pressures.
- Increased legal and regulatory pressures.
General Electric is one of the Industry leaders in the area of high technology. Its business is spread across 8 main segments including power, aviation, healthcare, transportation, capital, energy connections and lighting, renewable energy and oil and gas. In all these areas GE is pushing the line to build competitive advantage and higher profits. The company achieved a sharp rise in revenue across its power segment. In aviation and renewable energy too, the brand achieved good results. Some of the other business segments saw a decline in revenue. The overall performance of the brand has been good despite the ever-changing economic, geopolitical and technological scenario. 2016 was an year when the power of business was being questioned by several important forces including governments, legal and cultural forces. Rising protectionism has proved a challenge to business expansion since brands had started looking farther to expand their business.
Quality and technology have become important strengths in this era that are helping businesses overcome the biggest challenges and hurdles before them. Businesses are doing everything to create value for the society and to build trust. Bad regulatory and economic practices throughput the world are also making the environment challenging for the big businesses. Rise of disruptive innovation (Uber & Air BnB) has also challenged the big businesses. If GE has performed in such a difficult environment then it is because of excellent technology and focussed human resources. GE has several more strengths that have helped it bear the most turbulent market situations and helped it sustain its market position. This is a SWOT analysis to help you understand GE’s market position and business strategy.
Strengths: –
– Global market presence – GE was incorporated in 1892 and through the acquisition of new technologies and services, it has improved its scope of business since then by a very large degree. Today the global digital industrial company is transforming the industry with its extraordinary capabilities. Today, the brand is present in more than 180 countries and has a large workforce of 295,000. It is one of the companies with the finest global footprint.
– Advanced technology – The brand is known the most for its advanced technological capabilities. It has solved some of the biggest problems in this world through its advanced technological capabilities. The brand is known for long for being a leader in clean energy innovation. Other areas where the brand has made a strong presence felt through its technology are locomotives and jet engine.
The brand also played a major role in restoring electricity to Iraq. Advanced technology is a major source of competitive advantage for GE and it has set several examples in many areas starting from power to transportation. Its CFM Leap engine is one of the most advanced engines equipped with 141 sensors. GE has also shown special focus in the area of IT where its IT team is reinventing IT an designing new ways for technology implementation inside General Electric.
– Large business portfolio – The brand has a very large business portfolio spread across 8 major segments that include power, aviation, healthcare, transportation, capital, energy connections and lighting, renewable energy and oil and gas. In some of these sectors it made major progress despite the situation being challenging and in some the revenue fell. Overall, the entire business portfolio is spread across some major groups which is another sign of a strong global brand. In its business portfolio, the industrial segments are now the biggest source of revenue for the brand. They create 45% to 90% of revenue for GE.
– Smart business structure for better management – Another important advantage that GE has grabbed is through its smarter business structure. All the business segments have their own business leaders. At GE there are no philosophers, only leaders who meet regularly and discuss important issues like competition and key challenges. Right at the time Jack Welch was the CEO, the brand had focussed on simplifying the entire structure to create more space for innovation.
– Strong financial position – The brand is in a strong financial position owing to its strong technological capabilities and global footprint. Amid the challenging situation globally over the past few years, the brand has grown profitably. Its industrial revenue in 2016 was $111. 5 Billion and the compound annual growth rate was at 3%.
– Investment in disruptive innovation – Innovation has become the new norm in the industry and so investment in it has become more than compulsory. GE is also investing in disruptive innovation so that its industrial productivity can rise higher in future. It has established two new ventures GE digital and GE additive manufacturing. The biggest challenge big businesses are facing is related to their future. The brand is also challenging itself to achieve major financial goals in the coming future. Its two new business ventures are in the early stage of value creation for its investors and shareholders. The brand is investing in technology to become the leader in industrial productivity. Last year, GE invested around $4 billion in analytics software and machine learning capability. Apart from it the brand has invested $2 billions in additive manufacturing, equipment and services.
– Strong presence outside US – More than 50% of its earnings come from outside the US. There has been a major change since 2000. In 2000, the brand earned more than 70% of its revenue from US. Today, more than 60% of the orders GE receives come from outside United States. The average growth rate of the brand globally has been at 5% of 10% since 2000. The 9/11 attacks marked a critical turn in the US aviation market. However, GE’s extraordinary capabilities have kept it winning in the global markets.
– Strong backlog – By the end of 2016, GE had a record backlog worth $321 billion. Digital Industrial service is an important domain where GE has a leadership status and where it has accumulated a strong backlog of $237 billions.
- Heavy investment in R&D – The brand is making heavy investment in research and development. This amount has kept increasing over years and from $5,273 millions in 2014, it has reached $5,466 millions in 2016. Here is a break up of the investment made by GE in R&D.
Segment
2016
2015
2014
Aviation
$1595
$1893
$1965
Healthcare
$938
$905
$817
Power
$695
$721
$641
The dollar sums are in millions. You can see that Aviation, healthcare and power are important segments where GE has consistently invested a large sum in Research and development. the competition is intense and that is why such heavy focus on R&D. While the investment in R&D in aviation has been reduced over years, in healthcare and power they have increased.
Weaknesses: –
– Falling revenue across certain business segments – Except some major technological segments, the brand has seen its revenue falling in some of the business segments like healthcare and transportation. However, seen in the light of the challenging market situation and competition, GE’s performance is still good. Increased competition has only made its profits fall across certain segments.
– Higher pension related liabilities – The pension related liabilities of the business have grown. In 2016, its pension plan deficit decreased which was due to growing pension liabilities and lower discount rates. However, GE’s investment performance and changes in mortality assumptions were able to partially offset these liabilities.
Opportunities:
– Entering new business segments – GE has entered some new businesses which have started creating value for its shareholders and investors. To find faster growth, it can look for business opportunities in more new areas.
– Growth through mergers and acquisitions – Mergers and acquisitions can also help GE find faster growth. Like its merger with Baker Hughes, it can merge more such businesses operating in similar business areas. Baker Hughes was 62.5% owned by General Electric.
– Further Expansion in middle eastern and Asian markets – More opportunities are waiting for GE in the Middle Eastern and Asian markets. Like Africa, the brand can increase its presence in Asian countries too.
Threats:
– Higher tax related liabilities – Being a global company increases the tax related liabilities of a multinational brand. In US, the business policies have grown increasingly antiquated while its competitors have embraced change. While other countries are making trade deals and promoting growth throughout the world, US is still lagging in this area. In other parts of the world too governments have grown more and more aggressive while dealing with businesses. India recently introduced new tax liabilities that have hit both small and big businesses. Moreover, tax laws differ from market to market.
– Geopolitical changes – Geopolitical changes all across the world have brought major difficulties before the big business brands. Falling oil prices, Ebola, ISIS, terrorism and all the other factors are affecting business dynamics throughout the world. These geopolitical changes have created pressures making businesses look for new markets.
– Competitive pressure – Competitive pressures on businesses have also grown for several important reasons. Technological changes have affected businesses like never before. Innovative disruption has changed the industry norms and the rise of digital has led to the emergence of new giants. All these factors have made businesses more aggressive in terms of competition.
– Legal pressures – Law agencies and governments are also more aggressive now towards businesses. Tightened legal net has resulted in less spaced more pressure. Since the 9/11 terrorist attacks, businesses in aviation are facing more pressure. In other areas too legal pressures are higher including product quality and labor related laws. Businesses are increasingly challenged by legal pressures.
Conclusion:
GE has continued to grow by investing in new businesses and technologies. Its growth has been based on some important technological capabilities. The company has a large and strong business portfolio which has kept it ready for new challenges and business growth. Its global footprint and financial strength have also ensured that the business is ready for future growth. The best thing is that the business has a strong backlog in services and is working on strengthening its presence across several key markets and business segments. Its presence outside the US has grown. More than 60% of its revenue comes from outside US. The business is also investing in disruptive innovation for growth. Through smart leadership and innovative business practices, it has become a leading name in the industry. GE also invests heavily in R&D which is a very critical part of business if a brand wants fast expansion. All of its strengths show that the business is highly competitive and has kept growing globally based on its smart strategy and extraordinary capabilities.
Sources:
https://en.wikipedia.org/wiki/Baker_Hughes
https://www.ge.com/ar2016/assets/pdf/GE_AR16.pdf