General Electric

Aaron Trigg, Lindsey Mauro, Michelle Milkovich, Sean Smith

Key Facts about GE

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

At 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 technologies

The two companies united in 1892 and formed The General Electric Company

Headquartered in Fairfield, CT 300,000 employees In over 160 Countries CEO - Jeffrey Immelt

Vision and Mission

Although GE does not have an exact mission statement it operates under the following four main values: Values - Imagine, solve, build and lead - four bold verbs that express what it is to be part of GE. Their action-oriented nature says something about who we are - and should serve to energize ourselves and our teams around leading change and driving performance.

Vision – “ We Bring Good Things to life”

History of GE

1879 – Thomas Edison Invents light bulb 1890 – Edison General Electric Created 1892 – Edison merges with Thomas-Houston Electric (owned by Charles Coffin) 1896 – One of first 12 companies listed on Dow Jones Industrial Index 1919 – Founded Radio Corporation of America (RCA) to further international

radio (later sold) WWI – Developed Aircraft turbosuperchargers 1941 – Whittle w.1 jet engine – GE Aviation 1950s – GE began Computing branch (Sold to Honeywell in 1970) 1968 – American Airlines and United Airlines chose to purchase new GE jet

engines 1981 – Jack Welch named CEO (GE worth $13B) 1986 – Purchased RCA & NBC 1992 – Purchased Britain’s General Electric Corp (Overseas growth) 1995 – GE Adopts Six Sigma management approach 1998 – Revenues over $100B for first time 2001 – Jack Welch Retires (GE worth $410B)/Jeffery Immelt named CEO 2001 – Honeywell Merger Blocked 2002 – Acquired wind turbine assets from Enron 2004 – Reorganized GE’s 13 businesses into 11 focused on customers 2007 – Acquired Smith Aerospace/Sold GE Plastics 2010 – Acquired gas engine manufacturer Dresser Inc.

GE or Not GE

World’s Largest Producer of Solar Panels

GE or Not GE

NBC is an American commercial broadcasting television network

GE or Not GE

UK pharmaceutical company, specializing in medical diagnostics and life science products

GE or Not GE

Conglomerate Company based out of Gotham City

Divisions of General Electric

EnergyEnergy Services Oil & Gas Power & Water

Technology InfrastructureAviationHealthcareTransportation

GE CapitalAmericasAsia PacificAviation Financial ServicesConsumer FinanceEurope, Middle East & AfricaEnergy Financial Services Real Estate

Home & Business SolutionsAppliances & LightingIntelligent Platforms

Organized Along 11 Businesses

Financial Analysis/Comparison

GENERAL ELECTRIC SIEMENSRatio 2010-

20112011-2012

Total Asset T.O.

.2 .2

ROA 1.48 1.79

ROE 9.6 11.15

EPS 1.24 (ttm)

FCF/NI 2.26 1.46

Current 3.01 2.73

EBT Margin 9.46 13.64

Debt/Equity 2.72 2.34

Receivables T.O.

12.99 10.34

Inventory T.O. 6.1 5.39

Ratio 2010-2011

2011-2012

Total Asset T.O. .77 .71

ROA 3.94 5.94

ROE 14.18 20.53

EPS 8.72 (ttm)

FCF/NI 1.8 .91

Current 1.22 1.21

EBT Margin 7.65 12.57

Debt/Equity .62 .45

Receivables T.O.

5.17 5.24

Inventory T.O. 3.74 3.42

Six Sigma

Six Sigma Business Management Strategy▪ Originally created by Motorola Inc.

John Francis "Jack" Welch, Jr.– GE CEO (1981-2001)▪ Early adopter (1995)▪ In 1980, the year before Welch became CEO, GE recorded

revenues of roughly $26.8 billion. In 2000, the year before he left, the revenues increased to nearly $130 billion.

▪ The company had gone from a market value of $14 billion to more than $410 billion, making it the most valuable and largest company in the world.

Interview with Jack Welch about Six Sigma

SWOT Analysis

Strengths Global strength and recognition▪ 6th in Fortune 500 list, operating in more than 160 countries▪ 5th Best Global Brand▪ 19th Most Innovative

Excellent management▪ 7th Best Company for Leaders▪ Proven leadership and business model▪ Confident investors – raising capital

Diverse product range▪ Long Term (GE Aircraft engines)▪ Short Term (GE Lighting, Plastics, NBC) ▪ Financial Services (contributes to 40% of GE’s revenue)▪ Spreading the risk of failure in every market and not just one

SWOT Analysis

Weaknesses Conglomerate▪ Complexity in management and difficult for analysts and investors

to understand operations No Mission Statement▪ Without a clear mission, it can be difficult to make decisions and set

the direction of the company Company size/ acquisition restriction ▪ Eg. GE’s planned acquisition of Honeywell International, a

diversified technology and manufacturing company, specializing in aerospace products, was rejected by the EU

Energy Segment▪ Underperforming, no signs of near future recovery

Pollution▪ History of being a heavy polluter▪ 4th Largest Corporate Producer of Air Pollution in the United States

Flexibility ▪ Large and diverse businesses might overstretch the company and

reduce reaction times to shifts in targeted markets

SWOT Analysis

Opportunities Green Technology▪ Had a history of being polluters, so finding environmentally

friendly alternatives▪ $850 Million investment into Renewable Energy▪ Investment into Solar Technology for use in Plants

Divesting Consumer and Industrial Businesses Research and Development ▪ Immense capital allows GE to contribute a lot to R&D for

product development and improvement Increased geographic growth▪ Global expansion = more opportunities (Eg. China)

Merger between NBC and Vivendi▪ Further opportunities in the media business

Improved customer services▪ Adopted a new customer focus initiative

SWOT Analysis Threats

Technology Disaster▪ Produced nuclear reactors that contributed to Fukushima disaster

Exposure to global economy▪ Economy slowdown would affect GE, since 40% of the revenue is

generated overseas▪ Exposed to currency fluctuations

Publix Relations Problems▪ $84 Million used for political lobbying▪ Pay no taxes and $4.7 billion in tax rebates▪ Laid off over 4,000 workers while increasing executive pay by 27%

Intense scrutiny after Enron▪ More transparency and disclosure; skeptical investors ▪ Public image of all large companies suffered

Competition▪ Constant change in technology heats up competition▪ Very diverse:- tough to be the best in all industry

Porter’s Five Forces

Threat of New Entrants Tough for new entrants to pinch a sizable

chunk of market share from GE or its competitors

All of GE's companies are in very large-scale economies, which are difficult to break into. It would require a great deal of capital in advertising to get a new companies brand name out to the public

Porter’s Five Forces

Threat of Substitutes The financial segment of GE is not as

susceptible to a threat of substitutes as other units of GE.

i.e.: it is much easier for a customer to switch their brand of appliances than its financial institution

GE NBC is highly prone to substitutes as viewers can easily change the channel to another network

Just about every technological product GE creates has the threat of substitutes, technology is constantly evolving and becoming more efficient.

Porter’s Five Forces

Bargaining Power of Buyers Due to the size of General electric, they have

considerable bargaining power for most of their products.

For companies such as GE Healthcare the volume per buyer is very high in quantity of goods and cost of goods, making the switching cost high for buyers, giving GE the advantage

For other companies such as GE financial, it is easier and not as costly for buyers to switch, making it essential that GE stays competitive in price wars with the competition.

Porter’s Five Forces

Bargaining Power of Suppliers The bargaining power of suppliers is

relatively low for GE’s many industries Because of the shear volume of goods

that GE buys for their suppliers, suppliers have very little ability to bargain with GE

Most of GE’s suppliers could not survive if they lost GE’s business

GE has to be aware of suppliers that might integrate forward

Porter’s Five Forces

Competitive Rivalry Within Industry Rivalry with Siemens – biggest competitor

Creating competitive advantages to create bigger market share

Acquisitions, mergers and joint-ventures Battle for innovation and technological

improvements GE has high brand recognition, market share,

access to assets and competencies and customer loyalty making it highly competitive within the industry

Our Recommendations

Do not become complacent Understanding Growth Potential of each

division and how to be #1▪ “Expect to be industry leaders in market share,

value and profitability, if a business cannot meet our financial goals, or could be better run outside GE, we will exit that business rather than erode shareowner value”

Divesting▪ Are all of the divisions necessary?

How competitors are performing, to stay ahead

Our Recommendations

Making sure they make smart decisions Know the company culture, values and

performance before acquiring in order to make sure they align with GE’s▪ Ex. Kidder, Peabody (Brokerage Firm)

Investment into Environmentally Efficiency