General Electric Medical Systems, 2002

Healthcare systems across the globe

• US- Funding comes from government (45%), private insurance (33%), out of pocket (17%) and the rest from private.

• Japan has universal health coverage, with around 27% population above 65+

• France has universal health insurance, with 75% being government sponsored.

• India has hardly any health insurance with 75% out of pocket expenses

• 50% urban Chinese has health insurance, with hospitals being government run and underpriced

• Trends in Healthcare

The industry• Market share-50%, Siemens, Philips & Toshiba-

30% (2002)• Siemens- $4bn, with 50% of its sales from USA,20%

Germany (leader). Profit margin is 10%. Equipment -3% & Services- 15%

• Philips- $5bn, with 50% of its sales from USA,30% Europe, 15% Asia. Profit margin is 3%. Equipment -3% & Services- 10%

• Toshiba- $2.3bn, second largest player in Asia and strong in CT and ultrasound, 5% margin.

General Electric Medical Systems (GEMS)

• $8bn dollar division within GE, with operating margin at 18% and growing at around 16% annually, mkt share is 50%

• Leadership (Exhibit 3 & 4)• Immelt bought an initiative called GPC.• Manufacturing was handled by COE. • 7to 9 % of sales was spent on R&D• Sales and marketing were local operation• 60% of revenue came from equipment sales, and 40%

from services.• Used equipment market was at $1bn with 15% growth

with GEMS share of around 30%. • China imbroglio!!!!

International Structural Stages Model

Foreign Sales as Percentage of Total Sales

Foreign Product Diversity

Global MatrixWorldwide Product Division

Area Division

International Division

International Product Life Cycle Raymond Vernon

Multinational Organization

Decentralized federationKey assets, responsibilities and decisions decentralized

Informal HQ-sub relationships overlaid with financial control

Management regards overseas operation as a portfolio of independent business

Characteristics of mainly European companies that ventured aboard pre World war

International Organization

Assets, resources, decisions decentralized but controlled from HQ

Formal Management planning and control for tighter HQ-Sub Linkage

Management regards overseas operation as a appendages to a central domestic corporation

Characteristics of mainly US companies that ventured aboard post World war

Global Organization Model

Centralized HubStrategic Assets, resources, responsibilities and decisions centralized

Tight Control of Decisions, resources & information

Management treats overseas operations as delivery pipelines to a unified global market

Characteristics of mainly Japanese companies that ventured aboard during 1980s

Integration-Responsiveness Grid

Integration

Low High

LowH

igh

Res

pons

iven

ess

Global Company

Organizational Characteristics of the Transnational

Organizational Character tics

Multinational Global International Transnational

Assets & capabilities

Decentralized and self sufficient

Central & Globally scaled

Centralized and HQ centered

Dispersed, interdependent and specialized

Role of subsidiaries

Sensing and exploiting opportunities

Implementing parent company strategies

Adapting parent company competencies

Differentiated contributions by national units worldwide

Diffusion of knowledge

Developed & retained in subsidiary

Developed and retained at the centre

Developed at center and transferred

Knowledge jointly developed and shared worldwide

The Pharmaceutical Industry Value Curve

Stan Shih’s smiling curve

Learnings from the case

• How do MNC create value?

• Can MNC survive without creating value?

Adapting to the context

Changing the context