General Electric (GE)

GeneralElectric (GE)

GeneralElectric is a multi –Industry Company. It generates revenues byassuming a multinational conglomerate business model (Gec Review 18).The business model enables general electric to control production ofgoods and services in one or more countries other than the homecountry. AS a conglomerate, General Electric has engaged in entirelydifferent business segments including technology, infrastructure,capital finance as well as consumer and industrial. The companytraces its origin back in 1889 when Thomas Edison, who was aninventor and a successful businessperson developed many devices thatinfluenced many lives in the world (Gec Review 26). Edison discoveredgadgets such as phonograph, the motion picture camera and thelong-lasting and practical motion picture camera (Welch 19). Hemanaged to patent 1,093 US patents for his personal inventions healso registered new patents in the United Kingdom, France, andGermany (Immelt 24). He developed business interests in many electricrelated companies like Edison Lamp Company, Edison machine works andelectric motors Bergman &amp Company that manufactured electriclighting fixtures and other lighting devices (Immelt 11).

In1882, General Electric was formed because of a merger between EdisonGeneral Electric and Thomas Houston electric company. Fourteen yearslater in 1896, General Electric was amongst the first 12 companies tobe listed on the Dow Jones industrial average and it is the only firmout of the first twelve that remains listed in the Dow Index after118 years. In the same year, GE absorbed the National Electric LampAssociation to its lighting business which to date remains as theGeneral Electric headquarters for the lighting business (Immelt 24).

Theprofitability of General Electric business model can be determined byuse of both financial and non-financial measures. First, by use ofnon-financial measures, the growth of the company throughacquisitions are enough evidence that the company was profitable.General Electric ventured into power generation in 2008 afteracquiring a 90% stake in Converteam Company for $3.2 billion (GecReview 36). The energy business was later divided into variousbusinesses such as GE energy management, General Electric oil and gasand General Electric power and water, which have their varioussubcategories. The company also has a subsidiary named GeneralElectric wind energy, which manufactures and sells wind turbines tothe international market. In 2009, General Electric was the secondlargest wind turbine manufacturer in the world (Argyres 17).

Second,general electric company has appeared in many corporate recognitionrankings. In 2011, the company was ranked by Fortune as the 14th mostprofitable firm in the United States in addition to being the sixthlargest firm (Slater 38). In the year 2011/2012, the company wasranked by Fortune as the 18th best company of leaders and 91st mostadmired company. The Interbrand Company also ranked GE the sixth bestglobal brand while Fast Company rated it the nineteenth mostinnovative company (Argyres 8).

Byusing financial measures, General Electric profitability can beanalyzed using indicators such as sales revenue, gross margin, netincome, and earnings per share. In a period of 9 years from 2004 to2013, the revenue has declined from $152 in 2004 to $146 in 2013(General Electric Market Capital 1). Similarly, gross margin on saleshas declined from $59.5 in 2004 to $47.2 in 2013. Further, net incomehas declined from $16 million in 2004 to $13 million in 2013 andearnings per share have declined from $1.59 to $1.27 (Fleck 38).

Profitabilitycan also be determined using the key ratios such as earnings beforetax margins, return on equity and return on assets. Earnings beforetax margin have declined from $13.20 in 2004 to $11.06 in 2013.Similarly, return on equity and return on assets have declined from$2.37 to $1.95 and $17.52 to $10.30 respectively (Fleck 29).

TheGeneral Electric business model has not been changing, but there havebeen substitutions between the various projects. General Electric hasbeen continuously buying promising and selling loss making businesses(Immelt 18). In April 2014, General Electric was in talks to acquirea global power division of French engineering group Alstom for $ 13billion which was a higher offer compared to other interestedcompanies like Siemens and Mitsubishi heavy industries who hadoffered 3.5 billion Euros, General Electric acquired Alston at $17billion which is to be completed in 2015. Further, in 2014, GeneralElectric announced its intentions to sell its Polish banking business(General Electric Market Capital 1).

JefferyImmelt the CEO announced a set of changes in the presentation of thebrand, which was commissioned in 2004. The changes were aimed atunifying the various businesses of General Electric. The alterationsfeatured include a fresh corporate color palette , slight changes onthe GE logo, a fresh customized face (GE inspra) and a new slogan “imagination at work“ to replace the slogan “we bring good thingsto life “ which has been in use since 1979 (General Electric MarketCapital 1).

Theprofitability of General Electric can be improved by taking advantageof the ongoing privatizations of government-run industries.Privatization has an effect of removing barriers to internationaltrade that avails the existing infrastructure for multinationals.Hence improving the flexibility of General Electric should increasethe speed at which emerging opportunities are utilized (Immelt 23).

Demandforecasting will enable the production of the right quantity of goodsrequired in a given region. Overproduction of goods is a great threatto multinationals success in developing countries since, as theproductive capacity of General Electric increases, the buying powerof people in the developing countries remains the same. This resultsin excessive production of a product that leads to price and wagedeflation, reduction of corporate activities, and a rapid drop of thegeneral economic life (General Electric Market Capital 1).

Workscited

GecReview.London: General Electric Co, 1985. Print.

GeneralElectric Market Capital.Forbes Magazine.2014. Web. 18 December 2015.

Immelt,Jeffry R. General Electric Works 2013 Annual Report. 2014. Web. 18December 2015.

Welch,Jack. General Electric`s Revolutionary. HarvardBusiness School Review.18 December 2015.

Slater,Robert. JackWelch and the Ge Way: Management Insights and Leadership Secrets ofthe Legendary Ceo.New York: McGraw-Hill, 1999. Print.

Argyres,Nicholas. General Electric. ThePalgrave Encyclopedia of Strategic Management.2013. Print. DOI:10.1057/9781137294678.0245

Fleck,Denise Lima. The building and development of the American electricalmanufacturing industry and its top two companies. GeneralElectric &amp Westinghouse.2009. Print.