Blog - Page 11 of 15 - Porter's Five Forces

Porter’s Five Forces Analysis Of General Electric Key Facts Name General Electric Company Industry Conglomerate (Energy, Aviation and Healthcare) Founded April 15, 1892 Headquarters Boston, Massachusetts, United States CEOs H. Lawrence Culp Jr. Revenues US $ 74.196 billion, 2021(audited) Profit/(Loss) US $(6.591) billion, 2021(audited) Year end 31st December Competitors Schneider Electric, ABB., Oracle, Siemens, Advanced Control Systems, Survalent Technology. Company Overview The company was incorporated in 1892, acquiring all the assets of the Edison General Electric Company and two other electrical companies. Edison General had been founded as the Edison Electric Light Company in 1878 by Thomas Alva Edison to market his incandescent lamp and other later products. Today, GE employs some 174,000 people worldwide. The company generated global revenue to the value of over 79.6 billion U.S. dollars in 2020 as per Statista. Its reported annual revenue for 2021 is US $74.196 billion. It has reported net assets of US $ 4.1612 billion for the year 2021. Porter’s Five Forces Analysis Porter’s Five Forces Analysis is a widely used model to evaluate companies’ strategies in reference to its industry for neutralizing the competition and increase the margins, it is developed by Professor Michael E. Porter in 1979, at Harvard Business School. General Electric Rivalry among Existing Competitor General Electric Business Segments: The Company’s main business includePower, Renewable Energy, Aviation and Healthcare. GE also provides services in Additive Manufacturing, materials science and data analytics. The company’s sales & distribution network is in more than 170 countries, having nine manufacturing plants across five states build appliances that are in half of all U.S. homes. General Electric Operations Year 2021: The Company’s major manufacturing and assembling facilities are located in U.S., Europe, China region, Asia (excluding China region), Middle East and Africa. The revenue generated in 2021 from different segments include; Aviation segment worth US $ 21,310 million, Healthcare US $ 17,725million, Power US $ 16,903 million Renewable EnergyUS $ 15,967 million and US $ corporate 2,561 million. Siemensis also proved to be one of key players by giving a record sale of€ 71.977 billion and net profit of € 3.723 billion in 2022. Siemens is also a conglomerate corporation As of September 30, 2022, Siemens has the following reportable segments: Digital Industries, Smart Infrastructure, Mobility and Siemens Healthineers, which together form our “Industrial Business” and Siemens Financial Services (SFS) . On a geographical basis, 74% of revenue was generated in the Europe, C.I.S., Africa, Middle East region, 18% in the Asia, Australia region and 8% in the Americas region. Exports from Germany accounted for 57% of overall revenue. In fiscal 2022, orders for Siemens AG amounted to €20.8 billion. Income from investments included in particular profit distributions from Siemens Beteiligungsverwaltung GmbH & Co. OHG, Germany, amounting to €2,380 million, from Siemens Ltd., China, amounting to €1,060 million, from Siemens Healthineers AG, Germany, amounting to €567 million, and from Siemens Beteiligungen Europa GmbH, Germany, amounting to €333 million. Schneider Electric is also a major competitor with an annual reported sales of € 28.905 billion and net income of € 3.204 billion for the year 2021.Schneider Electric is also a conglomerate corporation with reportable segments; Automotive and eMobility, Cloud and Service Providers, Energies and Chemicals, Food and Beverage, Mining, Minerals and Metals, Power and Grid. The revenue generated for the year 2021 includes Western Europe € 7,382 million , France € 1,749 million, AsiaPacific € 8,995 million , China € 4,701 million , North America € 8,267 million , USA € 7,148 million , Rest of the World € 4,261 million. They have over 128,000 employees and operate in more than 100 countries Investment in Research & Development-Marketing Cost and Brand Image: The existing battles among the brands with a challenge of changing trend towards AI technology, advanced health care equipment and power generation from renewable resources requires high investments in research and development to better design the product for an accelerated customer satisfaction. GE also needs to focus on marketing to increase the brand image and better customer loyalty. General Electric Threat of New Entrants Global Aviation, Health Care Equipment and Power Industry: By 2027, the worldwide aerospace forging market is expected to be worth 7.9 billion U.S. dollars. Revenue in the Health Care segment is projected to reach US$63.90bn in 2023.Revenue is expected to show an annual growth rate (CAGR 2023-2027) of 10.15%, resulting in a projected market volume of US$94.07bn by 2027. Whereas it is projected that electricity generated worldwide will increase by nearly 70 percent in the coming three decades, to reach some 42 thousand terawatt-hours by 2050. That year, renewables are expected to be the largest source of global electricity, accounting for some 56 percent of electric power produced as per Statista. High Capital Investment- Trained Human Resources: The new entrant will be requiring high capital investment, with extensive and sophisticated manufacturing-assembling structure so it is discouraging barrier for any new entrant. As due to the specialized nature of the product only limited human resource can handle such high-end products. High Research & Development Cost: High research and development cost is required for launching any new product in the current power, healthcare and aviation industries Technological Advancement: The facilities and equipment for carrying out designing, testing and production of aircrafts, health care equipment and power generation requires a lot of investment which can only be managed by firms having a strong financial base. General Electric Bargaining Power of Suppliers Supplies Industry Influencer: Since there are few manufacturers in aerospace, health care equipment and power generation industry, this give the power to suppliers and they can shape the prices as per their profitability requirements in addition General Electric uses high quality materials and is therefore dependent on first and second tier suppliers for purchase of materials. Suppliers Collaboration: GE buys directly from over 30,000 suppliers from multiple locations around the world. The company has close ties and collaboration with the suppliers, the GESupply Chain Principles take an expanded view at how greater collaboration with suppliers can strengthen relationships that yield improved performance, on-time delivery, and affordability. General Electric Bargaining Power of Buyers High Product Differentiation: Due to highly sophisticated and technological advanced product the buyers have less knowledge and influence over the company’s decisions. Customer Satisfaction - After Sales Services: The requirements of aerospace, health care equipment and power generation industrysales services include engineering , staff training, maintenance etc. As it is a high-end product customer feedback, customer satisfaction and continuous innovation is important to retain the market share.General Electric’s brand is ranked #336 in the list of Global Best Brands, a carefully curated list of recognized brands as rated by customers of General Electric. When compared to other organizations within the Energy and Manufacturing industry, General Electric is ranked #23. Among its major competitors, General Electric is ranked in 4th place for Net Promoter Score (NPS). Government Rules & Regulations: Changing government rules and regulations are formulated in the favor of customers which added in the buying bargain power. General Electric Threat of Substitute Products or Services High Speed Railway System: In case of aviation industry there are currently many alternatives to aircraft travel including car, air and ship travel. Depending on distance air travel has a significant advantage depending on speed and convenience. High speed rails may be a significant competitor. Many advance countries has developed an excellent railway system reducing domestic travelling through planes. Cheaper Medical Services: In case of healthcare industry threat of substitute involves preference of customers for cheaper prescription medicines. They would always opt to go where they can find cheaper prices. Stores like Walmart, Target and other small in-house medical stores provide cheaper drugs however; substitute for coverage of entire health plan lacks and the situation is less alarming for future. References GE Annual report 2021| Available at GE GE general information| Available at Britannica GE general information| Available at Forbes Healthcare- Worldwide(Dec 2022)|Available at Statista GE Directory | Available at GE GE frequently asked questions| Available at GE Siemens Annual report 2022| Available at Siemens Schneider Electric Annual report 2021| Available at Schneider Electric GE customer satisfaction and NPS| Available at Comparably Global aerospace forging market size from 2019 to 2027(Oct19 2021)| Available at Statista Projected electricity generation worldwide from 2020 to 2050, by energy source(Feb21 2022)| Availability at Statista