General Electric

"I never perfected an invention that I did not think about in terms of
service it might give others"
- Thomas Alva Edison, GE Founder
It all started with the flicker of a light

bulb and soon enough GE was off and running

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

Key Facts About GE

Headquarters
Fairfield, Connecticut
Number of Employees
Over 315,000
Locations
Over 160 Countries
Symbol on Stock Exchange
GE
Number of Shareholders
4 Million
Number of Shares
Outstanding
10 Million
Historical Number of Share
Splits
9

Annual Revenue From 1994- 2003

GE Stock Price Relative to S&P 500 From

1999-2004

Reginald H. Jones
Chairman & CEO, 1972
1981
Managerial qualities:

Intellectual breadth, strategic

capability, social sensitivity,
political sophistication, worldmindedness, and above all, a
capacity to keep their poise
amid the cross-currents of
change.
Relationship between business
and government
TodayGE spends 7.5MM on
lobbying

Jack F. Welch Jr.

Chairman & CEO, 1981
2001

On Six Sigma Welsh

said, ...it is the way
we work.
Customer-Focused
Methodology to Improve
Quality Through Defect
Reduction
TodayRigorous Employee
6 Certification

Jeffrey R. Immelt
Chairman of the Board
and Chief Executive
Officer, 2001 Present
Today
New Frontiers & Strategic
Alliances for GE
NBC-Universal acquiring
interest in Telemundo network
GE and Honda form GE
Honda Aero Engines LLC,
design small (private) jet
engines

GE is Organized Along 11
Businesses

Growth vs. Cash Generator

Energy

Commercial
Finance

Transportation

NBC Universal

Healthcare

Consumer
Finance

Advanced
Materials

Consumer and
Industrial

Insurance

Infrastructure

Equipment
Services

Perceived Drivers for

Change
Globalization
Technology
Innovation
Diffusion of
technological knowhow
Regulatory influences
and government
policy changes

Four Values Translates Into Action

Action At Work:
Six Sigma Product Standard
Must produce no more
than 3.4 defects per
million opportunities.
An "opportunity" is
defined as a chance for
nonconformance, or not
meeting the required
specifications; GE strives
to be flawless in
executing their key
processes.

1.
2.
3.
4.
5.
6.

6 Key Areas
Critical to Quality
Defect
Process Capability
Variation
Stable Operations
Design for Six Sigma

Four Objectives of Work Out

Meetings
Create a New
Paradigm for GE
Empower
Employees
Eliminate
Unnecessary Work
Build Trust

Action Fosters Business-Wide and

Personal Growth
Toastmasters is an
international organization
dedicated to improve/
facilitate communication
within an organization
4 Goals of Sessions
Deliver great presentations
Easily lead teams and
conduct meetings
Give and receive
constructive evaluations
Be a better listener

The $1Billion GE Talent Factory

Program began in 1919
oldest training program of
its kind

Engineering
Finance
Info Management
Operations
Sales and Marketing
Several assignments within
discipline
Acquire broad overview of
GE
Develop leadership/
professional skills

The Ultimate Driving

Machine Just Got Better
GEs Advanced Materials has teamed up with
BMW to design and produce lightweight,
durable, chip resistant fenders for their high
performance 6 Series

GEs Financial Statements

Revenue By Operating
Segment
% of 2003 Total
Revenue

% of 2002 Total
Revenue

% of 2001 Total
Revenue

% of 2000 Total
Revenue

Advanced Materials

5.27%

5.27%

5.59%

6.15%

Commercial Finance

15.51%

14.82%

14.02%

13.46%

Consumer Finance

9.57%

7.76%

7.52%

7.15%

Consumer & Industrial

9.57%

9.75%

10.33%

10.28%

Energy

14.22%

17.88%

16.64%

12.04%

Equipment & Other Services

3.30%

4.19%

6.12%

11.56%

Healthcare

7.60%

6.77%

6.65%

5.58%

Infrastructure

2.29%

1.44%

0.31%

0.37%

Insurance

19.52%

17.62%

18.90%

18.99%

NBC

5.12%

5.41%

4.56%

5.21%

Transportation

10.07%

10.35%

10.98%

10.19%

Corporate items and eliminations

-2.05%

-1.26%

-1.63%

-0.99%

GEs Revenue Breakdown in

2003

Revenue Growth 2001-2003

**Values in millions of dollars

Profit By Operating Segment

% of 2001 Total
Segment
Profits

% of 2002 Total
Segment
Profits

% of 2003 Total
Segment
Profits

Advanced Materials

7.59%

5.41%

3.10%

Commercial Finance

15.26%

17.89%

19.67%

Consumer Finance

8.49%

9.73%

10.87%

Consumer & Industrial

4.74%

3.07%

2.90%

Energy

25.95%

34.03%

20.67%

Equipment & Other

Services

-1.18%

-2.10%

-2.11%

Healthcare

7.94%

8.36%

8.56%

Infrastructure

0.14%

1.61%

2.32%

Insurance

9.96%

-0.51%

10.57%

NBC

7.46%

8.96%

10.05%

Transportation

13.66%

13.57%

13.39%

Net Earnings Growth 20012003

**Values in millions of dollars

Ratio Analysis
2002

2003

ROE

22.16%

18.95%

Gross Profit
Margin

60.02%

61.84%

Debt-to-asset
Ratio

87.97%

86.88%

Debt-to-Equity
Ratio

794.38%

710.44%

Current Ratio

2.13

2.35

Finances, GE, and its

Competitors
GE

ALSTOM

Siemens

Industry

Revenue Growth

1.90%

N/A

4.40%

7.40%

Revenue

140.74B

20.89B

92.78B

6.06B

Gross Margin

61.42%

14.76%

28.70%

34.44%

EBITDA

27.23B

475.67M

9.34B

696.69M

Oper. Margin

13.93%

0.38%

5.32%

10.40%

Net Income

15.74B

-2.24

4.35B

259.44M

EPS

1.544

-4.96

4.719

1.67

PE

21.52

N/A

15.62

21.24

Competitors of GE

Main Competitors
ALSTOM
specialize in energy, ship buildings
and marine systems and transport
infrastructure.
Headquarters in Paris, France
Acquired ABB (Asea Brown Boveri, a
leading competitor to GE)
A force to be reckon with; would be GEs
ultimate competitor

Main Competitors
Siemens
electronics and electrical engineering company
6 groups:- Automation and Control, Information and
Communications, Medical, Power, Transportation, and
Lighting
provides industrial automation and control, information
and communications, lighting, medical, power
transmission, and transportation products and services

Headquarters in Munich, Germany

Subsidiaries headquartered in New York

Very similar to GE; strong brand name equity, has

business operations in over 190 countries

5 Forces Model
Rivalry among competitors
ALSTOM and Siemens, in
particular
Creating competitive
advantages to gain bigger
market share
Acquisitions, mergers and jointventures
Battle for innovation and
technological improvements

5 Forces Model
Potential of New Entrants

Adaptac (1981) and Adept Technology

(1983)
Late bloomers, but slowly gaining market
share
Does not pose too much of a threat to GE,
ALSTOM or Siemens for now
Tough for new entrants to pinch a sizable
chunk of market share from GE, ALSTOM or
Siemens

5 Forces Model
Suppliers
Materials, parts, components, other resources
Vertically integrated (GE Advanced Plastics,
GE Consumer and Industrial Manufacturing)
Has to be aware of suppliers that might
integrate forward

5 Forces Model
Substitutes
Has many substitutes that might pose a threat
Very well-diversified which means that GE is
spreading the risk of failure in every market
Eg. GEs NBC-Universals substitute are pirated
VCDs or DVDs

Buyers
Similar to its substitutes, GE has a broad line of
buyers, ranging from consumers to large corporations
Eg. GE Healthcares buyers are hospitals and
pharmacies.

Strategic Group Map

Performance/Product Quality

High

General Electric

Adaptac

Adept
Technology

Alstom

Siemens

Low

Less
Diversified

More
Diversified

Product Range

GEs SWOT Analysis

Strengths
Global strength and recognition
5th in Fortune 500 list, operating in more than 160 countries

Excellent management
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 GEs revenue)
Spreading the risk of failure in every market and not just one

SWOT Analysis
Weaknesses
Company size/ acquisition restriction
Eg. GEs 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

Flexibility
Large and diverse businesses might overstretch
the company and reduce reaction times to shifts in
targeted markets

SWOT Analysis
Opportunities
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
Exposure to global economy
Economy slowdown would affect GE, since 40% of the
revenue is generated overseas
Exposed to currency fluctuations

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

Weighted Strength Assessment

Ratings Score
Importance
Key Success Factors

Weight

GE

ALSTOM

Siemens

Product/Performance Quality

0.16

9/1.44

8/1.28

7/1.12

Recognition/Brand name

0.11

10/1.1

8/0.88

10/1.1

Managerial Ability/Leaders

0.13

9/1.17

7/0.91

7/0.91

Flexibility

0.13

7/0.91

8/1.04

7/0.91

Customer Service

0.10

6/0.6

7/0.70

7/0.70

Innovation/Technology

0.14

9/1.26

7/0.98

8/1.12

Distribution network

0.11

9/0.99

7/0.77

9/0.99

Financial Resources/Capital

0.12

8/0.96

7/0.84

8/0.96

Sum of importance weights

1.0
8.43

7.40

7.81

Weighted Overall Strength Rating

Key Competencies
Competence
Great and proven leaders
Eg. Jeffrey R Immelt, Jack Welsh,
Reginald H. Jones

Expertise
More capital can be invested in R&D

Core Competence
Innovative
Desire to strive for perfection (6 Sigma)

Key Competencies
Distinctive Competence
Ability to respond to the drivers of change by
understanding the important global trends
Acquisition of rivals and other companies

Recent News
GEs $900 million acquisition of InVision
Technologies
March 15, 2004, GE made it public
September 16, 2004, FTC gave approval but
deal is still not finalize

Recent News
Advertising Campaign
Genworth, a financial company part
of GE, has signed a 5 year contract
to license the GE logo and use the
slogan, Built on GE heritage
Genworth is planning to allocate $30
million into advertising this coming
year

Recent News
October 11, 2004, Senate
passed a $136 billion corporate
tax package that cuts taxes for
businesses
Includes $76.5 billion in new tax
relief for the manufacturing sector
Includes $42.6 billion in tax relief
for multinational companies
Additional capital from the tax
break could be used for
reinvestment, increase dividends,
etc

Conclusion
GE recognizes that part of being successful
and well-respected is being socially responsible
as well
Has huge potential to remain successful without
any major threats from competitors
Staying Power

Will only continue to expand

Questions and Answers

Session