Understanding the International Environment of Firms
GE Healthcare in India: An Ultrasound Strategy?
GE Healthcare India, a joint venture between General Electric and the Indian multinational Wipro Ltd., was the market leader in the ultrasound machine market with sales growth of 10% for the previous fiscal year in 2007. The enormous market potential and General Electric’s successful low-cost operations fitted well with the aggressive sales strategy that the corporation had established. Solely on a business point of view, GE Healthcare India had tremendous growth potentials in the still developing market, but the social side of ultrasound machines was threatening to kill the future of the industry.
General Electric entered India in the 1980s and “early investments by GE in India gave their technology and business-service sectors crucial credibility and cash when other companies still viewed the country as a risky backwater.” Many even credit then GE CEO Jack Welch with fueling the economic boom that would come to India in the 1990s. GE Healthcare joint-ventured with Wipro Corporation, India’s third largest software provider, and their activities included the design and manufacture of ultrasound scanners and cardiology products; sales and service of medical imaging and information technology products; parts and services logistics; software services and technology solutions; training-in-partnership programs; and design, sourcing, and manufacture of diagnostic imaging systems.
As a venture in India with $100 million in revenues, GE Healthcare was the country’s largest medical systems sales and service provider, outpacing its competitors which included Toshiba, Siemens, Philips, and Mindray International Medical. The company began manufacturing and selling ultrasound machines in India in the 1990s, and took advantage of Wipro’s robust and extensive distribution and service networks to deliver its product to approximately 80% of its customers. The company’s diagnostic equipment sales in India had risen to $250 million by 2006.
Ultrasound technology was the most profitable market for GE Healthcare and was used in early detection of fetal defects or complications during childbirth; diagnosis of gallbladder disease or obstructions; evaluation of blood flow in blood vessels; identifying abnormal structures or functions in the heart; detecting kidney stones and measuring the blood flow through the kidney; detecting prostate cancer early; and increasingly, ultrasound was used in emergency room diagnoses.
GE Healthcare had helped introduce ultrasound technology into the rural areas of India where only 20% of India’s hospitals are located although 70% of the population resides there. GE was also making significant inroads into providing affordable and quality health care technology to Indian patients. Having ultrasound available in rural areas had cut costs tremendously for patients as well as fear, as the diagnostic tests were performed in the comfort of their own villages. Many more people were getting medical attention they needed.
A major social issue was the use of ultrasound machines as tools in prenatal gender determination and the resulting abortions of female fetuses. The 2001 Indian census revealed that there were only 927 girls to every 1000 boys, compared to 962 girls to 1000 boys twenty years earlier. A December 2006 UNICEF report stated that 7 000 fewer girls than expected were born daily in India. A study by the British medical journal “Lancet” indicated “that prenatal sex determination and selective abortion probably accounted for nearly all the deficit in the number of girls born as second or third children after previous female births.” If such trends continued, many social scientists predicted social upheaval, even war.
In India many families preferred sons to daughters for a variety of reasons, including cultural taboos. Boys...