Case study: General Electrics

Topics: Economic system, Mixed economy, Planned economy Pages: 5 (1300 words) Published: March 5, 2014
Case Questions:
1) Why do you think GE has invested so aggressively in foreign expansion? What are the opportunities that it is trying to exploit?

General Electric (GE) established in 1879 was originally provided the electric power, providing single service. However, GE not only works on energy today, but also health and home, transportation, financial services and even television broadcasting, GE is now the largest industrial conglomerate in America. The reason to make such foreign expansion was forced from its goal, that to be number 1 or 2 globally in every business in which it participated.

Internal opportunities
As the saying goes, chances only favor the prepared minds, GE starts participate in different business in its early business, such as the formed of GE Commercial Finance in 1905, the acquisition of Ken-Rad Tube Manufacturing Corporation in 1952, the formed of MSNBC with partner Microsoft in 1996[1], etc.. The outstanding business achievement, building up GE’s potent background and powerful infrastructure. The increase of market share in different field, GE own more and more local companies in its home country America, in which provided GE a great capability to make such aggressive foreign investment strategy, to fulfill its company goal.

External opportunites
Opportunities seem to be within Jack Welch’s grasps, GE captures every advantage of the economic uncertainty to make acquisitions or capital injections. In the case mentioned “GE took advantage of economic weakness in Europe from 1989 to 1995 to invest $17.5 billion in the region, half of which was used to acquire some 50 companies. When the Mexican peso collapsed in value in 1995, GE took advantage of the economic uncertainty to purchase companies throughout Latin America. And when Asia slipped into a major economic crisis in 1997-1998 due to turmoil in the Asian currency markets, Welch urges his managers to view it as a buying opportunity. In Japan alone, GE spent $15 billion on acquisition in just six months.”. When GE earned more profit from international business, there are logically generating more capitals and market share globally.

2) What is GE trying to achieve by moving some of the headquarters of its global businesses to foreign locations? How might such moves benefit the company?

Everyone knows that there are differences between running a business in home country and in foreign country, as there are national differences in each area, such as political, economic, legal system and even culture.

Political system
Political system can be assessed by to dimensions: the degree to which the country emphasize collectivism as opposed to individualism, and the degree to which they are democratic or totalitarian [2]. The citizen of a country desire state ownership or an individual’s freedoms can probably affect a business, such as GE television broadcasting would not enter China, as there is no freedom of expression, no democracy in so call free media.

Economic system
There are three board types of economic systems, a) market economy, b) command economy and c) mixed economy. In each economic system, the prices of goods and services, and the assets of ownership are different [2]. GE is an American multinational conglomerate corporation, where the United States has a mixed economy that the elements of both market economy and command economy are existed, so GE logically will invest in the country which has market economy or mixed economy such as Canada, China, Mexico, Japan, and Germany, but not the country with command economy such as Cuba, North Korea and Laos.

Legal system
The structure of law between countries has immense importance to international business; it determined whether the property rights, product safety and liability are protected, the nature of law within countries affect the development progress of a company.

That is why GE moving some of the headquarters of its global businesses to foreign...

References: [2] Hill, Clares W L (2012), Internatioanl Business: An Asian Aspectives,,New York: McGraw-Hill, 80.
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