Reverse innovation is a term to describe products that are designed in the emerging markets and subsequently being sold globally.
Figure 1 indicates a tremendously change in GE’s revenue sources. This signifies a successful international expansion.
Figure GE Total Revenue by Region
Source: Compilations – Case Studies on Strategic Management, Case 19-Healthymagination at GE, pp 262 & Exhibit 10a.
With PESTEL analysis , GE is able to identify its external challenges when entering a new market. The emerging markets deliver an estimated annual growth of three times that in the developed markets . The vast untapped economies of emerging markets facilitate GE’s first mover advantage . However, GE has to be cautious when investing in these markets as they are less politically and socially stable with complicated governmental regulatory and legal issues . GE can overcome these challenges by partnering with local authorities and continuing the innovation cycle for competitive advantage to sustain its position in that country. GE also has to deal with the perception of inferior goods from emerging markets as the workforce is not as skilled as to those in the developed markets.
The resource based theory would present GE several internal challenges. Workers from the emerging markets pose differences in cultures, languages, working styles and time zone barrier. Beside these differences, the management also has to ensure the process of knowledge transfer to the locally grown team. However, the workforce in GE at home might be resistant as they risk losing their jobs during corporate restructuring. Nevertheless, the emerging markets open up new sales channels, lower the operational costs and thus increase profit margin. Still, the shareholders might have concern over risk versus profit issues.
The examination of the internal and external factors is critical for GE’s
Bibliography: Chao, R., Dec 2009 / Jan 2010. Careful preparation for reverse innovation, Shanghai: www.chinalawandpractice.com. Immelt, R. J., V, G. & and C, T., 2009. How GE is disrupting itself. Marne L. Arthaud-Day, A. H. F. T., 2012. Case 19 - Healthymagination at GE. In: A. D. Moraes, ed. Compilations - Case Studies on Strategic Management. UK: McGraw Hill, pp. 247-269. Moraes, A. D., 2013. Lecture 3 Note - Strategic Analysis: an overview. In: MN2001K Strategic Management Part-Time Intake 2. UK: Royal Holloway, p. 5. Prahalad, C. K. & Hamel, G., 2009. The Core Competence of the Corporation. Harvard Business Review, Issue June, pp. 79-91.