Case 1 - GE Globalizes Its Medical System Business

Mini-Case : General Electric Globalizes Its Medical Systems Business
One of General Electric’s key growth initiatives is to globalize its business. According to its website, ‘‘Globalization no
longer refers only to selling goods and services in global markets. Today’s most valuable innovations and solutions are
envisioned, designed, built and offered on a global scale.’’3 A critical element of General Electric’s global strategy is to be
first or second in the world in a business or to exit that business. For example, in 1987, GE swapped its RCA consumer
electronics division for Thomson CGR, the medical equipment business of Thomson SA of France, to strengthen its own
medical unit. Together with GE Medical Systems Asia (GEMSA) in Japan, CGR makes GE number one in the world market
for X-ray, CAT scan, magnetic resonance, ultrasound, and other diagnostic imaging devices, ahead of Siemens (Germany),
Philips (Netherlands), and Toshiba (Japan). General Electric’s production is also globalized, with each unit exclusively
responsible for equipment in which it is the volume leader. Hence, GE Medical Systems (GEMS) now makes the high end
of its CAT scanners and magnetic resonance equipment near Milwaukee (its headquarters) and the low end in Japan. The
middle market is supplied by GE Medical Systems SA (France). Engineering skills pass horizontally from the United States
to Japan to France and back again. Each subsidiary supplies the marketing skills to its own home market
The core of GEMS’s global strategy is to ‘‘provide high-value global products and services, created by global talent,
for global customers.’’4 As part of this strategy, ‘‘GE Medical Systems focuses on growth through globalization by
aggressively searching out and attracting talent in the 150 countries in which we do business worldwide.’’5 GEMS also
grows by acquiring companies overseas in order to ‘‘broaden our ability to provide product and service solutions to our
customers worldwide. Through several key acquisitions, we’ve strengthened our position in our existing markets, and
entered new and exciting markets.’’6 For example, in April 2003, GE announced that it would acquire Instrumentarium, a
Finnish medical technology company, for $2.1 billion. According to the press release,
“The combination of Instrumentarium and GE offerings will further enable GE Medical Systems to support healthcare
customers with a broad range of anesthesia monitoring and delivery, critical care, infant care and diagnostic imaging
solutions and help ensure the highest quality of care.”
A year later, in April 2004, GE spent $11.3 billion to acquire Amersham, a British company that is a world leader
in medical diagnostics and life sciences. According to the press release, the acquisition will enable GE to ‘‘become the
world’s best diagnostic company, serving customers in the medical, pharmaceutical, biotech and bioresearch markets
around the world.’’8 The combined GEMS and Amersham is now known as GE Healthcare.
In line with GE’s decision to shift its corporate center of gravity from the industrialized world to the emerging
markets of Asia and Latin America,9 Medical Systems has set up joint ventures in India and China to make low-end CAT
scanners and various ultrasound devices for sale in their local markets. These machines were developed in Japan with
GEMS’s 75% joint venture GE Yokogawa Medical Systems, but the design work was turned over to India’s vast pool of
inexpensive engineers through its joint venture WIPRO GE Medical Systems (India). At the same time, engineers in India
and China were developing low-cost products to serve markets in Asia, Latin America, and the United States, where there
is a demand from a cost-conscious medical community for cheaper machines. In 2010, GE Healthcare derived about $3.5
billion in sales to emerging markets, with over $1 billion in revenue from China alone.
Although it still pursues geographic market expansion, GE’s globalization drive now focuses on taking advantage
of its global reach to find less expensive materials and intellectual capital abroad. In material procurement, GE’s global
supply chain does business with over 500,000 suppliers across thousands of entities in more than 100 countries, deriving
over $1 billion in savings on its foreign purchases. On the human capital side, General Electric has established global
research and development (R&D) centers in Shanghai, China; Munich, Germany; Bangalore, India; and Rio de Janeiro,
Brazil. By sourcing intellect globally, GE has three times the engineering capacity for the same cost. For Medical Systems,
the ability to produce in low-cost countries has meant bringing to market a low-priced CAT scanner for $200, 000 (most
sell for $700, 000-$1 million) and still earning a 30% operating margin.
Questions
1. What advantages does General Electric seek to attain from its international business activities?
2. What actions is it taking to gain these advantages from its international activities?
3. What risks does GE face in its foreign operations?
4. What profit opportunities for GE can arise out of those risks?

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Mini-Case : General Electric Globalizes Its Medical Systems Business

3. What risks does GE face in its foreign operations?

4. What profit opportunities for GE can arise out of those risks?

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