University of South Wales

School of Business

Course Module: Strategic Analysis

Lecturer: Professor Christodoulos Kokoris

Present a current critical strategic analysis of ONE Business Unit within

General Electric

Student Number: R1811D6944174

Assessment Number: 2

Programme: MBA – Master of Business Administration

Date of Submission: 10th November 2019

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Table of Contents

1. Introduction……………………….…………………………………..….....3
1.1 Methodology…………………………………………………………….3
2. Strategic Positioning of GE of Healthcare.…………………..……...…...4
3. Critical Evaluation of GE Healthcare’s Internal Resources and Value
Systems……………………………………………………………………...6
3.1 Value Systems of GE Healthcare…………………………………….6
3.2 Internal Resources of GE Healthcare………………………………..8
4. Critical evaluation of the product/portfolio mix within the SBU…………8
5. Critical analysis and evaluation of the KEY future directions for
strategic growth…………………………………………………………….12
6. Conclusion and Recommendation….
……………………………………………….………13

References…………………………………………………………………………………14

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 1. Introduction

The intention of this report is to strategically analyse one business unit of General
Electric (GE). In performing this task, the report will review internet sources on GE
Healthcare and the analysis will cover the strategic position of GE Healthcare, an
evaluation of the resources and value systems, an evaluation of the product/portfolio
at GE Healthcare and lastly, give an analysis and evaluation of the future strategic
growth of GE Healthcare, some recommendations and a conclusion.

General Electric is a multi-divisional organisation which manages a complex set of

business units which have different products and services. Because each business
unit provides different products and services, all offering their own differences in
performance, they all have different future prospects.

1.1. Methodology

Johnson et al (2008) identified three levels of strategy in an organisation. The first,

corporate level strategy, aims to analyse the organisation in its entirety by assessing
the value that can be added to each part of the organisation and how resources can
be assigned between each part of the organisation. Secondly, the business level
strategy, deals with ways in which businesses in the corporate strategy compete
within their markets. Thirdly, the functional level strategy which refers to the actions
assigned to different parts of the organisation that are in support of the business
level strategy and corporate level strategy. In other words, they are specific in laying
down the outcomes that the organisation would like to achieve from their day to day
operations of specific departments in the organisation.

This report will use the business level strategy in analysing GE Healthcare. This
strategy is for a single business unit or product line and according to Schermerhorn,
Jr (2010, p.210), in a single product enterprise, business strategy is corporate
strategy. In analysing GE Healthcare, this report will consider sources such as
market news, company sources as well as News Paper articles in order to provide
an in-depth understanding of the company and its background.

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 2. The Strategic Position of GE Healthcare

Thompson (2001) states that competitive advantage depends on the strategic

position of the organisation.

General Electric is one of the largest multi-national organisations in the world. With
its incorporation in New York,1892 and discovery in 1878, it now leads new
prototypes of additive manufacturing, material science and data analytics.

As one of the most profitable organisations in the world, it has different business
units including Power, Oil and Gas, Aviation, Healthcare, Transportation and Capital,
amongst others, serving customers in approximately 180 countries.

GE Healthcare, which is the business unit being analysed in this report, is a

healthcare and life sciences company providing products inclusive of diagnostic
imaging systems such as magnetic resonance, computed tomography and position,
emission tomography, scanners, x-ray and nuclear imaging among others. This unit
of GE further experiments, fabricates and markets imaging agents, employed
throughout medical scanning procedures to highlight organs, tissue and functions
within the human body. With a total workforce of 50,000 and more, it is known to be
a global enterprise (CNBC, 2018).

Over the last decade, GE Healthcare has been consistent in annual revenues and
profits, however, performance in profits and revenues has improved significantly over
the past three years. Figure 1 highlights GE Healthcare’s annual revenues
respectively in the last ten years.

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Figure 1: GE Healthcare’s Annual Revenues from 2008 - 2018

Adopted from: Statista, 2019

From 2018, GE Healthcare had an overall turnover of $19.78 billion and was in
fourth position in terms of its generation of revenue among the eight business units
of GE as seen in Figure 2. This is an upsurge in comparison to 2008 when its
revenues totalled $17.4 billion.

Figure 2: General Electric’s Revenue by Segment, 2018 (in billion, U.S. Dollars)

Adopted from: Statista, 2019

Figure 3 below highlights a trend in annual revenues and profits in 2017 and in 2018.
From the chart below, it can be seen that Orders went down by 2%, from $5.8 billion
to $5.7. By contrast, revenues of $5.3 billion were up by 2% as reported below from
2017 to 2018.

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 Figure 3: General Electric Healthcare Annual Report 2018 (in million U.S. dollars)

Adopted from: https://www.ge.com/investor-relations/sites/default/files/GE_AR18.pdf

GE Healthcare consists of nine primary business units; Detection and Guidance

Solutions, Digital Healthcare, Life Care Solutions, Life Sciences, Magnetic
Resonance, Surgery, Molecule Imaging and Computed Tomography, Ultrasound and
Global Services (Wikipedia, 2019). It has offices around the world, operating in
countries such as France, Finland, Poland, Hungary, China, Japan and India. This
report will focus on Life Sciences as a primary business unit within GE Healthcare.

3. A Critical Evaluation of GE Healthcare’s Resources and Value Systems

3.1 Internal Resources of GE Healthcare

A resource audit is a strategic analysis technique that is used by organisations to

better understand its current state. It also helps to identify what resources the
organisation currently has that they can build on and areas of improvement.

Business resources are seen as people, stock, materials and other things that are
needed in order to manage a business’ (Burnie, 2003).

Thompson et al (2008) concurs with the above, define a resource as a ‘productive

input or competitive asset that is owned or controlled by the firm’. These resources
can either be tangible or intangible.

Resources consider Human Resources, like employees, managers and partners,

Physical Resources such as raw materials, buildings, stock and supplies and
Financial Resources, such as cash flow and balance sheets.

The Physical Resources are evaluated based on the level of utilization of plant as
well as their efficiency, productivity and flexibility.

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Financial Resources are evaluated based on the organisations’ ability to raise funds
and manage cash flow. From the strategic position of GE Healthcare, financial
resources are available to the organisation and they manage cash flow efficiently
based on the revenues and profits from 2018.

Human Resources are evaluated on the basis of how people gain and use
experience, skills and knowledge as well as how relationships are built and
maintained. Grant (2005) states that the brand name, technology and company
culture also affect the competitive advantage of an organisation due to their
sustainability and uniqueness. Company culture includes the norms and behaviour,
business principles and beliefs within the organisation. The Human Resources
department at GE Healthcare has developed a strong workforce and it responds to
the changing needs of the world, strategically employing and motivating the best
qualified talents. Its investment on education training, staff development and
leadership training has been more than $100 million annually. However, keeping
their employees motivated by providing better wages at a time of global economic
meltdown is the challenge.

Connor (2011) further suggested a need for a model or concept of an internal audit
process, the purpose of which would be the identification of internal resources and
liabilities together with an evaluation of their impact and significance.

According to the author, in assessing GE Healthcare’s strategic capability, five

questions need to be asked

1. Is GE Healthcare in a fit condition for the strategic task facing it?

2. Is it alert to change signals in the broad environment?

3. Has it got the durability to last the course over time?

4. Is it innovative in its pursuit of its strategic directions and methods and;

5. Has it got the capacity and disposition to adapt to changes in environment forces?

GE Healthcare’s technologies have a valuable place in the ever growing, fast paced
healthcare market and their ‘Healthy Imagination’ innovation, which is GE
Healthcare’s commitment to invest in innovations that bring better health to more

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people, is bringing these resources to emerging markets at a relatively lower price
(GE Healthcare, 2019).

GE Healthcare also does a great job of capturing the full value of its technologies
and has done significant work in ensuring that its technologies are the best and most
innovative in comparison to its competitors (GE Healthcare, no date)

3.2. Value System of GE Healthcare

Strategic value refers to the ‘degree to which a particular action or planned action is
important or useful in relation to something it wants to achieve’ (Cambridge
Dictionary). Further, Davies (2017) cited in the Topic 5 Overview, Evaluating
Strategic Growth states that value systems are ways in which activities in an
organisation may enable the value to be realised.

Rainer et al (2013) describe a value system as one that includes suppliers providing
inputs that are necessary to an organisation, along with their value chains. After an
organisation creates products, they pass through distributors and then customers.
These are all included in a value system.

In achieving and sustaining competitive advantage, organisations must understand

every part of the value system.

A company’s value chain activities determine their cost and subsequently affect their
profitability. Porter (1985) divided these activities into ‘Primary’ and ‘Support’
activities. Primary activities observe those activities involved in the actual creation of
the product, such as its sales and distribution to buyers. These activities include

 Inbound logistics, like warehousing and receipt of raw materials.

 Outbound logistics like transporting the product to customers
 Operations refer to the activities that transform the inputs to finished
products.
 Sales and marketing are the manner and process of convincing
customers to buy their products
 Services relate to the activities that help create value.

The primary activities of GE are activities such as the production and sells of their
products to customers. GE Healthcare’s ability to buy raw materials and finished

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products in bulk as well as managing a complex but efficient supply chain system
has greatly improved over the years. In analysing inbound logistics, GE Healthcare
would need to focus on raw materials and finished products; from retrieving raw
materials, storing the inputs and distributing the raw materials and parts to start
production.

The company has focused on developing its competencies by leveraging other non-
core activities through outsourcing possibilities. It considers that elementary
manufacturing is not one of its value creating activities. However, the organisation
has maintained its role of manufacturing for its products because it speaks to its
experts of technology. It has managed to retain and protect its reputation and
capabilities that define sustained strategic advantages in future.

The operations of GE Healthcare are specialised and widely distributed. In

sustaining competitive advantage, the organisation has maintained its connection
with global networks in creating value and as a result, it promotes research and
development to sustain innovation and manage its relationships and presence.
Some examples of operational activities including packing, assembling and testing
products; this is inclusive of manufacturing and serving.

Delivering the product through different sources is an outbound logistic. This

includes activities such as warehousing, order processing and delivering the product
to its destination. GE Healthcare can analyse their outbound logistics in order to
explore competitive sources and achieve its objectives for business growth.

The secondary activities, as mentioned above, are activities that facilitate the primary
activities in the value chain.

The firm’s infrastructure is made up of a range of activities, such as legal issues,

finances, planning and strategic management. Effective management of
infrastructure allows GE Healthcare to optimise the value of the whole value chain.

In relation to its services, GE Healthcare introduced Assetplus, a computerised

management system for Healthcare clients to help hospitals manage their equipment
and for maintenance (GE Healthcare, 2013)

As a secondary activity, GE has a Research and Development department which

has been the foundation of innovation at General Electrics. GE currently has

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approximately 36,000 technicians who work across their business and global
research is centred at the intersection of technology and industry in order to solve
some of the world’s toughest problems. (Research and Development, GE)

The way it has mixed technologies with biology and physics has transformed the
accessibility and quality of healthcare worldwide. GE’s research has been mainly
centred bioelectronic medicine and requires an understanding of electrical signals in
the human body for better treatment of chronic diseases such as diabetes. The
research uses its power of interdisciplinary model in developing technologies and
tools to carry out treatments for diseases and enhance access to treatment
modalities for people worldwide (GE Research, 2019).

GE also utilizes strategic alliances to gain competitive advantage in each of the

business units and through their partnerships with competitors, they have improved
their functionality as well as their market access. They have also reduced threats in
their different industries and expanded and improved on their internal resources and
capabilities/

4. Critical evaluation of the product/portfolio mix within the SBU

Johnson et al (2008) describe the Boston Consulting Group (BCG) matrix as one of
the most common ways of birthing the balance of a portfolio and a business. Using
the BCG, market share and market growth are important variables in determining
attractiveness and balance.

According to the BCG matrix, high growth demands heavy investment in order to
expand, for instance, capacity or develop brands.

The growth/share axes of the BCG matrix define four types of businesses. Firstly, a
star, which is a business unit with a high market share in a growing market. This unit
may be spending too much in order to keep up with growth, however, high market
share should yield sufficient profits in order to make it more or less self-sufficient in
terms of investment needs. Secondly, a question mark, which is a business unit in a
growing market but does not yet have a high market share. Thirdly, a cash cow,
which refers to a SBU with a high market share in a mature market but due to low
growth, investment needs are less while high market share means that the SBU

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should be profitable. Lastly, dogs are SBUs with a low share in a static or declining
market and are the worst of all combinations.

The BCG matrix has many advantages, namely its provision of a good way of
visualising the different needs and potential of all the diverse businesses within the
corporate portfolio. However, it warns corporate parents of the financial pressures
coming from what looks like a desirable portfolio of high-growth businesses.

The broad portfolio within GE Healthcare comprises of clinical equipment, life

sciences, information technology, medical diagnostics, and services and solutions.

Figure 4: Deep Portfolio of GE Healthcare by Share of Revenue

Adopted from GE, 2010

Forbes (2011) stated that

“Overall, diagnostic and clinical equipment like MR systems, CT/PET scanners and
X-ray technologies generated around $9.5 billion in sales for GE in 2013. Medical
equipment repair, data management and healthcare related IT services generated
another $6 billion, while molecular medicine products, which include tools used in
drug discovery and agents used in scanning procedures, grossed around $3.7 billion
in sales for GE in 2013”

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 5. Critical analysis and evaluation of the KEY future directions for strategic
growth

As discussed in the strategic position of GE Healthcare section, profits have

increased, and revenues have grown at a compounded rate from 2017 to 2018.
Profits and revenues are anticipated to continue their growth in 2019.

The ever-increasing demand for healthcare services from emerging economies and
the increasing healthcare expenditure of the US population are the key drivers
behind the industrial growth in the healthcare industry.

The Global Healthcare equipment industry was estimated to be around $315 billion
in the year 2015 and grew at a CAGR of 4.8% between 2011 and 2015. The market
is driven by technology disruptions as equipment offering higher resolution images or
more accurate monitoring are preferred by doctors.

The Healthcare Unit also manufactures, sells and services all types of medical
equipment; therefore hospitals, medical labs and governments remain the
primary customers of GE Healthcare.

Zinnov (2019) sat with Dileep Mangsuli, CTO, Wipro to better understand where the
healthcare industry is headed. There are still 5.8 billion people who do not have good
access to medicine or diagnostic services. In order to make this happen, costs need
to be cut down, accuracy needs to be enhanced and productivity increased. GE
Healthcare call this precision health, how quickly a disease can be detected and how
it can be detected correctly. As a unit, they are trying to utilize the present strengths
that they have in terms of clinical expertise, diagnostic expertise and combine this
with digital expertise. They are aiming to create the future of technology in
healthcare like an Apple or Android where they are going to need to bring in a lot of
experts from the field and collaborate. Therefore, healthcare is hoping to partner,
collaborate and drive success through open innovation.

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Conclusion and Recommendations

The main premise of this paper was to produce a strategic analysis of one business
unit with General Electric, namely Healthcare.

Overall, GE Healthcare presents a strong financial performance, currently standing

at $19.78 billion. Its production of highly valued products is difficult to replicate, and
the organisation does this by sustaining its global networks and value creation, as
cited above. Its presence around the world and indeed its client base are outstanding
and no doubt, its continued success in technology and healthcare is because of its
choice of business focus.

It is evident that new technology and the creation of a global virtual market offers an
opportunity for the firm to grow its business. There is need to identify and exploit this
business market and with increasing human rights concerns and demands for
accountability, there is need for education and corporate social responsibility, as
consumers are becoming more sensitive to scientific information. Nevertheless,
challenges of environmental accountability abound and cannot be ignored.

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References

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Zinnov (2019) Redefining the Future of Healthcare through Collaboration, Dileep
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