Strategic Management of General Electronics Healthcare - Essay Example

GE HEALTHCARE: BUSINESS PLAN General Electronics Healthcare, commonly known as GE Healthcare, was incorporated in 1892 after the merger of Thomson-Houston Electric Company and Edison General Electric Company. The merger was meant to create expansion for the patented products and technologies by the two merging firms. The company gradually began to enter the healthcare industry after the innovation of the x-ray technology. GE company became the global learn in the supply of diagnostic imaging equipment. The company has used a number of strategies to obtain this solid growth in the healthcare sector. Most important amongst the strategies is the continued exploitation of the emerging markets that has given the chance to benefit from the increasing healthcare spending from these countries, and specifically targeting Latin America and Asia-Pacific. Research and development has also been a primary factor towards this growth and has contributed in retaining the competitive advantage. The company has also improved its healthcare sector margins to about 16.7% through cost reduction activities benefits like existing from the low Margi product and headcount reduction. General Electronics has been structured into six distinct divisions. Every division is designed a specific product category. The six divisions include Healthcare, Aviation, Home & Business solutions, Energy, Capital and Transportation. Besides these six divisions, GE has specially devoted to the Global operations and growth. It is this division that was responsible for all the sales made by the company outside the United States. This sales division is very special for the future of the company. Jeffrey Immelt, the GE’s CEO, expect that other countries besides the USA will bring in more than 60% of the total sales globally. The company has been divided into a further twelve geographical regions to ensure that it becomes successful in its global marketing and sales campaigns: South East Asia, India, China, Canada, Australia, Europe, Africa, Germany, Middle East, Russia, Latin/ South America and Japan. The company hired one of the best minds to head the global operations (John Rice). GE Healthcare planned to spend $500 million between the years 2010 and 2020 in research into neurological disorders. The investment is targeted at the healthcare global business and specializes in neurological diagnostic solutions, expanding the ongoing research and educating the consumers. The target area of research include Parkinson’s disease, Alzheimer’s disease, post-traumatic stress disorder, traumatic brain injury, stroke, multiple sclerosis, and concussion. For years, the company has manufactured imaging agents, scanners and software to assist the physicians to have a clearer visual inside the brain and to help in better patient management. The company announced another $60 billion investment in research and development of new MR technology for traumatic brain injury in conjunction with National Football League. The paper analyzes GE Healthcare internal and external environment. We look at the PESTLE, Porter’s five forces analysis, SWOT analysis and VRIO. These will aid in better understanding of the operational environment, both internal and external environment. Image: Strategies Implications PESTLE ANALYSIS Political Health public expenditure is lower as compared to other upcoming countries; therefore, the healthcare sector is highly dominated by the private sector. The government helps in attracting the foreign investors by facilitating the functioning of the industry through tax incentives and investor friendly policies. The government is also promoting public-private partnership. It promotes the medical tourism in India. Through the National Rural Health Mission, the government is providing affordable healthcare services to the poor populations. Political The government has ease entry of foreign firms to the country. The local firms like GE Healthcare view this as a competition from the outside. Socio-cultural Environment Increase in the (life expectancy) life expectancy of the population and the ageing population. The market potential is affected by the increase in the ageing group above 65 years. India has a higher level of Population and Literacy. India is the second largest population globally after China. It is estimated that by 20150, the country will have surpassed China in terms of population. The health sector is therefore poised to benefit from the population increase. Shift to the urban centers is also likely to boost the private hospitals. Global & Technological Environment Poor health infrastructure in the West. The United States and Europe health escorts are currently under pressure. The UK National Health Services has a long waiting list of patients who need surgery. In the US, about 50 million citizens are not insured. There is also shortage of medical experts in those countries. The developed world patients are now traveling to India for medication. India provides low cost of healthcare and quality service. India offers highly advanced medical technological advances and cost-effective medical treatment in several areas including cosmetic, cardiology, eye care, orthopedic, dentistry, orthopedic surgery, and preventive health check-up. India also offers dental surgery, organ transplant, vision correction, hip replacements, and world-class cardiac bypass surgery. PORTER’S FIVE FORCES ANALYSIS Buyers Power The demand is exceeding supply. The Indian demographics are rapidly changing, the disease patterns have a shift and there is an increase/ upward trend in health and fitness awareness on a daily basis. Healthcare demand has recorded a CAGR of 16%. However, the country still falls short of other indicators like 1000 beds at 0.7 compared to the world average of 3.96. Medical tourism increase in India has led to the decrease on the dependence of the Indian hospitals on the local clients. Suppliers Power The equipment market has a very high level of competition. Disposable and consumable equipment made locally while the high-value equipment are manufactured by the international companies. Some of these international conglomerates have moved into Indian and made their assembly centers. Rivalry among Competitors The pharmaceuticals and drugs sector has attracted Foreign Direct Investment worth about $1.6 billion. Diagnostic and hospital centers have, on the other hand, received an FDI of about $760 million. Even though the market is fragmented, it is changing. Threat of New Entrants The government is encouraging health reforms. The Indian government does not have the muscle to finance large-scale medical projects and investments. Even though the government is using varied incentives to promote FDI hospitals, there are very few FDI hospitals in the country. There are a number of barriers to foreign affairs. Threat of Substitutes Some of the alternative medicines include Ayurveda, Homeopathy, Unani, etc. These alternatives have lesser side effects, are safer, and cost effective as compared to allopathy. The society prefers the alternatives because they are painless, takes shorter time to undergo the procedures. SWOT ANALYSIS Some of the strength of GE Healthcare includes; recommendable quality services at affordable cost, Medical tourism, India has huge supply for medical doctors, and doctors have very high reputation on the international front GE Healthcare benefits include; healthcare delivery in India is costly, there is limited accessibility to life-saving medicines and the middles class families may not afford the specialized treatment The greatest opportunities that GE Healthcare should take advantage of are good government support for healthcare. VRIO ANALYSIS Value: GE Healthcare places emphasis on the distribution of its fountain products through restaurants. While the retail distribution may be important, there is a higher margin for the fountain sales. The global markets distribution has shown to be very valuable in making the distribution network strong. The global medical equipment manufacturers have built a very strong distribution network in order to fairly compete with GE Healthcare. Rare: the size of the distribution network of GE Healthcare is rare since the company deliver their product to several buyers on a global scale. GE Healthcare only manufactures a few medical equipment while the global companies are manufacturing a wide variety of equipment. Imitability: GE Healthcare equipment has taken years of perfection, it would be very difficult to imitate the products. If any company imitates them, they would be very costly. Organized to Capture: GE Healthcare is properly organized and will exploit the competitive potential to beat the competition. GE HEALTHCARE LEADERSHIP GE Healthcare has worked together with International Labour Organization’s Declaration on Fundamental Principles and Right at Work and UN Universal Declaration of Human Rights to solve workplace problems and other related challenges. GE Healthcare management is known to have overcome the challenges of land rights, child labor, hours of work, workplace safety, contract labor etc. FINANCIAL Over the last few years, GE healthcare segment has experienced growth boosted by the gains from cost cutbacks and the sales in the emerging markets. During the period 2011-2013, the company’s profits leaped at a compound annual growth rate of about 4.3%. This growth continued in 2014 and it is expected to double even in 2015. GE provides to the markets the digital imaging systems, drug discovery tools, patients monitoring systems, medical IT solutions, medical equipment repair services in the global healthcare market. The company announced the 2015 first-quarter operating earnings per share to stand at $0.31. And this excludes the General Eclectic’s Capital exit impact, which has gone down 6% from the 2014 first-quarter. The Industrial operating Earnings Per Share went up to 14%. Reference Rothaermel F. (2015). Strategic Management. Georgia Institute of Technology. McGraw-Hill Publishers. Read More