General Electric and Chevron Corporation - Assignment Example

III. SUMMARY (200-300 words) Provide an introduction in your own words to the company, products, geographical markets, industry INTRODUCTION The companies considered are General Electric and Chevron Corporation for writing this paper. General Electric Co. GE is a diversified conglomerate having interests in aircraft engines, power generation, business and consumer financing, industrial products. The companies businesses are spread in more than 100 countries. The company was founded by Thomas Edison, a genius in its own right with hundreds of patents in his fold. With true entrepreneurial spirit, the company spearheaded multi dimensional growth and development in myriad of fields. Products and Industries: GE has a varied and highly diversified product list starting from Appliances, Consumer Electronics, Aviation, Lighting, Health Care, Media, Entertainment, Energy, Finance, Water Business and many more. Geographical Markets: GE has presence in more than 100 countries either alone or with local partners. Chevron Corporation Chevron is one of the largest energy companies previously known as Standard Oil of California. The company is engaged in oil and gas exploration and many energy related activities. Besides Chevron brand, the company is also known for its Texaco and Caltex brand of products. Products and Industries: The Company has many products in its list starting from Fuels, Lubricants, Energy services, Chemicals, Aviation fuel, Base oils, Additives, specialty products and many more. Besides, the company is in mining and power generation business. Geographical Markets: As of end 2006, the Chevron has presence in more than 100 countries of the world either independently or with local partners. IV. KEY LEARNING POINTS Provide a SWOT and competitor analysis of both companies SWOT ANALYSIS General Electric Co. Strengths: Diverse product Portfolio Strong Management and Culture GE, one of the most recognized brand in the world. GE ranked ninth as most sought after company by the fresh MBAs Most admired company as per Fortune Magazine in the year 2005 and 2006 Weaknesses: Performing not very well in Asian markets Department of Defense charged the company for corrupt practices for Jet Engine Sales to Israel. Energy sector not performing up to the mark. Opportunities: Mergers with allied companies Aviation industry growth Threats: Global Recession Dollar weakness Chevron Corporation Strengths: Strong brand image and accredited fortune 5oo Company. Second largest integrated energy company in the US Marketing is a strangle hold of the company. Financially the company is quite sound. Weaknesses: The perennial disturbances in operations at Nigeria can impede the growth of company. The company is facing legal tangle on the suit filed by Iraqi government facing accusation that it bribed erstwhile Saddam regime to bag the big oil contract under the United Nations oil-for-food program. Recession at U.S and Europe largest consuming markets are in grip of the recession Opportunities: Chevron’s strong presence in China through its Chinese subsidiary in one of the fastest growing market spells a big opportunity for the company In an energy starved market, the company is well placed to harness new technologies, which the company is known for its efforts. The company’s presence in the well known market Threats: International market accounts for the large chunk of its sales and restrictions on remittance from these markets pose a threat in consolidating its position in the world market Depreciating dollar value and fluctuating exchange rates pose a threat to the company Environmental norms are the threats for further expansion of its refinery operations in US. V. RELEVANT STATEMENTS TO THE SESSION Important Financial Ratios for both Companies (Values from their respective balance sheets) General Electric Co. 1.0 Asset Turnover = Sales/Average Total Assets = 156,783/781,818 = 0.20 2.0. Debt to Equity = (Short-Term Debt + Long-Term Debt)/Stockholders Equity = 656,682/117291 = 5.6 3.0. Earnings before interest and taxes (EBIT) or operating income is a measure of a Firm’s profitability Interest Coverage = Operating Income/Interest Expense = 10344+18769/18769 = 1.55 Chevron Corporation 1.1 Asset Turnover = Sales/Average Total Assets = 171,636/164621 = 1.05 2.1 Debt to Equity = (Short-Term Debt + Long-Term Debt)/Stockholders Equity = (384+9829)/92561 = 0.11 3.1 Earnings before interest and taxes (EBIT) or operating income is a measure of a firms profitability Interest Coverage = Operating Income/Interest Expense = (18556)/28 = 662.7 Financially both the companies are sound but Chevron is certainly better placed compared to GE. VI. CRITICAL ANALYSIS What do you feel are the relative strengths and weaknesses of each company? General Electric Co. Relative strength of General Electric lies in its multiproduct operations. The company has wider manufacturing base in number of countries of the world. That gives it the reach and depth to the market. Strong brand image gives it instant access to the market. The company has a strong research and development facilities and capable of delivering the newer and newer products in various fields such as Lighting, Appliances, Consumer Electronics, Aviation, Lighting, Health care, Media, Energy, Water business. The company’s resource base and access to financial resources is strong. On flip side, the company is vulnerable to competition from developing countries like China, India, Korea, Taiwan etc. Weak dollar is likely to pose constant challenges and likely to erode its resource base at U.S. A large size has its own disadvantages in decision making and procedural delays compared to a small company. High debt is another weakness for the company. Chevron Corporation Chevron is a company specialized in the field of energy and its derivatives. Though lately the company has diversified into the mining, shipping and power generation businesses but still main chunk of revenue comes from its operation in energy sector and the company is well placed in the sector. Relatively, when compared with General Electric, Chevron has the advantage of catering to the energy needs of the world, which is the fastest growing industry sector. Stark contrast between General Electric and Chevron is that former’s main line of products is a consumer of energy while latter’s main line of businesses stand as a producer of energy. Looking at the present scenario, thus chevron is definitely better placed for future growth. VII. PRACTICAL IMPLICATIONS What recommendations can you offer the company in order to improve its weaknesses? GE is recommended to focus more on new revolutionary technologies and find the ways on reducing the cost of products without compromising on the quality aspects. Chevron has to stress more on human relation aspects for that seems to be a weaker side of the company and spearhead aggressively on renewable energy sources to protect environment and meet world’s energy needs. VIII. LEARNING REFLECTIONS Based on the information provided in the company accounts and your responses in the LLB how would you advise your organisation against making similar errors? When Innovation is the strength of the company for past several decades and particularly, when it is the reason for its brand image among the masses; it becomes essential that company does not lose focus. In fact, people continue to expect the same in a more intensive way at the time of crisis and deep recession, which is what the world is now passing through. GE management has to show vision and intensify its efforts because it is a sure shot way to boost the demand for its products. It has been seen in the past that economy starts taking turn when such revolutionary technology of mass consumption starts making the foray in the market. That is what recently happened during communication and internet technology at the beginning of this century. General Electric or for that matter any company should keep in mind these aspects while formulating a long term strategy. Human Relation aspect is equally important for any company because it is an intangible asset which cannot be assessed easily. Labor unrest in Nigeria for Chevron clearly indicates that how it can derail the growth of the company. Any company needs to have strong HR policies aiming at all around growth of its employees. No company in the world can ignore human capital irrespective of which industry sector it operates in. Strong HR department with liberal policies aiming at continuous growth and development of human asset is the need of an hour, which helps place the company in fine footing. References: 1. Online from http://www.ge.com/pdf/investors/financial_reporting/financial_statements/ge_ar_2009_fin_sec_financial_position.pdf [Accessed on 12/8/2010] 2. Online from http://www.ge.com/pdf/investors/financial_reporting/financial_statements/ge_ar_2009_fin_sec_earnings_statement.pdf [Accessed on 12/8/2010] 3. Online from http://www.chevron.com/annualreport/2009/documents/pdf/Chevron2009AnnualReport_full.pdf#page=34 [Accessed on 12/8/2010] Read More