Strategic Analysis of GE Healthcare India - Case Study Example

Strategic Analysis of GE Healthcare India Name: Tutor: Course: Date: Executive Summary GE Healthcare is a global company exploiting the emerging market in India. The firm has competitive advantage of low operational cost, superior technology, cheap labor and a large market in a middle income economy. The firm has applied a licensing strategy to gain a huge urban and rural market in the country. However, the immoral use of Ultrasound machines is threatening company sustainability and shareholder returns. The company is trapped in a journey to explain itself regarding use of Ultrasound machines in gender sex determination. The options available for continued existence in India are to joint venture with a local company, increased budget on sales promotion and campaigns against abortion of girl child. Table of Contents Executive Summary 2 Table of Contents 3 Corporate Ethics and GE Healthcare 4 Corporate Ethics 4 Shareholder and Stakeholder Theories 5 Corporate Social Responsibility (CSR) 6 Ethical challenges facing GE Healthcare in India 7 Re-Positioning GE Healthcare in Emerging Markets 8 Entering the Emerging Market 8 Domestic Opportunities 8 Market Strategy for GE Healthcare 9 Recommendations 10 Conclusion 11 Reference List 12 Introduction The GE Healthcare is an American multinational that huge investments around the world. The company has over 30 years of intense presence in India which has a huge population of more than 1.2 billion people. The market for Ultrasound equipment is great in India owing to large birth rate numbers (Cole 2003:125). GE Healthcare being a manufacturer and distributor of Ultrasound equipment has an advantage over Philips, Toshiba and Siemens due to lower operational costs. It has penetrated to the interior parts of India which is a winning strategy. The success and continued existence of GE Healthcare in India depends on compliance with social and legal laws of the country. Due to increased cases of abortion after determination of the sex of the child, the Indian government has moved to regulate the Ultrasound market (Anurag 2006:77). The analysis looks into the company position in the emerging market and ethical issues that may limit GE Healthcare operations in India and provide recommendations on the way forward for GE Healthcare. Corporate Ethics and GE Healthcare Corporate Ethics Business ethics are decisions and actions of a business and its personnel influenced by standards and ethical principles. The ethics practiced by business in the emerging markets are not different from the ethics applied by all markets in the general concept of ethical principles (Nash 1999, 289). The business actions of emerging markets are not subjective to permissive standards but judged from the perspective of societal ethical standards. GE Healthcare can be seen to help the emerging market in need of Ultrasound tests which has a competitive advantage given great engineering skills exhibited by its workforce and lower costs of producing the equipment. The domestic demand is also on the increase driving growth in the country. The government is not able to cater for healthcare of half of its population hence the opportunity for private players. Ethics demand that the company build trust with people and their institutions. The laws of India respects the rights of the unborn child, dignity to gender and respects the wishes to pregnant mothers to carry their unborn until their time of delivery is ripe (Duin 2007:41). According to Nash (1999:297) ethical theory that should apply is the norm rather than utilitarianism. However, many businesses are thriving on unethical platform. GE Healthcare is pursuing wealth and other trappings that can be termed as ‘corporate greed’. Just like many other businesses, the company is in business and not to practice ethics. Its culture may not encourage unethical and illegal conduct to the Indian pregnant mothers but the huge pressures from the GE Group puts a lot of pressure on Raja, the CEO of GE Healthcare India to meet the required performance targets. Shareholder and Stakeholder Theories According to stockholder theory, the stockholders advance capital for managers to maximize the return on investments. Managers have legal obligations to their stockholders not to divert resources of shareholders to any other social beneficial or charitable project but can use their personal funds instead. Friedman (1970:45) argues that as long as businesses are engaging in open and free competition without fraud or deception can engage in activities or use its resources purposely to increase profits. The success of any venture is based on effective management and balanced consideration and attention to all stakeholders’ legitimate interests. The stakeholder theory maintains that the financial success of a business is attained through policy adoption and balanced consideration to all the stakeholders (Freeman & Evan 2003: 66). In this case, the stakeholders are Indian pregnant mothers, clinics, doctors, government of India, employees, management of GE Healthcare and its suppliers. The requirements for businesses especially in the health sector is to practice noble values like respecting the will of their patients, confidentiality, honesty, modesty and fair treatment. Corporate Social Responsibility (CSR) In the social contract theory, businesses are granted existence by members of society who give them legal recognition and the permission to use capital and human resources within the population. In the GE Healthcare case, the business is given the right of existence by the general society who entrust them with their resources to better their healthcare concerns. But the entity is out for quick wins despite their understanding of human rights and penalties if found violating the national laws. To manage its image, GE Healthcare must introduce strict terms and values to be observed by its employees, buyers and suppliers out of which any violation will attract legal penalties. The advancement of modern technology could not stop the killing of the unborn girls since the urbanized population continued the act. According to Singh (2011:390) ethics should govern the shared and agreed upon practice of diverse moral values or principles. GE Healthcare should own the social and moral responsibility on the overall moral nature and the particular moral choice a person makes relative to others. It should represent the standards and/or rules governing the conduct of the member of a profession group in this case the healthcare practitioner as applied to business (Singh 2011: 392). Ethical challenges facing GE Healthcare in India Rising cases of abortion of girls are worrying in India. Many gender diagnostic centers have capitalized on the failure by Indian government to crack down on rogue practitioners to create imbalance in the ratio of boys to girls. It is evident that the ratio of boys to girls is increasing as families continue to deliberately annihilate girls. The Management of GE Healthcare must conduct impromptu visits to clinics to assess the use of Ultrasound machines and stop relationships with those procuring abortions upon realizing the gender of the unborn child. The respect for human life is a moral as well as a legal issue (Carla 2006:67). Freeman and Evan (1988:112) support the stakeholder theory and argued that human should not be taken as mere pawns but valuables in their own right. Business should be moral agents. In this case the use of Ultrasound should be used to determine the position and status of the child and not for purposes of sex determination of the unborn child. It is evident that the continued violation of laws by many healthcare practitioners will make it hard for GE Healthcare known for ethical practices to be believed (Carla 2006:65). GE Healthcare needs to advance Ultrasound applications to promote increased use in other body organ investigations. Re-Positioning GE Healthcare in Emerging Markets Entering the Emerging Market The success of GE Healthcare in emerging markets like India is largely on the strategy and level of competition. It is also affected by political, economic, social, technological and cultural and legal aspects of its territory. GE is Triad Company intending to expand its operations and market share into emerging economies due to cheap labor, inputs and large number of consumers (Peng 2009: 73). It is motivated by resource and market seeking behaviors of the population recognized by growing markets and disposable income. These are middle income countries with increased crackdown on corruption and rule of law. The local firms are competing with global firms but at a position of weakness. The prevalence of investing in the Asian economies is driven by Foreign Direct Investment (FDI) rapidly growing and taking more than 50% of the FDI stock and intra-regional investments in Far East (Cole 2003:84). The GE Healthcare strategy can be through a merger with a local company in India which operates under low labor cost, national preference, and wide knowledge of its environment. Domestic Opportunities The government of India does not have preference of a company over others as this is an opportunity for GE to consider an equal level ground for building capabilities. The company should adopt follower strategies as a latecomer to leapfrog into winning a sizeable market share. To succeed in India, GE Healthcare should use disruptive development paths and innovation to gain global competition, wade through political advantages, utilize low resource costs, appropriate technology and marketing (Hoy & Stanworth 2003: 98). Use of disruptive innovation ensures that competitors do not follow the pattern of development in a sector and instead take time to learn market tactics. The best entry strategy of success in India is for GE Healthcare to enter in equity mode as a joint venture with a local firm in marketing but retain the licensing strategy agreement of producing Ultrasound equipment. This ensures that the local company owns the marketing rights while GE Healthcare owns the production rights, innovation and design. Market Strategy for GE Healthcare The licensing strategy will be good for GE Healthcare to minimize political risks, expand quickly with less risk, reach new markets in the heartland of India and achieve additional income for technical services and know-how (Sherman 2004: 94). The local firm will be vested with role of guiding sales targets to be increased from the previous year. The company can then commit some of its budget to promotion through clinics and hospitals by reducing price by 3% and introducing increasing warranty offers by one year. The joint venture with a local company will also help in overcoming cultural and language barriers in marketing as well as in coordination, communication and trust-building (Cole 2003:80). From the onset, many people had believed that GE Healthcare was producing cheap equipment which was affordable to unqualified doctors. The way out is to allow professional doctors purchase the equipment with due consideration to their financial capability (Anurag, 2006:77). The company will also have to counter the media and activist claims on by hosting TV programs showing uses of Ultrasound machines besides determining sex of the unborn like Heart pulse rate determination and other obstetric functions. Recommendations i) GE Healthcare needs to adopt a licensing strategy as well as a joint venture with a local company to take care of corporate image and advantage of local knowledge, language and cultural barriers. It also has to increase the sales budget by 10% to include extension of warranty periods and price cuts within a window period. ii) The company should set aside some financial and human resources that will be used in reaching the general population. The road show and TV campaign should show that Ultrasound machines does not have priority in determining the sex of the unborn but check its status and form. The company should also defend its position on uses of its machines for obstetric needs and checking the progress of fetuses only. iii) The company must work with reputable hospitals and clinics only. These centers must have met the conditions of Indian government on issues of pre-natal care. This can only happen through blacklisting of centers known to be involved in abortions and illegal sex determination of fetuses. iv) The firm has to play a huge role in changing the belief patterns of the population by supporting programs that campaign against dowry payments, suppression of girl child and gender discrimination. This can be done through focus groups and social media reaching majority of rural population both men and women. v) GE Healthcare must stand out as an activist of gender balance, pre-natal gender determination and repressive cultures through a strict corporate philosophy and values. The vision and mission of the company in India must be changed to reflect the domestic situation. Conclusion GE Healthcare can still capture the Indian market segment despite the legal and ethical problems emerging from the use of its products. Observing business ethics and complying with the local laws is very important for business sustainability. These practices must be consistent with the company’s objective of making profit and bringing returns to the shareholders. It is worthwhile to focus on the higher cadre of the target segment as this will lower the risk of running into unprofessional buyers (Cole 2003:125). Engaging in corporate social responsibility is vital for the Company by devoting some of its funds in running anti-abortion campaigns. This can be in partnerships with other Ultrasound scan manufacturers to show that the overall objective of the company is not only to make profits but cares about its customers and community at large. . Reference List Anurag, G 2006, Tapping the India Opportunity: India Healthcare Equipment Market, Wipro GE Healthcare, South Asia. P77-89 Carla, P 2006, NS Special Report…but What if It’s a Girl, New Statesman 135, no. 4789.p67 Cole, G A 2003, Strategic management, Cengage learning.p125 Duin, J 2007, GE Machines used to break the law. New York Times. Alabama.p41 Freeman S & Evan R 2003, Stockholders and Stakeholders: A New Perspective on Corporate Governance, in Corporate Governance: A Definitive Exploration of the Issues. London.p112. Friedman M 1970, The Social Responsibility of Business is to Increase its Profits. New York Times magazine.New York. 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