General Electric Medical Systems - Case Study Example

ESSAY Submitted by: GENERAL ELECTRIC MEDICAL SYSTEMS Conduct critical analysis in relation to Int’l Business Strategy Case Analysis: The case in point pertains to Milwaukee based General Electric Medical Systems’ (GEMS) – world’s leading manufacturer of diagnostic imaging equipment. The case describes GEMS’ cross-border management and operations, and it is centered around reducing costs, enhancing profits and maintaining an upward swing in sync with its celebrated parent General Electric (GE). Joe Hogan, the President and CEO of GEMS was expected to decide for himself if he should alter Global Product Company (GPC) concept launched by his successful predecessor, while dealing with the pressures of rapidly evolving healthcare technologies. GPC was set up to cut costs, by shifting the design, engineering and production activities from high cost countries to low cost countries. Hogan faced uphill but a feasible task of growing GEMS annually at 20% besides enhancing its capital from 26% to 35%. It had taken around 20 years (1980s to 2002) for GEMS to amass a market share of 50% and was constantly facing a stiff competition from its principal competitors namely Siemens, Philips and Toshiba. In order to achieve targets, strategy was prepared in the domains like manufacturing, research & development, product design, sales, marketing and human resources etc.. As a long term strategy GEMS worked towards developing local suppliers. Managers and engineers from GEMS, Milwaukee were deputed to various low cost sites where they developed the managers for GEMS operations in low cost countries like Mexico, China and India. The market share and revenues increased worldwide as the products were being sold in high-cost industrialized countries while manufacturing was increasingly carried out in low cost developing countries. Consistent innovations and thoughtful acquisitions enhanced revenues further. In fact, GEMS’ launched their globalization in 1980s by acquiring several key companies. GEMS had acquired nearly 100 businesses ranging in value from $1 million to nearly $ 1 billion. Besides sales, another source of revenue was servicing contracts and accessories sale. China was a significant market for GEMS, it also had an immense importance from being GEMS’ manufacturing site, 70% of the production in China was for export. Production from China increased revenue and sales. For “In China for China” policy they had to alter GPC’s policies that had propelled GEMS through its success. Later on, GEMS worked towards moving set-ups from other low cost countries to China. Pricing and segmentation was appropriately done to capture as more and more market in low and industrialized countries. GEMS faced variety of challenges under Hogan’s leadership. GEMS had increased its share 5 to 25% in Germany, i.e. Siemen’s home country. Hogan’s role in managing GEMS in China was a challenge and it was successfully overcome. 2. Draw explicitly on the concepts: Over a couple of decades earlier, America had managed to tide over import waves from countries like South Korea, Mexico and Japan etc. but “The China Price” has been the biggest challenged so far faced by the American Industry and most of the companies have been overwhelmed. Besides stiff global competition, the reasons for a fierce competition have been low wages and high-tech production capabilities in China. Owing to these inherent advantages, China has been able to able to post itself as the most competitive manufacturing platform. The case study is a very good case to describe a good business in global environment. Besides highlighting international business strategy, the concept of technology and innovation management has also been described. Strategy of internationalization has been explained along with its structure. Management adopted “pitcher-catcher” concept to efficiently move production from one location to the another. GEMS concept of dealing with adaptation has also been talked about. The case describes the lines along which geographical locations for international operations were selected and the process followed for moving the operations from existing location to another. Transnational and global approaches have been listed along with procedures for marketing and marketing strategies for various locations has been highlighted. Methods for creating sustainable competitive advantage in the case include Michael Porter’s i) cost leadership ii) differentiation iii) focus. Each of these methods have helped GEMS to gain a competitive advantage, as regards sales, GEMS always treated sales as a local operation. GEMS used a strategy of “defense and offense” and always maintained a very deep bench for maintaining a highly technical and managerial talent and it banked heavily on the concept of using local staff for the countries. 3. Concepts to the case: Management at GEMS formulated a policy called Global Product Company (GPC). GPC was set up to cut costs, by shifting the design, engineering and production activities from high cost countries to low cost countries. Very wisely, the management altered GPC’s guidelines in order to meet their revised targets. Another strategy adopted to meet these targets was to initially move operations from high cost countries to low cost countries. Furthermore, the to maximize the profits the operations from low cost countries were moved to China where the costs of production were the least. The operations were meant to produce medical diagnostic equipment for not only the industrialized countries and developing countries but were also meant to cater to the Chinese needs in specific. Thus the marketing strategy adopted by GEMS was aimed at addressing three marketing challenges, these were customizing products to suit country needs, marketing used products and marketing newer generation products and services (like Healthcare IT). Sustainable competitive advantage was aimed to be achieved by i) cost leadership – GEMS set out to become one of the lowest cost producer in its domain and it was achieved by reducing the costs (in China) by 10% , this thoughtful move enabled GEMS to gather 50% market in the country. ii) differentiation – GEMS strived to adopt unique measures to be differentiated as the only company to provide specific feature(s) – GEMS developed a system for maintenance of their products from a distance. They provided remote assistance to assess the status of their installations at sites. This feature helped them save their costs with respect to servicing or equipment. It also provided the user a quick solution in case of minor breakdowns. GEMS also had a ‘Gold Seal’ program to market used equipment, the Gold Seal, described the pre-owned marketing two categories ‘as-is-where-is’ business and the refurbished business. iii) focus – GEMS focused on region specific needs of the clinicians/users. Each of these steps helped GEMS to gain a competitive advantage. Consistent with GEMS’ new organization structure, GEMS had three prime groups namely the poles, the business and the functions. Each of these had a clearly defined mandate and portfolio. At GEMS local expertise and relationships were needed to deal with governmental regulatory bodies, healthcare infrastructures and customers in each country. To top it all GEMS produced three categories if products at GEMS China – locally made products for local use, locally made products for sale by GEMS around the world, and products imported from other GEMS plants worldwide. As regards the human resources, executives in one division regularly selected its own managers from other parts of GE. The concepts used in the case study have been listed above. One of the key ideas conveyed by the case in point has been a well planned international business strategy. The international business strategy at General Electric Medical Systems was centered around shifting operations from high cost industrialized countries to low cost developing countries. This concept brings in the desired cuttings in the cost and also provided General Electric Medical Systems with the much desired penetration into the low cost/developing countries. The author has cited an example of GEMS establishing themselves in the Chinese market. The move also facilitated their understanding of the Chinese market and hence enabled them to enter the business of selling refurbished diagnostic equipment. Technology and innovation management has been one of the cornerstones of GEMS and the visionary leadership at GEMS enabled them not only to foresee the upcoming trends and users requirements but they also acquired ventures those had the potential of enhancement. The author has cited a very good example that reflects that managers at GEMS were forward looking, they envisioned a possible two-step transition to make GEMS relevant in biochemical world as well. From being a purely medical diagnostic company they collaborated with pharmaceutical companies to develop equipment capable of detecting the reagents developed by pharmaceutical companies. GEMS had maintained attracting local talent from new regions as their major step in many countries. It helped GEMS to attain an image of insiders in countries those had significant national pride. The selection and development local suppliers in each of the countries was a huge challenge , GEMS selected suppliers with a long term view and GEMS’ sourcing and quality teams helps the local suppliers to maintain GEMS’ usual standards. GEMS’ international managers (as sourcing and quality team) were American nationals working the United States. 4. Analysis & Conclusion: The case in point refers to General Electric Medical Systems (GEMS), one of the leading manufacturers in the domain of medical diagnostic equipment. Medicine being safety and a security critical domain, it entails high quality, high reliability products. Technology used in imaging modalities being hi-tech, makes the business even more challenging in terms of scale of revenues, inventory, production facilities involved. Since these requisites are heavier, this line of business involves bigger companies but there are relatively lesser players in the arena. The operations of these companies are usually spread in number of locations, globally. These companies are constantly working towards technology innovation, cost cutting, marketing strategies, acquisitions and adaptations. GEMS being one of such cases into the business of medical imaging, has been consistently under pressure to innovate, diversify, extend reach and enhance profits. The company through its thought leaders has been growing in the past couple of decades and was managing corss-border business in various parts of the globe. Top management at GEMS had a daunting task of stepping up operations to increase revenues and market share to unprecedented levels. In order to achieve the targets, management worked towards shifting operations to low cost countries, which was the most logical and appropriate move. The strategy adopted in terms of preparing these new low cost production sites was well planned and well executed. GEMS had three principal competitors each of which had a rich background and presence in the domain of medical imaging. GEMS faced a tough competition from Siemens Medical Solutions, although Siemens Medical Solutions had a strategy to “win business at any cost” still GEMS with their aggressive market research and marketing strategies and could prove that they were more German than Germans. Philips Medical Systems too were as aggressive as Siemens Medical Solutions but still they could not match GEMS products and operations at global level. On the other hand, Toshiba Medical Systems were not as big as the other two competitors and were thus considered as an acquisition target by GEMS. As regards HR, GEMS had a good plan in place for setting up their production facilities in low cost operations, the effort to training local manpower through their American managers and engineers paid off significantly, another fact that each manager and each engineer was trained for higher order or responsibility was instrumental in giving GEMS an edge. GEMS policy of acquisitions too paid-off, technology innovation was brought into their products via acquisitions and in-house research and development, in house product development also complimented their acquisitions. Pricing and feature loading was meticulously done, management was open to price reduction specially when it had the potential to spark-off significant sale. Following efficient management practices (covering research and development; product design; manufacturing; sales; marketing; managing regulatory interface; human resources; managing acquisitions etc) the outcomes at GEMS have been promising. GEMS has been able to post itself at a comfortable slot that is much above its principal competitors. In due course of time as the competition grows the business strategy adopted by GEMS will provide them with additional edge over its competitors for the fact that the advantage of initial mover shall be theirs. Read More