Diversification and Market Penetration - Essay Example

From consumer electronics to aviations and rail, GE’s business spans across many countries and numerous industries .Ranked as the biggest company in the world in the year 2009 by the magazine Forbes, GE’s foundations were laid more than 134 years ago, by the great scientist Thomas Alva Edison. Some of Edison’s earliest offerings are still a part pf the products range offered by GE, but since then, the company has expanded from a laboratory in Menlo Park to a conglomerate spread over more than a hundred countries, offering different types of products and services. Diversification and market penetration are two strategies that have always played an important role in bringing growth in the business activities of an organization. Same is the case with General Electrics. By entering new markets and providing services designed around strategic problems faced by communities and market sectors, GE has expanded both effectively and efficiently. For any organization capturing emerging markets that have growing economies is an important business decision, which when taken at the right time, usually results in major benefits for organization. In 2003, Goldman Sachs economist, Jim O’Neill highlighted the growth in the economies of the four countries, namely, Brazil, Russia, India and China and predicted that the rapidly progressing economies of these countries will make them the world leaders by 2050. His report helped investing organizations, researchers and academics put more focus on these four countries in the future and shed light on the prospective prosperity that lay in investing in these rapidly growing countries. Currently, General electric is doing business in all four of the BRIC countries, but plans to increase its market share in these countries. The predictions that O’Neill made are dependent on a number of external issues that may eventually decide whether all of these four countries will make the progress that is thought that they will make or not. Similiarly, GE’s investment decisions in these countries will also be based upon the various risks and benefits that are associated with each country. China, being the third largest country in the world area wise and having the largest population on earth is slated to overtake all the G7 countries including America and become the world’s biggest economy by the year 2045. Experts have argued that the real ‘muscle’ in the BRIC name is due to China. With the economic and financial growth that china has experienced in the past decades, its increased exports, rapidly progressing industry and large population which promises cheap labor rates for investors makes it an ideal place for potential market expansion. But at the same time, the political situation of the country is such that it may eventually be detrimental to the predicted growth rate of the country’s economy. China is a communist country with little regard for public rights and even less regard for political dissenters. This situation may lead to a lot of educated and trained professionals to look for a life elsewhere in other more politically forgiving countries. Another big power in the BRIC is India, with the second largest population in the world. India offers a great opportunity for investors the likes of GE which can cater to the needs of the affluent middle class created after heavy investments were made by the governments to raise the living standards of the majority of its people. These people now want products and services, and organizations who can provide them with these products and services in the best possible way at the best possible price have a huge potential for growth in the Indian market. However, like China, investing in India can come at a price. The country has an alarming score of 126 on the Human Development Index, which highlights a country’s socio-economic development. India’s score shows the poor standards of living of a large number of the population who still live below the povenrty line. This means that if the government there does not improve the standard of living of these people, GE will face problems if it plans to increase investment in India. Russia being the largest country in the world is also an attractive market for GE. With the third largest foreign exchange reserves in the world, it offers organizations like GE a great opportunity to invest and grow in the natural-resource rich territory. For the begging years of this decade, the foreign investment rate in Russia’s economy remained a stable 20-21% of the GDP, but now this investment rate is ever increasing and playin a role in increasing growth there (de Souza, 2008). However, even though the prospects look excellent, Russia is still trying to completely rid itself of it’s communist past. Another problem that GE might face is the possibly lessening workforce. With a slightly lower population growth rate, over the next few decades, the workforce will start to grow old, and the ratio of working people to the retired people will become less. The country that in my opinion should be considered by GE as a priority for future investment is Brazil. With the privatization program that started in the 1990’s, to this date, Brazil has emerged through anonymity into a potential future market leader through a number of reforming action and decisions taken by the country’s government. The country’s recent political and economical stabilization can be credited to the inflation control, which not only cured the chronic inflation and promoted fiscal reform, it also increased foreign and domestic investor’s confidence in the government and the country’s ability to provide a great platform for growth. (Foreign investment in Brazil). Brazil has been noted for extreme corruption at the grass-roots level, but a major reason for that have been low-scale labor rates and wages. If GE can create plans that incorporate proper strategies to handle all these problems, Brazil can prove to be a veritable gold mine for the company, if it chooses to expand its currently existing operation in the country. With its natural-resources laden terrain and its GDP higher than all other BRIC countries except China, Brazil can provide GE with business in the energy sector and increase its market share in the region in a most effective way. Currently GE is more focused on building the country’s infrastructure, provide logistics solution ,healthcare and providing under developed areas of the country with clean drinking water, but in my opinion GE should also venture into offering products and services in the oil ,coal ,wind and water sectors of energy production. Brazil with its investor-friendly laws, lower interest rates, raw material availability and production capacities can prove to be a possible winner if GE focuses more attentively on Brazil for expansion. References De Souza, Lucio V. (2008), Foreign Investment in Russia, Economic analysis from the European Commission’s Directorate-General for Economic and Financial Affairs. Retrieved from http://ec.europa.eu/economy_finance/publications/publication10969_en.pdf on 16th march 2010. Tozzini, Freire, Teixeira e Silva Advogados. (1999). Foreign investment in Brazil. Retrieved from http://www.braziltradenet.gov.br/ARQUIVOS/Publicacoes/Estudos/PUBForeignInvestment.pdf on 16th march 2010. Read More