General Electric's diversification

1. General Electrics Presentation
Brief View to Diversification
(UN)Related Diversification
06/11/2013
Julian Kimora,
Scott Lichtenstein,
Erdem Tokmakoglu

2. 2
Contents
GE
GE Overview and History1
AviationA
2 GE Core Competencies and Divisions
HealthcareB
Relatedness3
GE CapitalC
NBCUniversalD
Conclusions4

3. 3
GE’s PAST to PRESENT
(GE website)
Appendix 2
5
1926
X-Ray
12
1990
Tomography
2
1900
Steam
Turbines
3
1905
Bond&
Share
11
1987
GE Capital
1
1892
Foundation
8
1938
Boxbob
Locomotive
14
2013
GE
Sells
Completely
NBC
9
1953
Lexan
Accidentally
Developed Coating
7
1935
First
Garbage
Disposal
4
1919
Radio Corp.
of America
Formed
10
1986
GE
Reacquires
RCA,
Forms
NBC
6
1932
Credit
Foundation
13
2004
Boing 787

4. 4
KEY INFORMATION
(Yahoo Finance)
GE Outline
Founded: 1892
Headquarter:Fairfield,
Connecticut,
CEO: Jeffrey R. Immelt
Global Locations:
more than 160 countries
Employees: 305,000
Total Revenue:
147,359,000,000 USD
Operating income(EBT):
17,406,000,000 USD
Net income:
13,614,000,000 USD
One of the 12 original Dow Jones
Industrial Average members
Various M&As have shaped
GEs organisational structure

5. 5
0 $
40 $
80 $
120 $
160 $
200 $
2008 2009 2010 2011 2012
Sales/Revenue Gross Income Research & Development EBITDA
ANNUAL FINANCIALS
(Marketwatch)
APPENDIX 1
Total Assets
717.26B
2012
Total Liabilities
588.79B
2013
Total Equity
128.57B
2013
Net Operating
Cash Flow
31.33B
Billions

6. 6
ORIGINAL BUSINESS AREAS
ORIGN
Original business areas were focused on the generation and application of electricity.
Power Plants Transformers
Electric
Locomotives
X-ray Tubes
Household
Goods

7. 7
MEET THE KEY PEOPLE
People
1981 CEO
Jeffrey Immelt
CEO 2001 - Present
“worlds best CEO“ (Barron),
Restructured GE, selling unrelated
assets and focusing
on core businesses
-However,
GE stock is over
40% lower than when he took over
John Welch
Chairman & CEO 1981 - 2001
Joined GE as chemical engineer in 1960
Increased market cap
from $13 bil. to several hundred billion
Streamlined operations and reduced bureaucracy
”Manager of the century”
(Fortune Mag. 1999)

8. 8
EXTERNAL STRATEGIES
THAT CREATE CORE
COMPETENCES
ABOUT GE
Few Corporate Layers
Where the ideas are born
Only 4 Corporate layers
Very few corporate staff
Therefore more differentiation
Power
Differentiation,
Portfolio Investments,
Value Creation,
“Aggressive acquisition
&
expansion strategy”
Regularly acquire firms in times of economic downturns
which improves customer values
Technical Leadership
Promoting the work
Innovation
%6 Investment on Research
Over Revenue

9. 9
CORE COMPETENCIES
ABOUT GE
Innovation
Cultivation in them of an insatiable desire to learn,
to stretch and to do things better every day.
GE uses its capabilities in R&D to continue to produce
some of the world’s most innovative industrial products
Tax Strategies
Corporate Profit Accounting to reduce tax liabilities (Scott 1977)
GE famously paid no US income taxes in 2010 despite
earning a profit of $5.1 billion in the country that year.
The company employs 375 lawyers in the
largest tax department in the world” (AP)
Corporate Organisation Design Strategies
The global recruitment and nurturing of worlds best people
(GE 2011)
GE spends over $1 billion annually on management training (WSJ)
“Session C” management training and performance review every year
Financial Economies of Scale
Cross-business synergies from debt coinsurance effects
In a moderating growth operating environment
and greater uncertainty,we believe investors
will gravitate to GE's late-cycle exposure,
high-margin services mix, emerging markets strength,
and attractive earnings visibility/consistency,’
Dray wrote in a note to investors.” (AP 2006)

10. 10
Relatedness
General Info
Corporate Relatedness
The application of core competencies to
different business areas
All of GE’s divisions share their core
competencies of innovation,
management training, and tax strategies
Operational Relatedness
The sharing of skills and inputs across
different business areas
GE’s divisions sometimes require
different inputs and skills
We will analyse the Operational
Relatedness of a few key divisions

11. 11
GE CORE SECTORS
Appendix 3
1. Finance
2. Power & Water
6 Transportation
7. Aviation
8. Home &Business
Solutions
3. Oil & Gas
4. Power & Water
9. Energy Infrastructure
A. Powering
B. Curing
D. Building
5. Health
C. Moving
Premier
Infrastructure
Company

12. 12
GE SEGMENTS
(CSI MARKET DATA)
ANALYSIS
Total Revenue
$147,469M
2012
46.039
7.967
5.608
18.290
19994
7412
15241
28299
%31
%5
%4
%12%14
%5
%10
%19
Power & Water Oil & Gas
Energy Management AviaCon
Healthcare TransportaCon
Home & Business SoluCons GE Capital
Most margin over revenue – Energy Infrastructure
Million USD

13. 13
GE AVIATION
(GE website)
GE FAILURE
In 1917, GE was granted a US military contract to build the first superturbo
charger for airplane engines for the US entry into WWI
By the beginning of WWII, all US Air Force planes were using GE engines
GE built the America’s first jet engine in 1942
In 2012, GE Aviation had revenue of $19.994 billion, which is 14% of GE’s total revenue
Today, a plane flying with GE engines takes off every two seconds somewhere in the world

14. 14
GE AVIATION RELATEDNESS
(GE website)
Sectors
R&D Skills
First turbocharged & jet engine
Advanced engineering, long design period
Revenue: $19.994 Million
14% of GE’s total revenue in 2012
Manufacturing
Both machinery and aircraft engines require complex products
Manufacturing focuses on precision and durability rather than volume
Currently Boing 787’s engine supplier
Inputs
Engines require complex electrical components
Conclusion
Corporate & Operationally related

15. 15
GE HEALTHCARE
(GE website)
GE FAILURE
GE Healthcare began as “GE X-ray Corp” in 1926 when GE merged with
Victor Electric, a manufacturer of X-ray tubes
In the 1950s and 1960s the company began manufacturing
pacemakers and patient monitoring equipment
In the 1980s, GE Medical began investing heavily in MRI and CT machines
Name changed to GE Healthcare in 2001
2012 revenue of $18.29 billion, which is 12% of GE’s total revenue

16. 16
GE HEALTHCARE RELATEDNESS
(GE website)
Sectors
R&D Skills
Biology research and biomedical engineering are different
than electrical and industrial engineering
Revenue: $18.29 Million
12% of GE’s total revenue in 2012
Manufacturing
A higher number of product categories sold
than power generation machinery and more units sold per category
Inputs
Biomedical products require small and intricate parts,
some of which are electrical
Conclusion
Somewhat operationally related

17. 17
GE CAPITAL
(GE website)
GE FAILURE
In 1905, Electric Bond Share Co. is established to finance small utility companies
In 1932, GE Credit Corporation is founded to provide credit for families purchasing GE appliances
Had branched into credit cards, personal loans, mortgages,
savings accounts, and other areas of consumer finance by the time
the name was changed to GE Capital in 1987
Currently also involved in energy derivatives trading, real estate,
and asset-backed securities issuing in 55 countries with over 50,000 employees
Had $46 billion in revenue in 2012, which was 31% of GE’s total revenue.

18. 18
GE CAPITAL RELATEDNESS
(GE website)
Appendix 2
R&D Skills
Financial market analysis and economic intuition are very different
than electrical engineering
Revenue: $46 Million
31% of GE’s total revenue in 2012
Manufacturing
No manufacturing is required for GE Capital
Inputs
Human capital is largest input
Conclusion
Not operationally related

19. 19
GE TRANSPORTATION
(GE website)
Appendix 4
R&D Skills
First turbocharged & jet engine
Advanced engineering, long design period
Revenue: $5.608 Million
4% of GE’s total revenue in 2012
Manufacturing
High-horsepower diesel-electric locomotives which share
gear and engine tech.
Inputs
Engines require complex electrical components
Conclusion
Corporate & operationally related

20. 20
GE POWER & WATER
(GE website)
Appendix 5
R&D Skills
Advanced engineering, long design period
Revenue: $ 28,299 Million
19% of GE’s total revenue in 2012
Manufacturing
Water purification systems, pumps, valves, filters
and fluid handling equipment for improving the performance of water,
wastewater and process systems, including mobile treatment systems
and desalination processes, floating use similar technical structure with engines.
Inputs
Engines require complex electrical components
Conclusion
Corporate & operationally related

21. 21
GE OIL & GAS
(GE website)
Appendix 6
R&D Skills
First turbocharged & jet engine
Advanced engineering, long design period
Revenue: $15,241 Million
10% of GE’s total revenue in 2012
Manufacturing
floating production platforms,
compressors, turbines,high pressure reactors,
industrial power generation and a broad portfolio of equipment
use similar technical structures with engines and pumps.
Inputs
Engines require complex electrical components
Conclusion
Corporate & operationally related

22. 22
GE HOME & BUSINESS SOLUTIONS
(GE website)
Appendix 7
R&D Skills
First turbocharged & jet engine
Advanced engineering, long design period
Revenue: $7,967 billion
5% of GE’s total revenue in 2012
Manufacturing
Both machinery and aircraft engines require complex products
Manufacturing focuses on precision and durability rather than volume
Currently Boing 787’s engine supplier
Inputs
Engines require complex electrical components
Conclusion
Operationally related

23. 23
NBC UNIVERSAL 1
(Forbes)
GE FAILURE
GE founded RCA in 1919 as a subsidiary to manufacture radios
RCA launched NBC in 1926 as America’s first broadcast radio network in order to sell more radios
GE sold its stake in RCA in 1932
GE repurchased NBC in 1986

24. 24
NBC UNIVERSAL 2
(Forbes)
GE FAILURE
GE bought 80% of the movie studio Universal for $5.9 billion in 2004
and merged it with NBC to create NBCUniversal
GE sold 51% of NBCUniversal to Comcast in 2011 for $6.5 billion
GE sold the remaining 49% to Comcast in 2013 for $16.7 billion
NBC had dropped from the number 1 US network in the 1990s to number 4 at the time of the sale

25. 25
NBC UNIVERSAL RELATEDNESS
(Forbes)
GE FAILURE
GE NOT operationally related at all
Skills and inputs for hit TV shows and movies very different than for
heavy industrial manufacturing (creativity versus engineering)
Sale to Comcast driven by changes in the entertainment industry
Growing power of cable: In 2011, 90% of US homes had cable TV subscriptions
and spent twice as much time watching cable as watching broadcast TV (Nielson)
Rise of the internet: Netflix has 30 million US streaming subscribers and Hulu has 4 million (NY Times)

26. 26
BCG Matrix
Analysis
Oil & GasAviation
Power & Water
Transportat
ion
Home &
Business
Low High
Market Share
LowHigh
MarketGrowth
Healthcare
GE Capial

27. 27
CONCLUSION
LAST WORDS
“One-stop shop’ for developing countries (NYT 2005). To achieve this objective, Jeff Immelt
formed vertical cross- business teams in Healthcare, Energy, Water, and Rail that focused on
company-to-country relationships in developing countries (GE 2004, 2005)”.
Mainly focus on
related areas.
GE capital is not
related but the
most profitable.
GE should be
careful not to fall
into “?” or “Dog”
Immelt is trying
to refocus GE on
their core
businesses

28. THANK
YOU
For your attention!

29. QUESTIONS &
ANSWERS
Go ahead. Don‘t hesitate.