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PRESENT A CURRENT CRITICAL STRATEGIC ANALYSIS

OF ONE BUSINESS UNIT WITHIN GENERAL ELECTRIC
Strategic Analysis; Tools and Techniques (University of South Wales)

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ESSAY TOPIC: PRESENT A CURRENT CRITICAL

STRATEGIC ANALYSIS OF ONE BUSINESS
UNIT WITHIN GENERAL ELECTRIC

University of South Wales

Name: Arthur Kachemba

Programme / Course: MBA - Master of Business Administration V2
Module: ST4S38-V1-Strategic Analysis; Tools and Techniques
Student ID#: R1702D2307535
Tutors name: Stavros Sindakis
Date of submission: 06/10/2018

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Table of Contents
1. INTRODUCTION...................................................................................................................................3
2. GE HEALTHCARE STRATEGIC POSITION...............................................................................................3
2.1 Cooperate Performance..............................................................................................................3
2.2 Total Asset Worth........................................................................................................................4
2.3 Business Structure.......................................................................................................................4
3. AN EVALUATION OF GE HEALTHCARE RESOURCES AND VALUE SYSTEMS...........................................5
3.1 GE healthcare Resources Analysis...............................................................................................5
3.2 GE healthcare Capabilities and Core Competences – A Value Chain Analysis..............................5
3.2.1 Sustaining Global Value Networks and Value Creation........................................................5
3.2.2 Learning and Sustaining Innovation.....................................................................................6
3.2.3 Managing Relationships and Sustaining Global Presence....................................................6
3.2.4 Product Differentiation and Cost Efficiencies.......................................................................7
3.2.5 Research and Development.................................................................................................7
4. AN EVALUATION OF GE HEALTHCARE PRODUCT/PORTFOLIO MIX......................................................7
5. ANALYSIS AND EVALUATION OF GE HEALTHCARE FUTURE STRATEGIC GROWTH...............................8
5.1 Healthcare Industry Focus...........................................................................................................8
5.2 Research and Innovation to Stimulate Growth............................................................................8
5.3 Expanding Footprint in Emerging Markets..................................................................................9
5.4 Accelerating Sales Growth through Life Sciences Segment.........................................................9
6. CONCLUSION AND RECOMMENDATIONS..........................................................................................10
REFERENCES..............................................................................................................................................11

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1. INTRODUCTION
The focus for this paper is to present a current strategic analysis of GE Healthcare. This task will
be performed by reviewing and synthesizing web-based materials on the subject matter. The
strategic analysis approach will highlight the following themes:
 GE Healthcare Strategic Position
 Evaluation of GE Healthcare Resources and Value Systems
 Evaluation of GE Healthcare Product/Portfolio
 Analysis and Evaluation of GE Healthcare Future Strategic Growth
2. GE HEALTHCARE STRATEGIC POSITION
1.1 Cooperate Performance
GE Healthcare is one of the eight Strategic Business Unit for General Electric Company. It is a
global enterprise with a total workforce of more than 50, 000 staff. Healthcare professionals and
patients in over 100 countries utilize its products and services (UKEssays, 2013). As of 2017, the
company had a total turnover of approximately $ 19.12 billion and it occupied a third position in
revenue generation among the eight business units of GE.
Figure 1: General Electric's revenue in FY 2017, by segment (in billion U.S. dollars)

Power 35.99 1.59%

3.34%
Aviation 27.38 7.24%
Power
Healthcare 19.12 28.74%
8.21% Aviation
Oil & Gas 17.23
Healthcare
Renewable energy 10.28
Oil & Gas
Capital 9.07
13.76% Renewable energy
Transportation 4.18
Capital
Lighting 1.99
Transportation
0 5 10 15 20 25 30 35 40
21.86% Lighting
Revenue in billion U.S dollars
15.27%

Source: Statista 2018

Over the past ten years, GE Healthcare has had stable annual revenues and profits averaging
US$17.82 billion and US$2.93 billion respectively. GE Healthcare’s revenues and profits grew
at a compounded annual growth rate (CAGR) of 1.1% and 1.9% respectively in ten years.
However, the performance has significantly improved over the past three year. During the period
2015 to 2017 the CAGR for both revenues and profits was estimated to be 4.1% and 9.4%
respectively. The chart 2 highlights a trend in annual revenues and profits over the past ten years.

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Figure 2: Revenue and Profit of General Electric Healthcare from 2008 to 2017 (in billion U.S. dollars)
20 4.0
Revenue in billion U.S dollars

Profit in billion U.S dollars

19 3.5

18 3.0

17 2.5

16 2.0

15 1.5

14 1.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Statista 2018

.2 Total Asset Worth
As of 2017, General Electric total assets was approximately US$374.15 billion. The chart below
represents General Electric's total assets in the fiscal year of 2017, with a breakdown by segment.
In 2017 GE Healthcare segment, had assets to the value of more than 28.7 billion US dollars.
This represented a 7.7% of General Electric total assets and ranked fifth among GE’s business
units. Interestingly however, GE Healthcare occupied third position in revenues with a 15.3%
contribution towards GE’s turnover. Just 13.5% below Power with assets valued at UD$71.13
billion and 6.6% below Aviation with asset value of US$41.75 billion.
Figure 3: General Electric's total assets in FY 2017, by segment (in billion U.S. dollars)

Capital 156.70 0.19%

1.20%
Power 71.13
Oil & Gas 59.78 Capital
Aviation 41.75
7.69% 2.89% Power
Healthcare 28.77 11.16% Oil & Gas
Renewable energy 10.81 41.88% Aviation
Transportation 4.49 Healthcare
15.98% Renewable energy
Lighting 0.72
Transportation
Lighting

Assets value in billion U.S dollars 19.01%

Source: Statista 2018

.3 Business Structure
With its headquarters situated in the United Kingdom (UK), GE Healthcare is the only General
Electric business segment outside the United States. Its head office in the UK is primarily
responsible to perform eight functions. These are manufacturing, cooperate affairs, global
acquisition, finance, sales, design, X-Ray marketing and distribution. Even though the primary
role for sales and finance divisions is to perform all critical decisions for GE Healthcare, other

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sub-divisions have their own comparable departments. The global sourcing subdivision performs
all acquisition functions
“GE Healthcare provides a variety of products services namely Technologies in medical
imaging, diagnostics in medicine, systems for monitoring patients, solutions for improving
performance, discovering drugs, and technologies to manufacture biopharmaceuticals. It
also provides X-Ray products, which include radiography, fluoroscopy, vascular,
cardiology, and the Mobile C-Arm machine” (UKEssays, 2013).
At present, GE Healthcare has six major business units. These are Global Diagnostic Imaging
Unit, Integrated IT Solutions (IITS), Medical Diagnostics Business Unit, Clinical Systems Unit,
GE Healthcare Life Sciences Unit, and lastly but not the least GE Healthcare Surgery Business
Unit. GE Healthcare has operations in various parts of the world. It likewise has essential
regional operations in Paris, Japan, and India (UKEssays, 2013).
3. AN EVALUATION OF GE HEALTHCARE RESOURCES AND VALUE SYSTEMS
In 2009, under the leadership of Jeff Immelt, GE Healthcare began the implementation of
"healthymagination" vision for the future, whose focus was to "reducing costs, increasing access
and improving quality and efficiency around the world." The purpose of the forthcoming section
is to conduct a strategic analysis evaluation of the company’s internal resource and capabilities
with respect to its current and future competitiveness.
.1 GE healthcare Resources Analysis
The resource base of GE healthcare is tremendous, and provides a strong competitive advantage
to its prospects. GE healthcare financial and physical assets are solid and enables the company to
earn superior earnings. Having consistently achieved sufficient turnover, the firm has a favorable
credit rating, which enables it to acquire low priced debt to finance its growth. With superior
earning at its disposal, GE Healthcare has a dominant global presence and invests in excess of
half a billion dollars in R&D annually. The technical advancement and adaptability of
manufacturing systems is remarkable to engineer adequate working supply systems. Its
incredible status makes it attractive to highly skilled human resources, which is retained for a
long period. Based on the given resource configuration a wide range of competitive advantage
possibilities are achievable. In the coming section, this paper lays out GE Healthcare’s
capabilities and demonstrates the extent to which the company’s resource configuration enables
sustained competitiveness.
.2 GE healthcare Capabilities and Core Competences – A Value Chain
Analysis.
As way of sustaining competitive advantage GE healthcare has over years strived to distinguish
its capabilities or competencies. The company has achieved this goal by sustaining its global
value networks and value creation, promoting learning and research to sustain innovation,
managing relationships and global presence, product differentiation and achieving cost
efficiencies.
.2.1 Sustaining Global Value Networks and Value Creation
In view of the company’s ability to buy huge quantities of raw materials and finished products,
its ability to manage a complex but efficient supply chain system has improved over years. Given
this level of success the company has efficiently focused on developing its core competences by
leveraging other none core activities through outsourcing possibilities. In support of this strategy,

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GE Healthcare considers that elementary manufacturing is not one of its value creating activities.
However, it is important to point out that even if GE Healthcare does not value the
manufacturing process of basic parts as a core capability. It maintains a sole manufacturing and
assembly role for its proprietary products because it speaks to its technological expertise and the
foundation for future dominance in research and innovation. In other words doing so guarantees
retention and protection of capabilities that defines sustained strategic advantages in future.
The company maintains components manufacturing in various locations such as India, Mexico,
and Israel and specialized engineering in Korea, Hungary, and China. The operations of the
company are highly specialized, widely distributed and mutually dependent. Achieving success
in managing these complex dimensions that encompass value creating processes, embracing
proactive organizational learning and managing relations to achieve competitiveness is not easy
(Heide, 2018).
.2.2 Learning and Sustaining Innovation
As an organization, GE Healthcare strives on its ability to implement a robust Knowledge
Management or Leaning process. In view of this, the organization takes a highly proactive
approach to respond to global shifts. GE Healthcare has consistently achieved sound financial
gains with respect to continuous introduction of state-of-the-art product mix. By continuously
adjusting its competences, the organization has simply defined itself as the epi center of learning
and special skills development. This has been reinforced by self-recognition of GE Healthcare
human resource team and the reception of divergent ideas that accommodate the company’s
desire to experiment on new ideas. This could possibly be the reason why GE Healthcare has
consistently achieved superior performance for many years. Having adopted a proactive learning
approach GE Healthcare success is focused on growth and achieving innovations to meet future
growth prospects. GE Healthcare has vital infrastructure, which attracts competent personnel and
unique talent. GE Healthcare through the parent company leverages several self-developed
management concepts and the ability to manage acquisitions, the excellent innovation reputation
and the strong partnership with customers are supporting GE Healthcare learning organization
approach (Heide, 2018).
The firm takes a deliberate stance to achieve maximum performance efficiencies in its workforce
as it responds to constant shifts in global trends. GE Healthcare has one of the best-recognized
training institute, which provides tailor made advanced training to both employees and
customers. The training programs delivered varies from leadership, technical, and applications.
To optimize the effectiveness of training delivery and provide GE healthcare and customer
topnotch teaching, the institute has more than 70 laboratories with the latest equipment and
teaching aids. Approximately more than US$100 million is invested annually on training and
staff capacity development. Furthermore, the firm takes a strategic recruitment approach and
continually attracts best skilled talent internationally. It is generally agreed that GE managers are
among the firm's distinguishing competencies and assets (UKEssays, 2013).
.2.3 Managing Relationships and Sustaining Global Presence
In an effort to remain, competitive and viable GE Healthcare values its global relationships. As a
result, it has guarded this competency as one of its key strategic goal. In view of the above, GE
Healthcare has maintained a focus on comprehensive customer and supplier relations as a value
creation approach. GE Healthcare infrastructure, human resources and technology is tailored to
have absolute benefits on superior service, sales, and marketing. It attracts GE Healthcare near
its clients and empowers the organization to fragment the diverse world markets with their

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distinctive needs. Products are flawlessly custom-made and evaluated to client needs (Heide,
2018).
The firm has a worldwide network, with manufacturing locations outside the US and UK, a more
extensive client base, an unbeatable brand, marketing, sales, IT and Production divisions within
each business category. This guarantees productivity within each specialty of business unit. To
guarantee financial accountability, all critical decisions on acquisition and subcontracting are
executed by headquarter divisions. Furthermore, GE Healthcare has well-established operational
systems and encourages management knowledge transfer within the company (UKEssays, 2013).
.2.4 Product Differentiation and Cost Efficiencies
General Electric and its subsidiary GE Healthcare has developed over years a competitive
strategy around product differentiation and achieving cost efficiencies. The company has built its
image and reputation by providing high quality and differentiated services to its customers. By
leveraging its capabilities as a learning organization and the ability to manage relationships. The
company has ultimately achieved superior product differentiation thereby sustaining its
competitiveness in the sector.
Superior Knowledge Management capabilities and sustaining meaningful relations have also
resulted into cost efficiency advantages. Given this background, GE Healthcare has weathered
stiff competition from its rival firms such as German-based Siemens. By aiming to achieve cost
competitiveness the company has also strategically moved some aspects of its operation into low
cost countries and further its linkages with low cost and reliable suppliers. A combination of cost
effectiveness and wide network of suppliers has gained GE Healthcare beneficial economies of
scale. The company has further standardized its components by streamlining its supply chain
systems
.2.5 Research and Development
GE Healthcare has the ability to re-design itself and adapt to complex changes in business
requirements. Setting new measures for execution of strategy, Research, and Development has
been the mainstay of the firm as demonstrated by its six established business units discussed
earlier in this paper. By harnessing the assets that the firm has, this competency is un-
substitutable. The firm through its research investments is ceaselessly creating solutions for
clients evolving needs. This capability is exceptional and cannot be copied easily (UKEssays,
2013).
. AN EVALUATION OF GE HEALTHCARE PRODUCT/PORTFOLIO MIX
Technology has been the anchor for the medical equipment market. GE Healthcare has an
advanced suite medical technological innovation that has been the pillar of its sustained growth.
The broad portfolio category comprises of diagnostic & clinical equipment, information
technology, life sciences, medical diagnostics, and services and solutions. Both doctors and
hospitals have relied upon the technological apparatus that provide higher resolution
videos/images to perform more accurate patient diagnostics and treatment. (GE Healthcare,
2010)
“Overall, diagnostic and clinical equipment like MR systems, CT/PET scanners and X-ray
technologies generated around $9.5 billion in sales for GE in 2013. Medical equipment repair, data
management and healthcare related IT services generated another $6 billion, while molecular
medicine products, which include tools used in drug discovery and agents used in scanning
procedures, grossed around $3.7 billion in sales for GE in 2013” (Forbes, 2014).

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Figure 4: Broad Portfolio Categories by Share of Revenue

Services & Solutions; 27.00%

Diagnostic & Clinical

Equipment; 45.00%

Medical Diagnostics; 10.00%

Life Sciences; 10.00%

Information Technology;
8.00%

Source: GE 2010
5. ANALYSIS AND EVALUATION OF GE HEALTHCARE FUTURE STRATEGIC
GROWTH
From 2015 to 2017, profits for GE Healthcare have increased by 20%. During the same period,
revenues have grown at a compounded rate of 4.1%. It is anticipated that this growth will
continue in 2018. This section will conduct an analysis and evaluation of GE Healthcare future
strategic growth prospects. The analysis will begin by providing a brief overview of the
healthcare industry focus. Then the paper will proceed by highlighting specific areas of
strategic growth that will benefit GE Healthcare.
.1 Healthcare Industry Focus
The Healthcare Equipment industry continued its growth trajectory in 2017 and we expect this
to continue its growth going forward. Key drivers are the increasing demand for healthcare
services from emerging economies and increasing healthcare expenditure of an aging U.S.
population. Asia Pacific's consumer spending on pharmaceutical and medical equipment is next
only to North America and Europe. Construction of hospitals and clinics, and the
establishment of public health insurance in the region, makes it a bright spot for investment for
major players such as GE Healthcare, Siemens Healthcare and Intuitive Surgical. Overall, U.S.
and Europe remain the key markets for healthcare equipment companies in the near term.
However, Asia Pacific and other developing countries remain the long-term growth driver
(Nasdaq, 2016).

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.2 Research and Innovation to Stimulate Growth

GE has about 11% market share in U.S. healthcare market and its R&D is well supported by its
strong financials and capital division, which makes its healthcare division revenues stable. A
strong focus on research and innovation will enable growth by allowing the company to retain
its competitive advantage. Over the past ten years, General Electric has increased its research
and development spending on healthcare products, totaling $3 billion as of 2015. The increase
in spending for research and innovations is expected to:
 “Introduce a 15% improvement in cost efficiencies procedures and processes with GE
technologies and services.
 Increase by 15% people’s access to services and technologies essential for health, reaching 100
million more people every year.
 Improve quality and efficiency by 15% for customers through simplifying and refining health
care procedures and standards of care” (Forbes, 2014).
In excess of the $3 billion spending on research and innovation by GE Healthcare, GE Capital
and several GE businesses injected an additional $3 billion to advance healthcare IT and leverage
partnerships, media content and services related to healthymagination. Initiative linked to
delivering cost effective technologies targeted to have a wider customer coverage, product
design that align with client needs and process expertise to help customers win (Sustainable
Brands, 2009).
.3 Expanding Footprint in Emerging Markets
The decision to expand operations in developing markets has significantly enhanced GE
Healthcare’s revenue generation capacity. This has particularly been a result of significant raise
in health care expenditures from developing markets such as Asia and Latin America. It is the
expectation of this paper that this strategy, will continue to play a key role in driving growth for
GE’s healthcare segment.
Increased GE Healthcare operations in emerging markets has further expanded the product
portfolio and addressed inherent pricing challenge faced by these markets.
“For example, GE Healthcare has come up with a super value CT machine specifically for India
that costs about one-tenth its premium segment Revolution CT, which costs roughly $2 million a
unit. The company has also established research centers in China and India outside of the U.S. and
Europe, and has established several manufacturing plants across Asia-Pacific, the Middle-East
and Latin America” (Forbes, 2014).
However, it is important to stress that the developed markets will still play a major role in GE.
Expenditures in health care are still projected to go up in these markets as a result of aging
population structure.
.4 Accelerating Sales Growth through Life Sciences Segment
The Life Sciences segment is posed to be the major revenue earner for GE Healthcare. This
segment alone has grown at a compounded rate of 10% for about seven years
consecutively. The Life Sciences unit delivers tools to perform cell, protein, drug discovery,
and manufacturing research. Life sciences segment delivers products to a wide range of
pharmacology industry players such as Roche, Sanofi, Novartis, and Pfizer. GE Healthcare is
resolved to make additional investments in this unit as it aims to expand its product portfolio
and sustain strong future sales growth (Forbes, 2014).

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. CONCLUSION AND RECOMMENDATIONS

The focus for this paper was to present a current strategic analysis of GE Healthcare. In
performing this task, this paper accessed, reviewed and synthesized a number of web-based
materials. The strategic analysis approach was centered on themes highlighted in the table of
content in this report.
On overall, GE Healthcare has strong financial performance and asset base. Its current turnover
and asset base is standing at $ 19.12 billion and $ 28.77 billion respectively. Furthermore, the
company has highly valued capabilities that are very difficult to replicate. The company has
achieved this goal by sustaining its global value networks and value creation, promoting learning
and research to sustain innovation, managing relationships and global presence, product
differentiation and achieving cost efficiencies. As an example, the company has a sound research
and innovation drive and invests in excess of half a billion dollars in R&D annually. The
company can also boast of its proactive leaning culture. Approximately more than US$100
million is invested annually on training and staff capacity development.
GE Healthcare global presence and client base is outstanding and ultimately its continued
success in the health care and technology sector is conditional to the choice of business focus.
The need to be more targeted in finding a market position cannot be overemphasized.
Diversification and product differentiation is beneficial; however, caution on the extent to which
it is done should be applied as it can also introduce negative outcomes. The emerging and
developing markets such as African and Asian provides GE Healthcare enormous growth
opportunities.

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REFERENCES

Forbes (2014). GE Healthcare Is Focusing On Emerging Markets. [online] Forbes.com. Available at:
https://www.forbes.com/sites/greatspeculations/2014/05/22/ge-healthcare-is-focusing-on-emerging-
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GE Healthcare (2010). GE Healthcare: healthymagination Investor Update. [online] Ge.com. Available
at:
https://www.ge.com/pdf/investors/events/11092010/ge_healthcare_analyst_meeting_presentation_11
092010.pdf [Accessed 10 Jun. 2018].
Heide, M. (2018). Harvard Business Review Case Study: General Electric Medical Systems (2002).
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Sustainable Brands (2009). GE Launches Healthymagination, Invests $6b in Healthcare Innovation.
[online] sustainablebrands.com. Available at:
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essay.php [Accessed 10 Jun. 2018].

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