- Information
- AI Chat
GEMS - Solution - Case Study - GE Medical Systems 2002
Strategic Management (MSCH304)
Amity University
Preview text
General Electric Medical Systems Divisions (GEMS), the world’s leading manufacturer of diagnostic imaging equipment and a subsidiary of General Electric (GE), has had years of success with its Global Product Company (GPC) concept. The GPC philosophy states that GEMS manufacture wherever in the world, products could be carried out to GE’s standards in the most cost-effective manner. However, the “In China for China” proposal by the head of GEMS China division, is causing the company to re-evaluate its global positioning strategy. China is the third largest market for medical diagnostics worldwide and is growing rapidly. Core markets are facing decade-long economic challenges and are unlikely to have the growth rates of China. In parallel, technological demands are ever present. The market demand is veering towards biochemistry. GEMS must decide if its growth strategy means focusing on the China market as part of its competitive advantage.
GEMS has several strengths. Per the financial statements in the Exhibit 1, the company has the financial resources to invest in its desired growth strategy. Changing a corporate strategy often requires the cash flow to hire and train new talent as well cash to pay for capital and operating expenditures. GEMS has a global presence through its extensive sales and marketing organizations; thus, if there was a decision to focus on the China market, the company would probably not lose its current global market share. GEMS core competencies are supply chain management and its vertical alignment structure through acquisitions. The organization has a solid infrastructure which can be leveraged for expanding into new markets, product development, creating smart partnerships, and achieving market penetration internationally.
GEMS weakness is its need for reverse innovation. Currently, the GPC model dictates that manufacturing happen in low cost countries and products be sold in developed countries. This model is too restrictive and does not allow for the company to meet market opportunities in China and other developing countries that are yearning for low-end medical devices. There is also a need for innovation and expertise in the area of biomedical sciences. Current manufacturers are experts in engineering and physics.
GEMS principal competitors —Siemens, Philips, and Toshiba— account for over 80% of worldwide sales. Though GEMS has increased market share, it is not at dominance and this is a threat to the future of the company. Traditional revenue generating countries are also experiencing financial difficulties and will spend less on hospitals. If these trends continue, GEMS sales will not grow at the desired 20% annually that GE has demanded.
Given the situational analysis, there are three alternative solutions I would explore with GEMS. The first would be to consider adopting the “In China for China” policy and to modify the GPC business model. This will allow the company to develop a new market and possibly raise sales by 50%. The cost to develop products in China is affordable and there is an opportunity to hire staff with the capacity to work on biomedical product development and compete with entrepreneurial software companies. There would however be some duplication of existing infrastructure and it would take time to set up strategic partnerships.
The second alternative could be to further penetrate the developed market while continuing to work on product innovations in the developing world. The company could also think about penetration through acquisition of its competitors. This strategy would most likely be extremely
costly and a financial analysis would need to be done to see if the investment would yield the desired market share and technology intelligence desired.
The final suggested alternative is to target developing countries and keep the technology as is. This allows the company to focus on market development: identifying new customers and marketing in developing countries without changing the current business model or straying away from its core competencies.
I would recommend a feasibility study for alternative one. A company must be able to adapt to changing times and meet market demand. The company must also be able to take calculated risk. Should a feasibility study indicate that the growth potential in China is worth the risk, then I would pilot operations and marketing in China.
GEMS - Solution - Case Study - GE Medical Systems 2002
Course: Strategic Management (MSCH304)
University: Amity University
