Case:GEMedicalSystems

Dr.S.Balasubrahmanyam StrategicManagement IndianInstituteofManagementKozhikode PGPI(Sections A&B) 6th March,2013

Strategies for Growth: Growth Through International Expansion

GE Medical Systems

The Healthcare Industry: Significant Differences across Countries

Dim ension Healthcare Spending Future Growth US Highest in the world M oderate (ageing population) Not-forprofit hospitals Govt, Insurance, Patients Cost control Europe High M oderate (ageing population) Govt owned hospitals M ainly govt, partly patients Cost control Japan Second highest M oderate (ageing population) For-profit, private hospitals Insurance, mainly patients Use of sophisticated equipment China Very low per capita Very high (large and growing middle class M ainly govt hospitals Govt; but increasingly by patients Affordable prices; better equipment India Very low per capita Very high (large and growing middle class) For-profit private hospitals M ainly directly by patients Affordable prices; better equipment

Healthcare providers Healthcare paym ent M ain focus or emphasis

Key Success Factors in International Expansion

* Knowledge of Local Conditions * Adaptation to meet Local Conditions Actions companies can take to improve their Performance in International Operations?

National Differentiation or Adaptation

+
* Global Standardization and Best Practices * Leverage Global Scale

Performance

Globalization or Aggregation

GEs Global Product Company: Global Standardization and Local Responsiveness

The Global Product Company

Global Standardization And Global Scale (R&D, Manufacturing)

Local Responsiveness to suit Differences across countries.

(Product, Sales, Marketing)

Aggregation

Adaptation

Drivers of Advantage in International/Global Business

Where you do things

Comparative or Arbitrage Advantage (based on location)

How you do things?

Competitive Advantage (distinctive activities across the value chain)

Competitive Advantage is seen to be more durable than Comparative Advantage

GEs GPC Model: Aggregation + Adaptation + Arbitrage

AGGREGATION

ADAPTATION

GE Philips Siemens ARBITRAGE

The Global Product Company: Critical Tasks and Challenges

The Global Product Company

How to Configure the Value Chain across Multiple Countries to exploit Adaptation, Aggregation And Arbitrage Advantages

How to Coordinate the Globally Dispersed Value Chain both Efficiently And Effectively.

Configuration

Coordination

GPC vs In China For China

AGGREGATION

ADAPTATION

ARBITRAGE

International Strategies: Evolution and Change over time

Should GE Modify the GPC To In China for China
NO - The Economics for YES
- Making products in China for China will help to better adapt products to meet unique needs in China -China is a large market to Enjoy Scale Benefits - These products can also be sold in other emerging mkts

Certain Products dont justify this change.

- The GPC is working fine, so why change it? - That is our Source of Advantage over rivals

Global Standardization Vs. National Differentiation: Variation Across Industries

High

Chemicals, Microprocessors

Consumer Products

Emphasis On Global Std. And Scale (Aggregation) Cement Law Services Food

Low Low

High

Need for National Differentiation (Adaptation)

Types of International Strategies

Transnational Strategy
An emphasis on both global scale/best practices and local responsiveness E.g.: Auto companies, appliance companies

Multi-domestic Strategy
Treat every international market as different and independent Primary focus is on local responsiveness E.g.: Law Firms; some food companies

Global Strategy
Treat all international markets as homogenous and similar Provide standardized products/services to all markets Focus on global scale and efficiency E.g.: Chemical companies