Essay about General Electric Case Analysis

927 WordsApr 2, 20144 Pages
Case Discussion Questions 1. GE used to prefer acquisitions or Greenfield ventures as an entry mode rather than joint ventures. Why do you think this was the case? According to our textbook, a firm can establish a wholly owned subsidiary in a country by building a subsidiary from the ground up, the so-called Greenfield strategy, or by acquiring an enterprise in the target market. Acquisitions have three major points in their favor. First, they are quick to execute. By acquiring an established enterprise, a firm can rapidly build its presence in the target foreign market. Second, in many cases firms make acquisitions to preempt their competitors. Third, managers may believe acquisitions to be less risky than Greenfield ventures. When…show more content…
Fueled by its large number of joint ventures, GE has rapidly expanded its international presence over the past decade. For the first time, in 2007 the company derived the majority of its revenue from foreign operations. A joint venture entails establishing a firm that is jointly owned by two or more otherwise independent firms. Joint ventures have a number of advantages. First, a firm benefits from a local partner’s knowledge of the host country’s competitive conditions, culture, language, political systems, and business systems. Second, when the development costs and/or risks of opening a foreign market are high, a firm might gain by sharing these costs and or risks with a local partner. Third, in many countries, political considerations make joint ventures the only feasible entry mode. I do think that the global economic crisis of 2008-2009 might gave affected this preference. In 2009, only 22% of all FDI inflows had been in the form of mergers and acquisitions which were reflected of the global economic crisis, which depresses equity values worldwide and made cross-border mergers and acquisitions less attractive as an entry mode. In the midst of the global economic crisis, the fact that joint ventures risks are shared among the partners is one factor
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