Porter's Five Competitive Forces Of General Electric Company

An industry product can be substituted by a substitute product which has the same or similar function by a different means. A substitute can limit industry profitability and growth. Porter (2008) gives several key elements on determining the threat.

However this latter argument ignores the fundamental advantage that big firms enjoy over small firms: economies of scale. Given the capital intensive nature of the energy industry it is most likely that large firms enjoy cost advantages that smaller firms will be unable to achieve; we can predict that the MES of an energy firm exists at an extremely high output level and so has a downward sloping long run average cost curve as seen below:

I think that if GE stays the course with innovative, ground breaking technology and development, investing in greener more efficient materials and

There are only a few firms that make up this industry and they have control over the price. These companies have high barriers to entry the market. The products they produce are similar which cause competition. There is both good and bad when it comes to oligopoly and monopolies. Some good things about oligopoly are by developing product innovations and taking advantage of economies of scale. With oligopoly it is more likely to expand production capabilities, promote economic growth, and they develop change that advances the level of technology ("Oligopoly," 2000). Some bad things about oligopoly is that they tend to be inefficient in the allocation of resources and promotes the concentration of income and wealth ("Oligopoly," 2000). They charge much higher prices and end up producing less of an output than the efficiency benchmark of perfect competition. One of the good forms is natural monopoly. Natural monopoly exists when economies of scale encourage production by a single producer (Mayer). An example of this is your local electrical utility. As a power plant increases, the cost per kilowatt hour of electricity falls (Mayer). If we were to all use small generators to run our homes the cost of each household would be ridiculous. The total fixed cost of generators for the community would be high and the variable cost of running it would also be high. Another form of monopoly that is good is

Threat from New Entrants New entrants into the small appliance space are always a concern. With the low front end expenses and wide variety of possible suppliers, its quick and simple for peripheral companies to attempt to disrupt the space. There are two companies who currently manufacture power tools and other small manufacturing appliances that may be attempting to enter the market.

This threat is low. Customers expect the lowest price for the highest quality, and information about competitors’ pricing is transparent. This leads the industry to the lowest acceptable rate of return. Buyers can switch easily without any cost, and can bargain for better, new and cheaper services. Their bargaining power/the threat is high. Alternatives to our services do exist, such as maid/house cleaners, but there are not many significant options. There are no switching costs, and elasticity is high. (If our prices rise, substitutes could extend and become a threat) Thus the threat of substitute products is moderate. Due to the lack of differentiation and zero switching costs, the intensity of competition is strong in this industry. Companies will have to battle to remain in the business; the rivalry is high and intense.

Also; Citigroup, Inc. another competitor for the GE Company made a total of $64.95 billion in 2011, and when we compare it with GE and SI its earnings where even less in the same year, making General Electric a leader in the industry. With this valuable information GE management can analyze its competitor’s financial statements results and from there they can evaluate their faults and create new ways to increase their annuals earnings and secure their place as one of leading companies in their industry. Another way GE can go forward in the industry is by adapting its services and products to other countries that need them.

General Electric’s lack of knowledge within foreign markets, because it is unfamiliar with the territory and the business structure, is decreased when the company uses a joint venture. The use of a joint venture in this case decreases the financial and economic risk by not putting so much pressure on General Electric if the company isn’t as successful as General Electric would hope that it could be. A joint venture can be the easiest option when entering into a new market because it allows General Electric to join forces with a company that is already established within the foreign market that General Electric is trying to enter, bringing some knowledge and experience of the foreign market to the table. I think that the global economic crisis of 2008-2009 does have an impact on General Electric’s preference to use joint ventures instead of continuing to use acquisitions or greenfield ventures. The global economic crisis of 2008-2009 may have been an eye opener for General Electric making the company realize that at any point in time the companies that General Electric have put so much time and money into can run into financial problems that could potentially destroy General Electric altogether. Had General Electric

The threat of new entrants refers to the threat posed by new competitors within an industry. If it is easy for new firms to enter the industry barriers to entry are low and the threat of new entrants is high. A profitable industry attracts more competitors. Economies of scale, learning curve effects and other macro factors impact the nature of an industry 's

Analysis - GE has likely been so successful over the years because of its ability to foresee major trends and capitalize upon them. In the 1960s, for instance, GE was one of the eight major computer companies. Even recently, since 1986, GE has continued to acquire several organizations; portions of NBC, wind manufacturing, universe pictures, aerospace industries, international firms, software and hardware manufacturing, even oil companies abroad. The company culture describes itself as not one company, but many each unit a vast and complex enterprise in and of itself, with a corporate

GE was entering a new generational era, one where technology is at the forefront of growth and adaptation. Immelt identified Technology as one of GE’s major drivers for future growth which was signaled by his expansion of GE’s R&D budgets. He shifted the importance of Technology within GE by focusing on the R&D projects that offered large scale market potential, reffered to as “Imagination breakthroughs”.

Doing these acquisitions at some certain stages were important to diversify GE technologies and maximize its market share (Immelt, 2005), however, the balancing between growing organically by empowering the company from within and acquiring some companies is even more important for setting up the company directions. Since more than half of the company revenue is derived from its financial services (Company Data 2008), this brings the argument onto the table about the nature of the company making it a financial company with a manufacturing arm.

The threat of substitutes: where it refers to substitute product as those that are available in other industry which can also fulfil the need and want of the consumers. It can affect competition in an industry by placing an invisible ceiling on prices which companies within the industry can charge, due to the fact that if the cost of substitute is low then the consumers will tend to purchase substitutes, therefore limiting the prices that a company can place on certain items to gain maximum profit. For example, lemonade can be substituted for a soft drink. Generally, competitive pressures arising from substitute products increase as the relative price of substitute products declines and as consumer 's switching costs decrease.

Rivals are competitors within an industry. Rivalry in the industry can be weak, with few competitors that don't compete very aggressively. Or it can be intense, with many competitors fighting in a cut-throat environment.

Buyers in this market are not very weak and powerful. They are few in numbers and can switch to other manufacturers for product quality but number of manufacturers is few and backward integration also seems impossible.