Module Title: Strategic Analysis; Tools and Techniques

(27262)

Module Course Code: ST4S38-V1-27262

Student Enrolee Number: 74113118

Assignment: Present a current critical strategic analysis of

ONE Business Unit within General Electric

Submitted: August 15, 2021

Tutor: Bernardo Batiz

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Contents
Introduction.................................................................................................................................................3
Brief Strategic Position of GE Healthcare....................................................................................................4
A Critical Evaluation of The Resources and Value Systems of GE Healthcare..............................................5
Financial Resources.................................................................................................................................5
Physical Resources...................................................................................................................................5
Human Resources....................................................................................................................................6
Technological Capabilities.......................................................................................................................6
GE Healthcare Value Systems......................................................................................................................7
Inbound Logistics.....................................................................................................................................7
Operations...............................................................................................................................................8
Outbound Logistics..................................................................................................................................8
Marketing and Sales................................................................................................................................8
Services....................................................................................................................................................9
A Critical Evaluation of The Product/Portfolio Mix Within GE Healthcare.................................................10
A Critical Analysis and Evaluation of Key Future Directions for Strategic Growth.....................................12
Conclusion.................................................................................................................................................14
References.................................................................................................................................................15

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Introduction
Large multinational corporations seek to achieve efficiency and greater market focus by
establishing Strategic Business Units (SBU) which focus on particular business sections of the
company, and operate as an independent entity with its own market strategy (Sammut-Bonnici
and McGee, 2015). The General Electric Company (GE) is an American multinational company
that has been operational since 1892 and serves customers in almost 200 countries worldwide.
The company is best known for its high-tech products and innovation in four particular
segments – Healthcare, Power, Aviation, and Renewable Energy (GE, 2021). All these segments
are run independently as SBUs. This report sets out to analyse The General Electric Company
Healthcare SBU. GE healthcare has been operational for over 100 years with a global reach in
over 150 countries. This SBU employs 57,000 people worldwide and as at 2018, it garnered a
revenue of $19.8billion. The unit is known for its expertise in digital solutions, drug discovery
and performance improvement solutions, medical imaging, patient monitoring and diagnostics
(GE Healthcare, 2019).

This report will present a current critical strategic analysis of General Electric Healthcare
Strategic Business Unit, providing a critical analysis of its strategic position, value systems,
resources, product and service portfolio, and its potential future strategic growth. To conclude,
the report will provide recommendations for strategic growth within the business unit as well
as highlight key points from the analysis provided. In order to achieve a well-rounded strategic
analysis, various models and frameworks would be utilized within the body of the report. These
include – The BCG Model, Product Matrix etc. This report utilizes information from online
electronic sources, particularly, business news, articles and academic publications.

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Brief Strategic Position of GE Healthcare
In the latest edition of their book ‘Market Strategy and Competitive Positioning’, Hooley,
Nicaulaud, Lee and Rudd (2020) postulate that a company’s strategic position reveals the
choices that it makes in respect to the kind of values been offered to customers and the
uniqueness of that value from rival companies. They went further to explain that businesses
that utilize a differentiated strategic approach as postulated by Porter (1980), where the
products or services offered to customers are both unique and valuable, strategically position
themselves for competitive advantage in their industries.

GE utilizes the differentiation strategy to achieve competitive advantage within its various
industries. Through constant research, development (R&D) and innovation, the American
multinational company has been able to offer its customers unique and valuable products in
the healthcare, power, aviation, oil and gas and renewable energy sectors (Thompson, 2017).
According to the New York Times, since its existence, GE has amassed a library of patents and at
different times earned the top spot as the company with the highest number of patents in the
United States (Owles, 2017).

The GE Healthcare Strategic Business Unit is known as the second most profitable unit within
GE after the aviation unit (Thompson, 2017). In 2020 alone, GE Healthcare profit represented
42% of GE’s total industrial profit (GE, 2020). This SBU has been able to attain this tremendous
profitability rate by doggedly following GE differentiation strategy, investing over $1billion
annually in R&D (GE, 2020). In a presentation, Kieran Murphy, the CEO of the Unit explained
that since the 1960s, GE has continued to produce industry-defining innovations for its
customers, beginning with the first ever battery powered mobile x-ray generation to its recent
MR AIR Coils produced in 2019 which was named the best new radiology device. He further
stated that GE Healthcare would go beyond just being known for imaging machines like CT
Scans and “continue focusing on creating new products and digital solutions” (GE Healthcare,
2019).

Similarly, GE Aviation, which is known as the most successful Business Unit in GE has
successfully differentiated itself in the industry and is recognized as the world leader in

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production of aircraft engines, systems and avionics. Between 2010 -2016, it invested
$4.2billion in the U.S. to create new factories and expand existing sites in order to upgrade its
manufacturing and respond to a commercial surge in the aviation industry (GE Aviation, 2021).

A Critical Evaluation of The Resources and Value Systems of GE

Healthcare
Connor (2011) postulates that a resource audit is a necessary requirement to determine a
company’s strategic position for proper decision making. Johnson, Whittington, Scholes,
Angwin and Regner (2020) postulates that the resources base of an organization consists of –
Physical, Financial, and Human Resources. For GE Healthcare we would also discuss their
Technological Capabilities.

Financial Resources
Since 2016, GE Healthcare has recorded a consistent growth of revenue. This growth can be
attributed largely to its investments in product development and operations in developing
countries (Tadviser, 2019). With a 4% revenue growth to 19.8billion in 2018, GE Healthcare is
recognized as the second most profitable business unit in GE. More than 16% of GE total
revenues in 2018 came in from the Healthcare business unit (GE, 2020). The Biopharma division
of the business unit, known as the most profitable is credited with bringing in up to 15% of GE
Healthcare revenue in 2018. In 2020 however, GE Healthcare recorded a decline in its revenue
by 10% to $18billion with order amount decreasing by 12% also. This decline was attributed to
the sell of the BioPharma Division to the Dahaner Company (Tadviser, 2019). Despite this
decline, there were positive indicators of growth in the Health systems division in Europe and
China. Growth of ultrasonic diagnostics and other visualization was also recorded. Above all, the
sales of medical equipments increased by 8% reaching $10billion (Tadviser, 2019). Furthermore,
the production capacity of GE healthcare increased drastically as a result of its response to the
COVID-19 pandemic in 2020 (GE, 2020).

Physical Resources
GE Healthcare is headquartered in Chicago IIonis, and operates in over 160 countries,
conducting active R&D in 18 countries with 38 manufacturing sites spread across 20 countries.
Some locations that have GE Healthcare manufacturing plants include – The United States,

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Switzerland, China, Mexico, India etc. (GE Healthcare, 2019). In 2016, it invested $7billion for
the expansion of one of its single-use manufacturing sites in the U.S. Similarly, in 2018, it
dedicated a 17,000m2 land in China to build a lab space and one KUBio factory-in-a-box facility
in order to make treatments more accessible within the country (GE Healthcare, 2018). Also, GE
Healthcare is known for its manufacture of medical equipments, diagnostics and provision of
digital solutions. Notable among its products include, the first handheld pocket ultrasound, first
commercial CT scanner and first ever mammography device that can be used by women (GE
Healthcare, 2019).

Human Resources
With a staff of over 50,000 worldwide, including 6,600 sales professionals, 2,400 channel
partners, 7,400 engineers and 8,000 field engineers, GE Healthcare boasts of having an
experienced management team and mission driven employees (GE Healthcare, 2019). The skills
of employees majorly include, project management, product sales specialist, financing,
accounting, services, supply chain, legal and business development. The management team is
led by the CEO, Keiran Murphy who has over 25 years of working experience in healthcare and
10 years working for GE (GE Healthcare, 2019). Following the COVID-19 pandemic, GE has been
undergoing cost reductions and restructuring which include workforce reductions across GE. In
their annual report for 2020, they stated that if this restructuring isn’t properly managed, it
would lead to constraint of key personnel, low moral for remaining staff and the inability to
attract talented professionals (GE, 2020). To improve employee productivity, GE uses a
standardized Japenese approach known as Lean – a set of principles that emphasizes customer
focus, elimination of waste, and ruthless prioritization of work to improve safety, quality,
delivery, and cost (GE, 2020).

Technological Capabilities
With a reputation as a proven technology leader with over 100 years track record, GE
Healthcare has garnered up to 14,000 patents globally (GE Healthcare, 2021). The business
subunit is known for its innovation and solutions in the diagnosis, treatment and monitoring of
patients through its Ultrasound and Imaging devices, Lifecare Solutions, Pharmaceutical Devices
and BioPharma. GE Healthcare produced the following – The world’s first ultrasound optimized

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for artificial intelligent (AI), and first ever deep learning image recon software in CT in 2018, and
in 2019, obtained FDA approval of first on-device AI to prioritize critical chest X-Ray review (GE
Healthcare, 2019).

From the above analysis of GE Healthcare resources, it can be seen that the business unit’s
resources are well balanced to respond to a sudden change in the business environment. For
instance, despite a drop in financial resources in 2020 due to the corona virus pandemic and
the sale of the BioPharma division, the unit was still able to respond strategically and make a
sizable amount of profit through the sale of medical equipments and production of diagnostic
machines and ventilators for COVID-19 treatment.

GE Healthcare Value Systems

Johnson et al (2020) explains that a value system refers to a set of interorganizational linkages
and relationships that is essential for the creation of a product of service. To maintain a
differentiated strategic position GE Healthcare carries out a number of specific activities that
make up her value chain.

Using the Value Chain Model, these activities are known as Primary Activities and they are
concerned with the creation or delivery or a product or service. They include:

Inbound Logistics

To ensure a well-coordinated cost effective, logistics system, GE healthcare utilizes a cost

reduction strategy through the management of fees on products supplied. For example, “for
distributed medical-surgical products, this strategy is accomplished by moving from national-
branded items with a fee structure of 3% to distributor-branded items at a zero-based fee
structure with increased rebates” (Davies, 2018). GE Healthcare also partners with other supply
chain organizations to manage its logistics process. In May 2019, GE Healthcare announced a
supply chain collaboration with World Courier. This collaboration was necessary to support the
commercialization and delivery of advanced therapies globally, overcoming time and weather
constraints (BioPharm International, 2019).

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Operations

With an operating profit of $3.7billion in 2018, GE Healthcare has maintained operational

effectiveness in over 160 countries worldwide with 3,400 suppliers (GE Healthcare, 2019). GE
Healthcare in their presentation to investors stated that they are working to ease operations
through Lean, “an operating philosophy based on the Toyota Production System, which is
helping GE improve safety, quality, delivery, and cost in support of long-term growth. Using
Lean, GE Healthcare Plant in North Carolina and Florence identified and fixed bottlenecks to
timely delivery, thereby growing their on-time delivery rate by over 90% and reducing inventory
by 23% (GE, 2020).

Outbound Logistics

In GE healthcare, outbound coordination entails warehousing, processing order requests and

shipping products to customers. GE Healthcare owns 55 established parts warehouses,
providing new and repaired parts directly to customers, with 90% of parts shipped within
24hours. (GE Healthcare, 2019). To promote ease in the sale of equipments, the business unit
developed the GE Healthcare online site for customers to easily purchase equipments on their
website and get it delivered to them in a timely manner.

Marketing and Sales

GE Healthcare works with 6,600 product sales specialists and 2,400 channel partners
worldwide, while also utilizing the traditional and online media, including their website, for
advertising their products. Channel partners act as an extension of GE Healthcare sales team,
while reselling their products independently. They are a critical part of GE Healthcare marketing
strategy as they have the ability to reach a new audience of buyers while also leveraging GE
products improve their sales outlook (GE Healthcare, 2021). In January 2021, idsMED Indonesia,
was awarded the GE Healthcare Channel Partner of the year for having $7.84 million worth of
orders with a revenue growth of 25% (idsMED, 2021).

Services

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GE maintains the value of its products to customers by offering a range of services from break-
fix services and parts, remote-fix capabilities, predictive maintenance, consultation, to even
training of customers on product usage. With 43 customer call centers, 31 repair centers and
8,000 field service engineers, GE offers remote fix with a 24hrs phone response service, and
ships parts within 24hrs. With its services, GE aims to deliver value to customers throughout the
life of their equipments (GE Healthcare, 2019).

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A Critical Evaluation of The Product/Portfolio Mix Within GE
Healthcare

Here, the report utilizes the Bolton Consulting Group Product Portfolio Matrix (BCG) to analyze
GE Healthcare growth opportunities by carrying out a review of its various products and provide
investment suggestions.

Stars ( ) Question Mark (??)

High

Imaging Enterprise Digital Solutions

Ultrasound
Market Growth Rate

Cash Cows ($$) Dogs

Maternal and Infant Care Parameters and accessories

Low

Anesthesia Respiratory Care

Diagnostic Cardiology

High Low
Table 1: BCG Product Matrix

GE Healthcare ultrasound and imaging products have remained the largest contributors to the
business unit, bringing in $8billion and $3billion in revenues respectively. Beyond its
profitability, these are star products because GE owns the largest market share for them.
Imaging equipments are sold in over 100 countries and 250,000 imaging bases have been
installed. GE has maintained a track record for innovative leadership in the imaging market with
notable innovations such as - CT Smart Subscription (SaaS model), Discovery™ MI with
quantitation, MotionFree, Patient-assisted mammography exams, among others (GE
Healthcare, 2019). Similarly, GE Ultrasound division has garnered 1,300 patents, with over
480,000 installed base and almost 50 products and applications within the entire ultrasound
market. This has enabled GE to maintain number one market position across its products areas

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of radiology and vascular, cardiovascular, OB/GYN, breast screening and primary/emerging care
(GE Healthcare, 2019).

Products in GE maternal and infant care, anesthesia and diagnostic cardiology are categorized
under the life Care Solutions (LCS) Division of the business unit which recorded a 2.2billion
revenue in 2018. Although not as large as the ultrasound and imaging global market, the global
LCS equipment market has recorded consistent growth from $5.8billion orders in 2015 to
$6.1billion in 2018. These products are seen as the cash cows because GE owns a majority
market share here, and despite not recording high growth as the star products, GE can continue
to get ROI by leveraging economies of scale. GE has over 3 million LCS units in use by customers
and has garnered 1,300 patents (GE Healthcare, 2019).

Products tagged question marks are high growth but with a low market share for GE. GE is
investing heavily in digital solutions focusing mostly on artificial intelligence applications, cloud-
based image visualization and platform capabilities (Imaging Technology News, 2020). However,
the AI market is highly competitive with GE just at its initial stage of AI products development.
According to Daley (2019), AI is “one of the world's highest-growth industries, the AI sector
was valued at about $600 million in 2014 and is projected to reach a $150 billion by 2026”.

Dogs are products with low growth and low market share. GE is still expanding into the
parameters and accessories markets and haven’t even attained a market position here yet (GE
Healthcare, 2019). Similarly, GE has the number five market position for respiratory care
products such as ventilators. Compared to other products, these record the least profit.
However, It is important to mention that GE ventilators saw a rise in demand in 2020, following
the COVID-19 pandemic, and therefore generated revenue for GE (GE, 2020).

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A Critical Analysis and Evaluation of Key Future Directions for
Strategic Growth
Using the Ansoff Product Portfolio/Market Growth Matrix, this section would analyze GE
Healthcare product offerings with the aim of ascertaining potential directions for organizational
growth.

INCREASING RISK

EXISTING PRODUCTS NEW PRODUCTS

INCREASING RISK
Market Penetration Product Development
GE Healthcare can continue GE Healthcare has committed develop even
focusing on and expand on existing more products in Digital Solutions, particularly
products in imaging, ultrasound focusing on offering AI enhanced products to
and life care solutions where it its existing markets to improve the efficiency
already has huge market shares in of their product technology. Kieran Murphy,
order to achieve market the CEO, stated that the business unit would
penetration. The global imaging continue expand and invest heavily in R&D,
equipments markets is growing particularly for digital and AI applications well
rapidly from 17.2 billion orders in into 2022 (Taylor, 2021). Some of their recent
2016 to 19.1 in 2018. This is also strides in the product area include - the
the case for the Ultrasound, which Voluson™ SWIFT, Command Centers (in use at
grew from 5.7 billion orders in 2016 200 hospitals), and Edison Applications
to 6.4 in 2018 (GE Healthcare, (Kellner, 2021). GE Healthcare can garner
2019). Given this huge customer response and enthusiasm for its digital and AI
EXISTING MARKETS

base, the strategic direction of GE solutions from its customers through constant
Healthcare would be to widen the customer education trainings, and
range of its products in order to consultations.
sustain its existing markets.

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 INCREASING RISK
EXISTING PRODUCTS NEW PRODUCTS
Market Development Diversification
INCREASING RISK
GE healthcare has a global Having established itself as a market leader in
presence, with its existing products healthcare products mainly in imaging,
saturating the markets in Asia, ultrasound, diagnostics and patient
Africa, Europe and the United monitoring, GE should continue to invest in
States. The vision of the business R&D to identify ways it can diversify its
unit is to become an established product offerings to respond to other health
leader in every region. However, challenges to enable it expand into new
while seeking to expand further markets. It can be argued that GE is already
into new markets, it is important pursuing diversification with its focus on digital
for GE to continue tailoring its solutions and AI. For example, through Edison
products portfolio to respond to (GE Healthcare’s AI platform designed to help
the local market needs in these you achieve greater efficiency), GE has been
different parts of the world. For able to push out AI enhanced products such as
instance, one of the major growth – AIRx, Critical Care Suite, CT Smart
drivers for its China market is the Subscription, Automated Lesion Segmentation
NEW MARKETS

aging population - 165 million+ (IT Supply Chain, 2018).

greater than 65 years old (GE
Healthcare, 2019).

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Conclusion
GE Healthcare has retained its position as a leader in the healthcare equipments market and
remains one of the most profitable units in The GE Electrics Company. As revealed by the
resource audit, the unit has a well-balanced resource base, which enables it to respond to the
ever-evolving healthcare business environment. Hence, despite experiencing a drop in revenue
in 2020 due to the COVID-19 pandemic, GE Healthcare was able to weather the storm by
focusing on leading on the production of ventilators and diagnostics machines for COVID-19
patients. GE Healthcare is also well positioned to achieve continuous market growth and
sustain competitive advantage in the imaging, ultrasound and life care solutions market with its
large investments in R&D to attain product improvements and expand into newer markets.

Also, leveraging its technological capabilities, GE Healthcare is charting a course for a promising
future direction by gradually expanding its product offerings and market share into the Digital
Solutions and AI market. AI is considered the next big thing in healthcare with almost 40
percent of healthcare providers investing in this market. GE Healthcare commitment to pursue
product development in this market would enable the unit stay ahead of trends in healthcare,
while guaranteeing it a market share in a product area projected to be worth $6.6billion dollars
in 2021 (IT Supply Chain, 2018).

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References
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Connor, T., (2011) ‘Internal Resource Audit for Strategists—A Proposal’. 3(03), p.287, The
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Daley, S., (2019) 32 Examples of AI in Healthcare That Will Make You Feel Better About the
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Davies, J., (2018) Taking Cost Out of Supply Chain: Make Versus Buy. Available at:
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