General Electric

"I never perfected an invention that I did not think about in terms of service it might give others"
- Thomas Alva Edison, GE Founder
It all started with the flicker of a light

bulb and soon enough GE was off and running

In 1890, Thomas Alva Edison established the Edison General Electric Company in Menlo Park, New Jersey At the same time Charles A. Coffin was growing his business, The Thompson Company It was increasingly difficult for Edison and Coffin to remain competitive based their own technologies

The two companies united in 1892 and formed The General Electric Company

Key Facts About GE

Headquarters Fairfield, Connecticut Number of Employees Over 315,000 Locations Over 160 Countries Symbol on Stock Exchange GE Number of Shareholders 4 Million Number of Shares Outstanding 10 Million Historical Number of Share Splits 9

Annual Revenue From 1994- 2003

140,000,000 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

GE Stock Price Relative to S&P 500 From 1999-2004

Reginald H. Jones
Chairman & CEO, 1972 1981 Managerial qualities:

Intellectual breadth, strategic capability, social sensitivity, political sophistication, worldmindedness, and above all, a capacity to keep their poise amid the cross-currents of change. Relationship between business and government TodayGE spends 7.5MM on lobbying

Jack F. Welch Jr.

Chairman & CEO, 1981 2001

On Six Sigma Welsh said, ...it is the way we work.

Customer-Focused Methodology to Improve Quality Through Defect Reduction
TodayRigorous Employee 6 Certification

Jeffrey R. Immelt
Chairman of the Board and Chief Executive Officer, 2001 Present Today New Frontiers & Strategic Alliances for GE
NBC-Universal acquiring interest in Telemundo network GE and Honda form GE Honda Aero Engines LLC, design small (private) jet engines

GE is Organized Along 11 Businesses

Growth vs. Cash Generator

Energy Commercial Finance Transportation Infrastructure

NBC Universal

Healthcare

Consumer Finance

Advanced Materials

Consumer and Industrial

Insurance

Equipment Services

Perceived Drivers for Change

Globalization Technology Innovation Diffusion of technological knowhow Regulatory influences and government policy changes

Four Values Translates Into Action

Action At Work: Six Sigma Product Standard

Must produce no more than 3.4 defects per million opportunities. An "opportunity" is defined as a chance for nonconformance, or not meeting the required specifications; GE strives to be flawless in executing their key processes.

1. 2. 3. 4. 5. 6.

6 Key Areas Critical to Quality Defect Process Capability Variation Stable Operations Design for Six Sigma

Four Objectives of Work Out Meetings

Create a New Paradigm for GE Empower Employees Eliminate Unnecessary Work Build Trust

Action Fosters Business-Wide and Personal Growth

Toastmasters is an international organization dedicated to improve/ facilitate communication within an organization 4 Goals of Sessions
Deliver great presentations Easily lead teams and conduct meetings Give and receive constructive evaluations Be a better listener

The $1Billion GE Talent Factory

Program began in 1919 oldest training program of its kind

Engineering Finance Info Management Operations Sales and Marketing

Several assignments within discipline Acquire broad overview of GE Develop leadership/ professional skills

The Ultimate Driving Machine Just Got Better

GEs Advanced Materials has teamed up with BMW to design and produce lightweight, durable, chip resistant fenders for their high performance 6 Series

GEs Financial Statements

Revenue By Operating Segment

% of 2003 Total Revenue % of 2002 Total Revenue % of 2001 Total Revenue Advanced Materials Commercial Finance Consumer Finance Consumer & Industrial Energy Equipment & Other Services Healthcare Infrastructure Insurance NBC Transportation Corporate items and eliminations 5.27% 15.51% 9.57% 9.57% 14.22% 3.30% 7.60% 2.29% 19.52% 5.12% 10.07% -2.05% 5.27% 14.82% 7.76% 9.75% 17.88% 4.19% 6.77% 1.44% 17.62% 5.41% 10.35% -1.26% 5.59% 14.02% 7.52% 10.33% 16.64% 6.12% 6.65% 0.31% 18.90% 4.56% 10.98% -1.63%

% of 2000 Total Revenue

6.15% 13.46% 7.15% 10.28% 12.04% 11.56% 5.58% 0.37% 18.99% 5.21% 10.19% -0.99%

GEs Revenue Breakdown in 2003

Corporate items and eliminations, -2.05% Advanced Materials, 5.27% Transportation, Commercial Finance, 10.07% 15.51% NBC, 5.12%

Insurance, 19.52%

Consumer Finance, 9.57%

Infrastructure, 2.29% Healthcare, 7.60% Equipment & Other Services, 3.30%

Consumer & Industrial, 9.57% Energy, 14.22%

Revenue Growth 2001-2003

Consolidated Revenue

$136,000 $134,000 $132,000 $130,000 $128,000 $126,000 $124,000 $122,000 **Values in millions of dollars

2001

2002

2003

Profit By Operating Segment

% of 2001 Total Segment Profits Advanced Materials Commercial Finance Consumer Finance Consumer & Industrial Energy Equipment & Other Services Healthcare Infrastructure Insurance NBC Transportation 7.59% 15.26% 8.49% 4.74% 25.95% -1.18% 7.94% 0.14% 9.96% 7.46% 13.66% % of 2002 Total Segment Profits % of 2003 Total Segment Profits 3.10% 19.67% 10.87% 2.90% 20.67% -2.11% 8.56% 2.32% 10.57% 10.05% 13.39% 5.41% 17.89% 9.73% 3.07% 34.03% -2.10% 8.36% 1.61% -0.51% 8.96% 13.57%

Net Earnings Growth 20012003

Net Earnings

$15,200 $15,000 $14,800 $14,600 $14,400 $14,200 $14,000 $13,800 $13,600 $13,400 $13,200 $13,000 **Values in millions of dollars 2001 2002 2003

Ratio Analysis
2002 2003

ROE Gross Profit Margin Debt-to-asset Ratio

22.16% 60.02% 87.97%

18.95% 61.84% 86.88% 710.44% 2.35

Debt-to-Equity Ratio 794.38% Current Ratio 2.13

Finances, GE, and its Competitors

GE ALSTOM Siemens Revenue Growth Revenue Gross Margin EBITDA Oper. Margin Net Income EPS PE 1.90% 140.74B 61.42% 27.23B 13.93% 15.74B 1.544 21.52 N/A 20.89B 14.76% 475.67M 0.38% -2.24 -4.96 N/A 4.40% 92.78B 28.70% 9.34B 5.32% 4.35B 4.719 15.62

Industry

7.40% 6.06B 34.44% 696.69M 10.40% 259.44M 1.67 21.24

Competitors of GE

Main Competitors
ALSTOM
specialize in energy, ship buildings and marine systems and transport infrastructure. Headquarters in Paris, France Acquired ABB (Asea Brown Boveri, a leading competitor to GE)
A force to be reckon with; would be GEs ultimate competitor

Main Competitors
Siemens
electronics and electrical engineering company
6 groups:- Automation and Control, Information and Communications, Medical, Power, Transportation, and Lighting provides industrial automation and control, information and communications, lighting, medical, power transmission, and transportation products and services

Headquarters in Munich, Germany

Subsidiaries headquartered in New York

Very similar to GE; strong brand name equity, has business operations in over 190 countries

5 Forces Model
Rivalry among competitors
ALSTOM and Siemens, in particular Creating competitive advantages to gain bigger market share
Acquisitions, mergers and jointventures Battle for innovation and technological improvements

5 Forces Model
Potential of New Entrants
Adaptac (1981) and Adept Technology (1983) Late bloomers, but slowly gaining market share Does not pose too much of a threat to GE, ALSTOM or Siemens for now Tough for new entrants to pinch a sizable chunk of market share from GE, ALSTOM or Siemens

5 Forces Model
Suppliers
Materials, parts, components, other resources Vertically integrated (GE Advanced Plastics, GE Consumer and Industrial Manufacturing) Has to be aware of suppliers that might integrate forward

5 Forces Model
Substitutes
Has many substitutes that might pose a threat Very well-diversified which means that GE is spreading the risk of failure in every market Eg. GEs NBC-Universals substitute are pirated VCDs or DVDs

Buyers
Similar to its substitutes, GE has a broad line of buyers, ranging from consumers to large corporations Eg. GE Healthcares buyers are hospitals and pharmacies.

Strategic Group Map

High

Performance/Product Quality

General Electric

Adaptac

Alstom

Adept Technology

Siemens

Low

Less Diversified

More Diversified

Product Range

GEs SWOT Analysis

Strengths
Global strength and recognition
5th in Fortune 500 list, operating in more than 160 countries

Excellent management
Proven leadership and business model Confident investors raising capital

Diverse product range

Long Term (GE Aircraft engines) Short Term (GE Lighting, Plastics, NBC) Financial Services (contributes to 40% of GEs revenue) Spreading the risk of failure in every market and not just one

SWOT Analysis
Weaknesses
Company size/ acquisition restriction
Eg. GEs planned acquisition of Honeywell International, a diversified technology and manufacturing company, specializing in aerospace products, was rejected by the EU

Energy Segment
Underperforming, no signs of near future recovery

Flexibility
Large and diverse businesses might overstretch the company and reduce reaction times to shifts in targeted markets

SWOT Analysis
Opportunities
Research and Development
Immense capital allows GE to contribute a lot to R&D for product development and improvement

Increased geographic growth

Global expansion = more opportunities (Eg. China)

Merger between NBC and Vivendi

Further opportunities in the media business

Improved customer services

Adopted a new customer focus initiative

SWOT Analysis
Threats
Exposure to global economy
Economy slowdown would affect GE, since 40% of the revenue is generated overseas Exposed to currency fluctuations

Intense scrutiny after Enron

More transparency and disclosure; skeptical investors Public image of all large companies suffered

Competition
Constant change in technology heats up competition Very diverse:- tough to be the best in all industry

Weighted Strength Assessment

Ratings Score
Key Success Factors Importance Weight 0.16 0.11 0.13 0.13 0.10 0.14 0.11 0.12 1.0 8.43 7.40 7.81 GE ALSTOM Siemens

Product/Performance Quality Recognition/Brand name Managerial Ability/Leaders Flexibility Customer Service Innovation/Technology Distribution network Financial Resources/Capital Sum of importance weights Weighted Overall Strength Rating

9/1.44 10/1.1 9/1.17 7/0.91 6/0.6 9/1.26 9/0.99 8/0.96

8/1.28 8/0.88 7/0.91 8/1.04 7/0.70 7/0.98 7/0.77 7/0.84

7/1.12 10/1.1 7/0.91 7/0.91 7/0.70 8/1.12 9/0.99 8/0.96

Key Competencies
Competence
Great and proven leaders
Eg. Jeffrey R Immelt, Jack Welsh, Reginald H. Jones

Expertise
More capital can be invested in R&D

Core Competence
Innovative Desire to strive for perfection (6 Sigma)

Key Competencies
Distinctive Competence
Ability to respond to the drivers of change by understanding the important global trends Acquisition of rivals and other companies

Recent News
GEs $900 million acquisition of InVision Technologies
March 15, 2004, GE made it public September 16, 2004, FTC gave approval but deal is still not finalize

Recent News
Advertising Campaign
Genworth, a financial company part of GE, has signed a 5 year contract to license the GE logo and use the slogan, Built on GE heritage Genworth is planning to allocate $30 million into advertising this coming year

Recent News
October 11, 2004, Senate passed a $136 billion corporate tax package that cuts taxes for businesses
Includes $76.5 billion in new tax relief for the manufacturing sector Includes $42.6 billion in tax relief for multinational companies Additional capital from the tax break could be used for reinvestment, increase dividends, etc

Conclusion
GE recognizes that part of being successful and well-respected is being socially responsible as well Has huge potential to remain successful without any major threats from competitors
Staying Power

Will only continue to expand

Questions and Answers Session