Group A2

GE Introduction
132 Yrs Old Company Diversified into Global Infrastructure, Finance & Media Company. Presence in More Than 100 Countries & 3 Lac + Employees Globally Founder Thomas Edison, Elihu Thomson, Edwin J Houston. Headquarters California - USA Revenue:- US$ 12.163 Billion Till 2010 First Company to Take Initiative in CSR Activities

Tungsram - Hungary
Formed In the Year 1896 Hungarys Largest, Oldest & International Light Equipment Manufacturing Co under the Communist Regime, 5th largest in Europe Tungsram = Tungsten + Wolfram 1st Company To innovate Bulbs with Tungsten Filament Exports in 100+ Countries 2%-3% Market share Globally 5% 6% Market Share in Western Europe Strength R & D, Highly Skilled & Low Cost Labour

Now GE in Hungary looks like below

GE capacity
Presence 14,500 2000+ 98% 3

platform: 3 industrial businesses $1.1BN investment, 13 plants

in 65 countries employees

key local suppliers

of Hungarian production is export

business HQs in Hungary: Consumer & Industrial EMEA; Healthcare CEE; Water & Process Technologies ZENON Membrane Solutions, Europe

Bbusiness technology

centers: Healthcare, Consumer & Industrial, Water & Process Technologies

Tungsram from 1980-1989

Insufficient investment in R&D(1-2% of sales)
Poor internal communication and information system Low Operating Efficiency : Losses due to wastage and breakage was high Product Development Life cycle was large :3 years Huge Unutilized Inventories. Time between order and delivery was 90 days.

 What does GE's experience in Hungary tell you about the relationship among economic systems, political systems, and national culture?

Hungary Vs USA
Hungarians Organization Culture Bureaucratic :Top to Bottom Approach Employee waits for the order from the top management Americans Aggressive management system , communication between managers and employees

Uncertainty Avoidance

Unwilling for change and innovation and no strong determination

Communist Male Dominance

Risk takers.

Political Nature Gender differentiation

Democratic Female-more assertive and competitive

Why GE Entered Hungary ?

En-cash Tungsrams Strength to Expand in Europe Market As the boundaryless General Electric wanted to dominate the global lighting business, it purchased One off the largest Eastern-European manufacturer Tungsram Take the advantage of Political Transformation from Communist Country to Democratic Country Strengthen Long Term Business Goals Hence GE acquired 50% +1 Share of Tungsram @ 150 million USD to Enter into Hungary

Entry into European Market

Acquisition of Tungsram in 1989 with 51% stake Driving Factors: To penetrate into European Market Traditional strength of Tungsram in science and Technology Low operational cost and cheap labour Free Market Economy Condition :Change in political system from communist to democratic

Problems faced By GE in Hungary

Initially GE failed in Hungary due to economic and cultural complexities GEs policies were based on capitalism which emphasis to Protect Stake Holders Interest First Tungsrams culture was Cradle-to-Grave Other Difference GEs Aggressive sales & marketing Strategy (Customer Centric) Tungsram Believed in Product American came to leverage Low Cost labour, where Hungarian employee thought they will be paid as per American Pay standards Americans found Hungarians lethargic & lack Interest whereas Hungarians found American very Pushy

Problems faced By GE in Hungary Contd

The transformation was very Slow Losses were mounting due to great expectations collided with realities Lots Of wastage Inefficiency Less emphasis on Customer & Quality Culture Eventually GE admitted that they underestimated Hungary

What changes GE made to make venture successful?

Divestment
Large Scale Investment in Infrastructure

Cost Cut Leadership

GE-Change Management

Work out Sessions (Brainstorming with Team)

Best Practices Bench marking Six-sigma Just in Time

Leading Change ..
Divestment (Stay Fit ) : From 1990-1992 Tungsram interest in products other than lighting was divested. Cost Cut Leadership: (Strategy to increase the Market share)
Economies of scale. Huge investment in Manufacturing and Infrastructure to generate the ability to produce large volumes. Cutting down the employees.

Leading Change ..
Workout sessions (Removal of Bureaucracy): Bring together the people(employees at different levels) who knows the issue best Challenge them to develop creative solutions Brain storming Make yes or no decisions on the solutions at the instant. Empower people to carry out solutions. 360 Feedback (Employee Improvement )
Feedback about a employee provided by his subordinates , peers and supervisors . Includes self assessment. The results are used for appraisal , training and development of employees.

GEs turnaround In HunGary

GE designed new strategy which was a fusion of National & Corporate Culture

Operation Restructuring, time between order and delivery at Tungsram has been slashed - from 90 days in 1990 to 32 days in 1994.
Extensive Training Programs like Language Training & Business Skills Reduced 20,000 employees, including two out of every three managers Invested additional $ 440 million in new plant and equipment to reduce the wastage, increase the capacity & efficiency Rotation to various different business & geographic location to the Young employees

GEs Turnaround contd

Initiated Open work culture & redressing right to employees Reduced Product Development Cycle from 3Yrs to Less Than a Yr Encourage Recommendations for improving Operations from all the layers of Production team. Empowerment, Encouraging Individual Initiative, communication between all hierarchies

Alternate Strategy
GREENFIELD VENTURE IN EUROPE A form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. In addition to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees. In short -- creating a business operation where none existed before