General Electric, GE Capital and the Financial Crisis of 2008
Introduction
General Electric, founded by Thomas Edison in 1878, has been a global leader in the great innovation, efficient management and the brand reputation in various industrial sectors. GE emphasizes in innovation, diversification and expansion to create the stable growth in the multiple business sectors. With the experience of operating in the industries for over a century, the company nowadays categorize its products into four core business sectors: energy, technology infrastructure, GE capital, and home and business solution. GE Capital was the most profitable sector of the business before the financial crisis in 2008 which is originally founded to increase the affordability to purchase the GE’s products. GE Capital added new products to increase the breadth of the business that included commercial lending and leasing, energy financial service, aviation service, real estate etc. However, during the financial crisis, GE Capital was hit severely due to its high leverage, subprime assets, tightened funding source that brought a 78.3% loss in net income.
Analysis
General Electric’s key strengths are its operational efficiency, business scale, history and brand reputation. GE, as the industry leader, operates more efficiently and on a great economic scale that indicates the high contribution margins. GE also create a large business network and the strong alliance with other major corporation to enable its long-standing relationships to obtain the best human resource, equipment, and the other resources. There are only a few companies (i.e. Siemens, Phillips, 3M) which are big enough to compete with the variety and breadth of the product lines of GE. Moreover, the smaller companies also do not have the competitive advantages in the single industry due to the GE’s great business awareness and brand reputation.
On the other hand, the comfortable income from the mature industries hampers GE to...