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How the index is constructed CLOSING CASE Globalization at General Electric Seneral Electric, the company that Thomas Edison be number 1 or 2 globally in every business in which it founded, and now the largest industrial conglomerate participated. To further this goal. Welch sanctioned in America, produces a wide array of goods and ser- an aggressive and often opportunistic foreign direct vices, from medical equipment, power generators, jet investment strategy. GE took advantage of economic engines, and home appliances, to financial services and weakness in Europe from 1989 to 1995 to invest even television broadcasting (GE owns NBC, one of $17.5 billion in the region, half of which was used to America's big three network broadcasters). This giant acquire some 50 companies. When the Mexican peso company with revenues of close to $180 billion is no collapsed in value in 1995, GE took advantage of the stranger to international business. GE has been operat- economic uncertainty to purchase companies through- ing and selling overseas for decades. During the tenure out in Latin America. And when Asian slipped into a of legendary CEO Jack Welch, GE's main goal was to major economic crisis in 1997-1998 due to turmoil in Globalization Chapter 1 37 to view it as a buying opportunity. In Japan aromater local needs. For example, GE Health Care makes MRI scanners that cost $1.5 million each, but its Chinese re- company spent $15 billion on acquisition in just six search center designing MRI scanners that can be months. As a result, by the end of Welch's tenure in priced for $500,000 and are more likely to gain sales in 2001, GE earned over 40 percent of its revenues from the developing world international sales, up from 20 percent in 1985. GE is also rapidly internationalizing its senior man- Welchs GE, however, was still very much an American agement. Once viewed as a company that preferred to company doing business abroad. Under the leadership of hire managers from the Midwest because of their strong his successor, Jeffery Immelt, GE seems to be intent on be work ethic, foreign accents are now frequently heard coming a true global company. For one thing, international among the higher ranks. Country managers, who in the revenues continue to grow faster than domestic revenues, past were often American expatriates, increasingly come passing 50 percent of the total in 2007. This expansion is from the regions in where they work. GE has found that increasingly being powered by the dynamic economies of local nationals are invaluable when trying to sell to local Asia, particularly India and China. GE now sells more companies and governments, where a deep understand- wide-bodied jet engines to India than in the United States. ing of local language and culture is often critical. In and GE is a major beneficiary of the huge infrastructure China, for example, the government is a large customer, investments now taking place in China as that country and working closely with government bureaucrats re- invests rapidly in airports, railways, and power stations. By quires a cultural sensitivity that is difficult for outsiders to 2012, analysts estimate that GE will be generating 55 to gain. In addition to the internationalisation of their 60 percent of its business internationally, management ranks, GE's American managers are increas- To reflect the shifting center of gravity, Immelt has ingly traveling overseas for management training and made some major changes in the way GE is organized and operates. Until recently, all of GE's major businesses con Transportation, which is based in Erie, Pennsylvania, had head offices in the United States and were tightly moved its annual sales meeting to Sorrento, Italy from controlled from the center. Then in 2004, GE moved Florida. "It was time that the Americans learnt to deal the head office of its health care business from the with jet lag," according to the head of the unit.80 United States to London, the home of Amersham, a company GE had just bought. Next, GE relocated the Case Discussion Questions headquarters for the unit that sells equipment to oil and gas companies to Florence, Italy. And in 2008, the com- 1. Why do you think GE has invested so aggres pany moved the headquarters for GE Money to London. sively in foreign expansion? What opportunities Moreover , it gave country managers more power. Why is is it trying to exploit? GE doing this? The company believes that to succeed 2. What is GE trying to achieve by moving some of internationally, it must be close to its customers. Mov. the headquarters of its global businesses to for- GE Money to London, for example, was prompted eign locations! How might such moves benefit by a desire to be closer to customers in Europe and Asia. the company? Do these moves benefit the United Executives at GE Health Care like London because it States? allows easier flights to anywhere in the world. 3. What is the goal behind trying to "international- GE has also shifted research overseas. Since 2004 it has ize" the senior management ranks at GE? What opened R&D centers in Munich, Germany: Shanghai, do you think it means to "Internationalize these China; and Bangalore, India. The belief is that by ranks? locating in those economies where it is growing rapidly, What does the GE example tell you about the GE can better design equipment that is best suited to nature of true global businesses