General Electric Case Analysis
Case Discussion Questions
1. GE used to prefer acquisitions or Greenfield ventures as an entry mode rather than joint ventures. Why do you think this was the case?
According to our textbook, a firm can establish a wholly owned subsidiary in a country by building a subsidiary from the ground up, the so-called Greenfield strategy, or by acquiring an enterprise in the target market. Acquisitions have three major points in their favor. First, they are quick to execute. By acquiring an established enterprise, a firm can rapidly build its presence in the target foreign market. Second, in many cases firms make acquisitions to preempt their competitors. Third, managers may believe acquisitions to be less risky than Greenfield ventures. When a firm makes an acquisition, it buys a set of assets that are producing a known revenue and profit stream.
On the other hand, the big advantage of establishing a Greenfield venture in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants. For example, it is much easier to build an organization culture from scratch than it is to change the culture of an acquired unit.
2. Why do you think that GE has come to prefer joint ventures in recent years? Do you think that the global economic crisis of 2008–2009 might have affected this preference in any way? If so, how?
GE now sees joint ventures as a great way to dip its toe into foreign markets where it lacks local knowledge. Also, in certain nations, China being an example, economic, political, legal, and cultural considerations make joint ventures an easier option than either acquisitions or greenfield ventures. GE believes it can often benefit from the political contacts, local expertise, and business relationships that the local partner brings to the table, to say nothing of the fact that in certain sectors of the Chinese economy and some others, local laws prohibit other entry modes. GE also sees joint ventures
1. GE used to prefer acquisitions or Greenfield ventures as an entry mode rather than joint ventures. Why do you think this was the case?
According to our textbook, a firm can establish a wholly owned subsidiary in a country by building a subsidiary from the ground up, the so-called Greenfield strategy, or by acquiring an enterprise in the target market. Acquisitions have three major points in their favor. First, they are quick to execute. By acquiring an established enterprise, a firm can rapidly build its presence in the target foreign market. Second, in many cases firms make acquisitions to preempt their competitors. Third, managers may believe acquisitions to be less risky than Greenfield ventures. When a firm makes an acquisition, it buys a set of assets that are producing a known revenue and profit stream.
On the other hand, the big advantage of establishing a Greenfield venture in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants. For example, it is much easier to build an organization culture from scratch than it is to change the culture of an acquired unit.
2. Why do you think that GE has come to prefer joint ventures in recent years? Do you think that the global economic crisis of 2008–2009 might have affected this preference in any way? If so, how?
GE now sees joint ventures as a great way to dip its toe into foreign markets where it lacks local knowledge. Also, in certain nations, China being an example, economic, political, legal, and cultural considerations make joint ventures an easier option than either acquisitions or greenfield ventures. GE believes it can often benefit from the political contacts, local expertise, and business relationships that the local partner brings to the table, to say nothing of the fact that in certain sectors of the Chinese economy and some others, local laws prohibit other entry modes. GE also sees joint ventures