Harvard Case - General Electric vs. Westinghouse in Large Turbine Generators (A)
"General Electric vs. Westinghouse in Large Turbine Generators (A)" Harvard business case study is written by Michael E. Porter. It deals with the challenges in the field of Strategy. The case study is 15 page(s) long and it was first published on : Jan 1, 1980
At Fern Fort University, we recommend that General Electric (GE) adopt a multifaceted strategy to maintain its competitive advantage in the large turbine generator market. This strategy should focus on leveraging GE's core competencies in technology and innovation, while simultaneously adapting to the evolving industry landscape marked by globalization, environmental sustainability, and digital transformation.
2. Background
This case study examines the intense rivalry between General Electric (GE) and Westinghouse in the large turbine generator market during the 1980s. The market was characterized by high capital investment, long lead times, and a complex sales process. GE, a dominant player, faced increasing competition from Westinghouse, which was aggressively pursuing market share.
The main protagonists in this case are:
- General Electric (GE): A global conglomerate with a strong presence in the power generation industry. GE held a dominant market share in large turbine generators and was known for its technological prowess and innovation.
- Westinghouse: A major competitor to GE, aiming to gain market share by offering lower prices and faster delivery times. Westinghouse was also actively pursuing international markets.
3. Analysis of the Case Study
To analyze the situation, we will utilize several frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: High barriers to entry due to significant capital investment and technological expertise required.
- Bargaining Power of Buyers: Moderate, as buyers are large utilities with limited alternatives but can negotiate based on price and delivery time.
- Bargaining Power of Suppliers: Moderate, as suppliers are specialized but can switch to other customers.
- Threat of Substitutes: Moderate, as other power generation technologies exist but are not always readily available or cost-effective.
- Rivalry Among Existing Competitors: High, with GE and Westinghouse engaging in intense price competition and product differentiation.
b) SWOT Analysis:
GE:
- Strengths: Strong brand reputation, technological leadership, global reach, extensive manufacturing capabilities.
- Weaknesses: High cost structure, complex organizational structure, potential for complacency.
- Opportunities: Growing demand for power generation, emerging markets, technological advancements in efficiency and sustainability.
- Threats: Intense competition from Westinghouse, changing regulatory landscape, economic fluctuations.
Westinghouse:
- Strengths: Lower cost structure, aggressive pricing strategy, focus on international markets.
- Weaknesses: Limited brand recognition, potential for quality issues, dependence on government contracts.
- Opportunities: Growing demand for power generation, emerging markets, technological advancements in efficiency and sustainability.
- Threats: Intense competition from GE, potential for technology gaps, economic fluctuations.
c) Value Chain Analysis:
GE's value chain includes:
- Research and Development: Investing in new technologies and product development.
- Manufacturing: Producing high-quality turbine generators with advanced manufacturing processes.
- Marketing and Sales: Building relationships with utilities and government agencies.
- Service and Support: Providing ongoing maintenance and upgrades.
d) Business Model Innovation:
Westinghouse was employing a business model innovation strategy by focusing on:
- Lower Cost Structure: Streamlining manufacturing and reducing overhead costs.
- Faster Delivery Times: Utilizing lean manufacturing principles and optimizing supply chain management.
- Aggressive Pricing: Offering competitive prices to attract customers.
4. Recommendations
GE should implement a multi-pronged strategy to maintain its competitive advantage:
a) Enhance Technological Leadership:
- Invest in R&D: Continuously develop innovative technologies that improve efficiency, reduce emissions, and offer superior performance.
- Embrace Digital Transformation: Leverage AI and machine learning to optimize manufacturing processes, enhance product design, and provide predictive maintenance services.
- Develop Sustainable Solutions: Focus on developing turbine generators that comply with stringent environmental regulations and promote renewable energy integration.
b) Optimize Operations and Cost Structure:
- Streamline Manufacturing Processes: Implement lean manufacturing principles and automation to reduce production costs and lead times.
- Optimize Supply Chain Management: Enhance global sourcing capabilities and leverage strategic alliances to secure raw materials and components at competitive prices.
- Improve IT Management: Implement robust information systems to manage data, track performance, and facilitate decision-making.
c) Expand Global Reach and Market Share:
- Target Emerging Markets: Identify high-growth regions and tailor products and services to meet local needs.
- Pursue Strategic Alliances: Collaborate with local partners to gain access to new markets, expand distribution networks, and leverage their expertise.
- Develop a Strong Brand Presence: Build brand awareness through marketing campaigns, industry events, and social media engagement.
d) Enhance Customer Focus and Value Creation:
- Develop Customized Solutions: Provide tailored products and services to meet specific customer requirements.
- Offer Comprehensive Support: Provide ongoing maintenance, upgrades, and technical expertise throughout the turbine generator's lifecycle.
- Build Long-Term Relationships: Foster strong relationships with customers based on trust, reliability, and value creation.
e) Foster a Culture of Innovation and Continuous Improvement:
- Encourage Employee Engagement: Create a workplace that fosters creativity, collaboration, and a commitment to excellence.
- Invest in Leadership Development: Develop leaders who champion innovation, embrace change, and inspire employees.
- Promote a Data-Driven Culture: Encourage the use of analytics and data insights to drive informed decision-making and optimize performance.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of GE's strengths, weaknesses, opportunities, and threats, and consider the following factors:
- Core competencies and consistency with mission: The recommendations leverage GE's core competencies in technology and innovation, aligning with its mission to be a global leader in power generation.
- External customers and internal clients: The recommendations focus on enhancing customer value, providing tailored solutions, and building long-term relationships.
- Competitors: The recommendations address the competitive threat from Westinghouse by focusing on cost optimization, technological leadership, and market expansion.
- Attractiveness: The recommendations are expected to improve GE's financial performance by increasing market share, reducing costs, and enhancing profitability.
6. Conclusion
By embracing these recommendations, GE can maintain its competitive advantage in the large turbine generator market. The company must focus on innovation, operational excellence, global expansion, and customer focus to navigate the evolving industry landscape and ensure its long-term success.
7. Discussion
Other alternatives not selected include:
- Merging with Westinghouse: This could have consolidated market share but would have faced regulatory scrutiny and potential antitrust issues.
- Exiting the large turbine generator market: This would have been a strategic retreat but would have lost a significant revenue stream and market presence.
Key risks and assumptions associated with the recommended strategy include:
- Technological advancements: The rapid pace of technological change could disrupt the market and require GE to constantly adapt.
- Economic fluctuations: Economic downturns could reduce demand for power generation and impact GE's sales.
- Regulatory changes: New environmental regulations could increase costs and impact GE's product offerings.
8. Next Steps
GE should implement the recommended strategy in a phased approach:
- Phase 1 (Short-Term): Focus on cost optimization, streamlining manufacturing processes, and expanding into emerging markets.
- Phase 2 (Medium-Term): Invest in R&D, develop sustainable solutions, and enhance digital capabilities.
- Phase 3 (Long-Term): Build a strong brand presence, foster a culture of innovation, and solidify GE's leadership position in the industry.
By taking these steps, GE can successfully navigate the challenges and opportunities in the large turbine generator market, ensuring its continued success in the years to come.
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Case Description
Describes the U.S. large turbine generator industry in early 1963, a period of severe price cutting and depressed industry conditions. Presents data to allow a structural analysis of the industry and an analysis of the strategies of the major players since 1946. The major teaching issue is the process of competitive rivalry in an oligopoly market, particularly the problems of deescalating in a situation of market warfare. This industry is one where the conditions for avoiding warfare are difficult. Subsidiary teaching issues include the structural analysis of capital goods markets and strategy for the market leader in areas like pricing, rate of technological change, and customer focus. After understanding the industry structure, the discussion should turn to what GE can do to extricate itself from the disastrous price cutting afflicting the industry.
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