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General Electric Healthcare with worth of $17 billion was a separate division of General Electrics. It was recognized for its high end medical instruments and medical solutions for developed countries. GE Healthcare entered into a joint venture with Wipro operating in India to realize the benefits of low cost, educated and talented technical staff available in India and to overcome the regulatory limitations and operational complexities. This essay will analyze the strategic shift taken by GE Healthcare to exploit mass market opportunity available in emerging countries. It also entails the challenges GE Healthcare faced while operating in the emerging markets and how it adds value to the global value chain.
The new shift in the strategy of GE Healthcare was influenced by some trends emerging in the global environment. One of the developing movements was a huge market in emerging countries. Among promptly increasing diseases, cardiovascular diseases were the leading cause of deaths in the world. Approximately 30 percent of deaths in the world were due to cardiovascular diseases. Historically developed countries were characterized with non-infectious and non-transferable diseases but the trend was shifting towards mid to low income countries, and these non-communicable diseases account for 80% of deaths in developing countries. In emerging countries, people from rural areas have insufficient access to sophisticated medical equipment and medical solutions. Conventionally, the focus of GE have been to cater the demand of developed markets customers which were not price sensitive and afford to pay for expensive and sophisticated equipment. But the emerging trend of cardiovascular disease in poor countries created the opportunity for GE to design products and solutions specifically designed to meet the needs and requirements of emerging countries. Rising health care issues among low income countries developed large market for low cost ECG machines of GE. Another rising trend was a shift towards low cost equipment designed for BOP market. Customers from emerging countries were substantially price sensitive with limited purchasing power and demand cheaper medical solutions. Hence, there was a need to design products of high quality and high performance, but inexpensive instruments and products to cater the mass market. Moreover, GE launched a global campaign of “healthymagination” to reduce the cost and increase the access and quality of healthcare to improve its CSR image. With the developing market in emerging countries and price sensitive low income customers prompt General Electric Healthcare to design inexpensive product solutions and serve the needs of the market.
The growth of GE Healthcare was not fully realized because of certain internal barriers within the organizations. One of the internal barriers of General Electric Healthcare was highly centralized and controlled management in the global organization. This centralized management and decision making was hindering the growth of GE products in India. Highly controlled organization structure was not capitalizing on the local low cost product demands of mass market in India. Higher management and leaders of GE Healthcare were unable to differentiate India as a separate region with unique demands from USA and China while integrating their global strategies and knowledge. They lack specific local strategy to grow and expand specifically designed to tap huge Indian market with 60 million heart patients. Due to centralized management, senior officials lack market awareness and were unaware of local demands of customers. This lack of awareness and specific strategy were reducing sales and revenue from Indian market. Another internal barrier for GE Healthcare was high development cost associated with the R&D for traditional products. Although research center developed in India (Bangalore) was not specifically focused to design products and solutions for the Indian market. The products from R&D institute in India were also considered meeting the high end needs of developed markets. These high end products were not meeting the requirements of price sensitive large Indian market, and hence they were unable to fully tap this huge low income market. Moreover, the development cost of traditional R&D institute was relatively high to meet the demands of low cost market. High cost associated with 12-channel printer output, full scale keyboard, large graphical color display, full network connectivity and interoperability and customized processing chips were hindering to reduce cost for price sensitive Indian market.
In order to tap Indian market, GE Healthcare faced certain external barriers which pose threats in meeting the goals in target market. General Electric Healthcare faced the barrier of inefficient distribution channels to penetrate their low cost product solutions to new customers. Although to provide cost efficient distribution system for Indian market, GE Healthcare had partnerships with pharmaceutical companies, surgical companies and large pharmacies. Still the GE low cost ECG solution was not able to spread in the mass market and ineffective distribution system and service networks restricted the products of GE to traditional customers. GE Healthcare should address this barrier by forward integration and investing in sales distribution networks to enhance the access of their products in mass market and rural areas of India. This strategy will help GE Healthcare to have control on the distribution of its products towards the target market and reach the low income customers of mass market. Another external barrier which General Healthcare faced in Indian market was strong competition by international players like Schiller, Philips and Siemens as well as local competitors like BPL. BPL was a strong competitor with local market knowledge, expertise and experience in the local market. BPL with low cost products, strong brand name and effective distribution networks was holding the maximum share and access to mass market in India. BPL was leading the market with efficient and quick delivery system, cash orders and flexibility in discount systems. GE Healthcare faced strong competition from the market leader in the Indian market, but GE can handle this issue by operating effectively and adopting flexible multiple channels for distribution of its products. Operational effectiveness will help GE to reduce the cost by capitalizing on experience curve and increase the market share. Flexibility in distribution networks will provide GE products access in the untapped regions of the market.
General Electric Healthcare took several steps to develop a specific strategy for growth in BOP market. First step in the process of strategy development was market research. This market research identified the demands, opportunities and growth potentials present in the BOP market. Price sensitivity, lack of accessibility and an enormous progress prospect provide the knowledge about the market which set the base to devise the strategy to target BOP. Second step was product development that incorporated R&D efforts to design a product specifically to meet the demands of low income BOP market. GE Healthcare reorganized the organizational matrix and devised local teams with better knowledge of local customers and off-shelf components available locally. These initiatives reduced the development cost during the development of product. Third step in the strategic formulation was accessing the target market. GE Healthcare targeted the market through effective marketing and promotional programs. They educated the potential customers about the technical aspects of product through product demonstration of ECG devices. After having certain constraints in fully capitalizing the benefits of growth in BOP market and with market experience GE Healthcare conducted product development. The new product developed was of low cost, cheaper, light in weight, user-friendly and technologically reliable. Strategically consistent behaviors of GE healthcare in BOP market contributed to add multiple features without compromising the quality at low cost. Inexpensive printers attached to the device for detailed reports, accurate results, lightweight and portable nature of ECG products enhanced the product performance in developed as well as emerging markets. SMS-texting facility attached with ECG machine and provided connectivity through USB and Ethernet ports according to market demands. All these developments in products and operational efficiencies contributed to reduce cost and enhance profitability in developed as well as emerging markets.
GE Healthcare changed its strategy to tap the mass market in emerging countries by reorganizing the organizational structure and local teams designed to develop products according to local demands. GE faced external barriers of high competition from local market leader and ineffective sales and distributions networks which limited their goals to capitalize the full market. GE should handle these external constraints through operational efficiencies and forward integration through controlling the distribution network. GE developed its strategy for BOP market through market research, product development, targeting the market and product development. These strategic activities produce cost effective products with multiple features for developed as well as emerging countries.
