GE Joint Venture Case Study
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General Electric’s Joint Ventures — 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? Acquisitions were thought to be more cost effective and less risky. With GE having total control, they did not have to worry about the internal problems of the company and could enhance coordination all the while gaining immediate market share.
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? With the detrimental occurrences due to the economic crisis, GE became more weary of how much money they were spending.
Despite wanting 100% control over a company in a new market, what overpowered that desire was their fear of spending too much for that and the potential acquisition of company problems. Aside from financial reasons, political and social situations make joint ventures favorable. Certain countries, specifically in the asian markets, prohibit entry into their market via any other method.
3. What are the risks that GE must assume when it enters into a joint venture? Is there any way for GE to reduce these risks? The most obvious risk GE encounters when entering a joint venture is the sharing of costs and risks with their partner. If the partner does not have sufficient leadership and support int he early stages it leaves GE to provide that. With that said, if the objectives of the venture are not totally clear and communicated to everyone involved problems are likely to arise. Any imbalances whether it be in knowledge and expertise or in assets brought into the venture, are a petri dish for risks and problems.
4. The case mentions that GE has a well-earned reputation for being a good partner. What are the likely benefits of this reputation to GE? If GE were to tarnish its reputation by, for example, opportunistically taking advantage of a partner, how might this impact the company going forward? GE’s positive, friendly, welcoming reputation makes for a friendly partnership with other companies. In the past, GE has accepted deals where they get less than 50% sharing which proves they are not looking to take advantage of the partner. They make the deals for the sake of relationships and long term investments, not for the power and immediate monetary reward. With this reputation, GE is more likely to find success in other markets through joint ventures. If for whatever reason they tarnish that reputation, they are closing their own doors of opportunity.
5. In addition to its reputation for being a good partner, what other assets do you think GE brings to the table that make it an attractive joint venture partner? In addition to GE’s willingness to hook up with other companies, even if that means taking a minority position, they also want to make smaller companies larger. If they can “GE-ize” multiple smaller companies they are not only increasing their revenues but also lowering the risk of having one big failed joint venture or acquisition. They recognize that relationships are what is most profitable in the business of joint ventures.