Post on 31-Mar-2015
GE and Competitive Analysis
James OldroydKellogg Graduate School of ManagementNorthwestern University
j-oldroyd@northwestern.edu801-422-7888650 TNRB
2
Early experiments in transportation
3
Costs
GE
Necchi
Matsushita
Sanyo, Hitachi, Toshiba
Embraco-Matsushita
48
32-38
32-38
Under 30
24
17
1.7
1.4
65
25
25
35
Cost Per Hour Minutes
4
New Costs
Labor
Material
SG&A
Overhead
US Plant
Labor
Material
SG&A
Overhead
Non-US Plant
Class Summary
GE’s Experience Illustrates:• Benchmarking (relative cost position analysis) is a key first step to make vs. buy and plant location
decisions.• Key question to ask: “Are we as good as the best in the world at this activity?”• Be careful about letting “nationalistic” ideals unduly influence decisions (need a geocentric mindset).
Also, understanding the technology is critical for top managers to make the right decisions.Benchmarking Example Illustrates:
• Firms may need a dedicated “competitive intelligence” team to continuously benchmark competitor practices.
• Focus on key cost areas (80/20 rule). Don’t waste resources• Detailed analysis (data) on processes and practices (visits, interviews) is necessary to understand
what processes to actually change/adopt.
BENCHMARKING(RELATIVE COST POSITION ANALYSIS)
COMPARISON OF PROCESSES AND PRACTICES TOIDENTIFY LOW COST PRACTICES AND QUANTIFY TARGET COST SAVINGS POTENTIAL
• PLANT VS. PLANT• PROCESS VS. PROCESS• MACHINE VS. MACHINE• EMPLOYEE FUNCTION VS. EMPLOYEE FUNCTION
SG&A
OverheadDirect Labor
Material
SG&A
OverheadDirect Labor
Material
$200
150
100
50
0Client Plant
CompetitorPlant
Man
ufac
turin
g C
ost P
er U
nit
(Dol
lars
)
Benchmarking
Raw Materials (material per piece; scrap per piece)
Labor (number of direct/ indirect employees, wages and fringe rates)
Capital Investment (building/ machinery type, age, & cost)
Transportation (cost per container, pieces per cont.)
Advertising
Corporate Overhead (SG&A expenses; number of sales/ officers)
Material analysis, commodity mkts, suppliers, purchasing.
Chamber of commerce, Dept. of Labor form EE0-1; corporate phone books, headcount, past employees.
Chamber of commerce, contractors, machinery mfgs.
Common carriers, physical examination, proc. & supply.
Leading National Advertisers (LNA); count.
Annual reports, former employees.
Expense Item Sources
8
The modern lion
9
“Matthews…we’re getting another one of those strange ‘aw blah es spanyol’
sounds.”
10
Today
http://www.geappliances.com/arctica/