management analysis

COMPANY PROFILE

General Electric Company

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General Electric Company TABLE OF CONTENTS

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TABLE OF CONTENTS

Company Overview ........................................................................................................3 Key Facts.........................................................................................................................3 SWOT Analysis ...............................................................................................................4

General Electric Company Company Overview

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Company Overview

COMPANY OVERVIEW

General Electric Company (GE or 'the company') is a global digital industrial corporation. The company offers a wide range of products and services that includes aircraft engines, oil and gas production equipment, power generation, household appliances, medical imaging, as well as business and consumer financing and industrial products. It offers its products under the brands Immersion, Infusion, Lumination, Albeo, TriGain, Tetra, Avantapure, Monogram, GE Café, GE Profile and GE. The company primarily operates in North America, Europe, Asia, South America, Australia, and Africa. It offers manufacturing plants in the US and Puerto Rico. GE is headquartered in in Boston, Massachusetts, the US.

The company reported revenues of (US Dollars) US$120,468 million for the fiscal year ended December 2017 (FY2017), an increase of 0.7% over FY2016. The operating loss of the company was US$8,036 million in FY2017, compared to an operating profit of US$9,961 million in FY2016. The net loss of the company was US$5,786 million in FY2017, compared to a net profit of US$8,831 million in FY2016.

The company reported revenues of US$30,104.0 million for the second quarter ended June 2018, an increase of 5% over the previous quarter.

Key Facts

KEY FACTS

Head Office General Electric Company 41 Farnsworth St Boston Massachusetts Boston Massachusetts USA

Phone 1 617 4433000 Fax 1 203 3733131 Web Address www.ge.com Revenue / turnover (USD Mn) 120,468.0 Financial Year End December Employees 313,000 New York Stock Exchange Ticker GE

General Electric Company SWOT Analysis

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SWOT Analysis

SWOT ANALYSIS

General Electric Company (GE or 'the company') is a diversified industrial corporation. Strong R&D capabilities; business segment performance: Oil & Gas; and wide customer Base are its key strengths, whereas dependence on third parties for raw materials is an area of concern. In the future, rapid technological changes, stringent regulations and intense competition could affect the company’s growth. However, positive outlook for global renewable energy market, strategic agreements and contracts could provide growth opportunities for the company.

Strength

Business segment performance: Oil & Gas Wide Customer Base Robust Research and Development Capabilities

Weakness

Dependence on Third Parties for Raw Materials

Opportunity

Strategic agreements Contracts Robust Outlook of Global Renewable Energy Market

Threat

Environmental and Other Government Regulations Aggressive competition Technological changes

Strength

Business segment performance: Oil & Gas

Oil & Gas business is one of the contributors to the company’s revenue stream. In FY2017, it accounted for 13.8% of the total revenue and reported an increase of 33.6%. Revenue growth was mainly due to increase in purchase orders and the acquisition of Baker Hughes in 2017.

Wide Customer Base

Wide customer base helps the company in enhancing its financial and operational capabilities. The company serves across various industries that inlcude agriculture, oil and gas, power generation, mining, marine, aviation, healthcare, medical equipment, military and others. The company serves customers in more than 180 countries. In FY2017, it has 191 manufacturing plants located in 38 states in the US and Puerto Rico and 348 manufacturing plants located in 43 other countries.

Robust Research and Development Capabilities

Strong R&D capabilities enables the company to bring new and innovative products to market and maintain technological leadership, which in turn enables GE to expands its customer base and generate incremental revenues. GE Global Research (GGR), the research and development (R&D) arm of GE, is one of the world's most diversified industrial research labs. GGR's diverse set of technology expertise

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covers range of fields such as electronics, chemistry, biosciences, computing, metallurgy, fluid mechanics, materials and imaging, among others. GGR is headquartered in Niskayuna, New York and has seven other multidisciplinary facilities located in Shanghai, China; Bangalore, India; Tirat Carmel, Israel; Munich, Germany; Rio de Janeiro, Brazil; Oklahoma City, Oklahoma; and San Ramon, California. GGR has won various recognitions across a range of fields. For instance, in March 2017, GE Healthcare introduced CardioGraphe, the dedicated cardiovascular computed tomography system. The company funded R&D expenditures of US$4,803 million in FY2017, US$4,782 million in FY2016, and US$4,249 million in FY2015. This represented approximately 3.9% of the total revenues generated by the company.

Weakness

Dependence on Third Parties for Raw Materials

GE is reliant on third-party suppliers, contract manufacturers and service providers and commodity markets to secure its raw materials, parts, components and sub-systems used in its products. This reliance exposes GE to volatility in the prices and availability of these materials, parts, components, systems and services. A disruption in deliveries from the company's third-party suppliers, contract manufacturers or service providers, capacity constraints, production disruptions, price increases, or decreased availability of raw materials or commodities, could have an adverse impact on GE's ability to meet its commitments to customers or increase its operating costs. Quality issues experienced by third- party providers can also adversely influence the quality and effectiveness of the company's products and services and result in liability and reputational damage.

Opportunity

Strategic agreements

Agreements could bring ample opportunities for the company and help it to grow financially. The company entered into several agreements in last few months. For instance, in April 2018, the company’s Power Services business entered into an agreement with Edison, a part of EDF Group. EDF Group is the second largest integrated energy company in Italy. This agreement is expected to improve performance at its Candela combined-cycle power station in Puglia. As per the agreement, the company would upgrade the existing GE 9F.03 gas turbine, to increase the plant’s production to 400 MW and increasing the global competence by 1%. In March 2018, the company’s Power Services business entered into a multiyear agreement with Southern Power Generation Sdn Bhd, for its new Track 4A plant, in Johor, Malaysia. As per the agreement, GE would provide services solutions for the first two GE 9HA.02 gas turbines, installed in the country and deploy its Predix Asset Performance Management software, helping to improve asset visibility, availability and reliability of SPG’s plant. It also provides a spectrum of digital solutions, major inspections and plant improvement services on the 9HA.02 gas turbines. In February 2018, the company partnered with ANSYS to leverage its Pervasive Engineering Simulation for accelerating product development and analysis.In January 2018, a consortium Macquarie Capital and Techint signed an agreement valued US$330 million with GE to Provide Total Plant Services Solution for the Norte III Power Plant, Mexico.

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Contracts

In April 2018, the company’s GE Power received a lead EPC contract for the construction of ultra- supercritical (USC) coal power plant Ostroleka C, 1,000 MW Power Plant, from Alstom Power Systems. As per the contract, GE power would manufacture, design and deliver its ultra-supercritical technology components for a new power plant. This helps it to gain confidence of Energa and Enea, and combines its EPC experience with leading coal based technology. In the same period, GE's Power Services unit secured a service contract worth US$300 million with Petrobras for power generation equipment in eleven power plants in Brazil. In March 2018, GE’s Power business obtained a contract from Eurotunnel, to supply a Static Synchronous Compensator to improve the stabilization of power supply of the Channel Tunnel on the catenary traction system. After the completion, the project will be one of the world’s largest STATCOM application connected to a catenary traction system. As per the contract, the company provides custom design and supply the entire STATCOM system. This helps the company to display its STATCOM technology as the prime solution to ensure power stability. In the same period, GE secured a federal contract worth US$$29,333 from the Defense Logistics Agency for sleeve spacers. In February 2018, GE and Dewa partnered to develop services and projects for enhancing its presence as one of the best utilities in the world.

Robust Outlook of Global Renewable Energy Market

The outlook for global renewable energy market is robust. According to an in-house research report, the global renewable energy market generated total revenues of $694.7 billion in 2016, representing a CAGR of 9% for the period 2012 and 2016. Furthermore, the market is expected to grow at a CAGR of 8% for the 2016–20 period to reach a value of approximately $957.5 billion in 2020. In addition, the market production volume is expected to rise to 6,399.8 terawatt hour (TWh) by the end of 2020, representing a CAGR of 5.1% for the 2015–20 period. The company is well positioned to capitalize on the growing end markets to enhance its revenues and market share. The company primarily focuses on the wind business and manufactures wind turbines and provides support services ranging from development assistance to operation and maintenance. In addition, the company has won a number of large contracts in the recent past. For instance, in June 2016, GE Renewable Energy signed a framework agreement with UKA Group to install approximately 250 MW of wind energy across 12 future project sites throughout Germany. Also in May 2016, GE Renewable Energy introduced a new software applications suite for its digital wind farm ecosystem. Further in June 2016, Saudi Aramco and the company partnered to install Saudi Arabia’s first wind turbine at the Turaif Bulk Plant, the UK. Also, in the same month, GE Renewable Energy signed a framework agreement with UKA Group to install approximately 250 MW of wind energy across 12 future project sites throughout Germany. Furthermore in March 2016, GE launched digital wind farm solution and the latest wind turbine 2.3-116 machine in India. Thus, the robust outlook of global renewable energy market could provide increased business opportunities to GE, helping it expand its revenues and market share.

Threat

Environmental and Other Government Regulations

GE's operations, like other companies in the industry, face several environmental and other governmental

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regulations. It is subject to various federal, state, local and foreign environmental laws and regulations in all of the jurisdictions in which it operates. These laws and regulations cover the discharge, treatment, storage, disposal, investigation and remediation of some materials, substances and wastes. GE is involved in environmental investigations or remediation at some of its current and former facilities, and at third-party sites. The company incurred expenditure for site remediation actions of $200 million, $200 million, and $300 million in FY2017, FY2016, and FY2015. Further, it expects that such remediation actions will require average annual expenditures in the range of about $200 million FY2018 and FY2019. In addition, GE's businesses are subject to various US federal, state and foreign laws, regulations and policies. These regulations and policies may force the company to modify its business models and objectives or affect its returns on investment by making existing practices more restricted. For instance, the US and non-US governments are undertaking a substantial revision of the regulation and supervision of bank and non-bank financial institutions, consumer lending, the over-the-counter derivatives market and tax laws and regulations, which changes may have an effect on GE's and GE Capital's structure, operations, liquidity, effective tax rate and performance. The company is subject to regulatory risks from laws that reduce the allowable lending rate or limit consumer borrowing, local capital requirements that may increase the risk of not being able to retrieve assets, and changes to tax law that may affect return on investments. Additionally, GE is also subject to a number of trade control laws and regulations that may impact its ability to sell products in global markets. Thus, compliance cost associated with such stringent environmental and other government regulations could increase GE's operating expenditure, which in turn may have material adverse impact on the company's cash flows, competitive position, and financial condition.

Aggressive competition

GE faces significant threat from the aggressive competition across it businesses globally. For instance, the businesses in which General Electric Capital engages are subject to competition from various types of financial institutions, including commercial banks, thrifts, investment banks, broker-dealers, credit unions, leasing companies, and consumer loan companies, among others. Similarly, worldwide competition for power generation products and services is intense characterized by various regional and multinational companies. In healthcare business, GE competes with a variety of US and non-US manufacturers and services providers. Technological competence and innovation, excellence in design, high product performance, quality of services and competitive pricing are among the key factors affecting competition for these products and services. The company competes with a number of US and international companies, including 3M, Hitachi, Honeywell International, Mitsubishi, Siemens, Textron, Thermo Fisher Scientific and United Technologies, among others. Thus, operating in intense competitive environment could result in pricing pressure risks which in turn may adversely impact GE's margins and profitability.

Technological changes

The offerings of GE are characterized by rapid technological changes, which could affect its business operations. The company serves a wide range of industries, including information and telecommunication, social infrastructure, electronics, construction machinery, and automotive. The company requires delivering various solutions at competitive prices to sustain its market position. It needs to invest to improve the capacity and quality of its solutions to meet the needs and preferences of end-user and strengthen its subscriber base.

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