General Electric medical systems, 2002

General Electric medical systems, 2002

Q 1. What is the underlying logic behind the global product idea? What are the costs and the benefits that are expected?

Answer- Global Electric Medical Systems (GEMS) had built a global presence on the backs of the Global Product Company (GPC) concept .This philosophy concentrated on manufacturing and then carry out activities anywhere in the world, where it could be carried out to GE’s Standards and cost effectively without compromising on quality.
Medical equipment are globally standardized product which don’t require to be tweaked or adapted to local market needs.

GEMS in terms of Adaptation, had invested heavily in country-based sales and
* With 40% market share, GEMS is the market leader in Chinese market and with this policy they can increase their market share further. * The low end products made for China could be exported to other countries also as these products makes 20% of the industry revenues. * Moving other plants to China is not very costly. It won’t require fixed cost more than $1 million and 2% decline in variable cost.
Factors not favouring any alteration in GPC policies- * GEMS is right now exporting nearly 70% of the products they are making in China. That shows that they are making high end and medium end products more. * They are already a market leader in China so why change an already successful strategy. * A move of resources from other low cost countries to China will duplicate the existing infrastructure as well as will keep rest of Asia at a back step. The sales in Asia on average grew annually by 23% in years 1998–2001 so rest of the countries cannot be ignored.
Financial details (using Exhibit 8) | # of units | Selling Price | Cost | Margin | Fixed costs | Profits | Current scenerio | 787 | 3300 | 2570 | 730 | 0 | 574510 | 10% price drop | 1180 | 2970 | 2570 | 400 | 0 | 472000 | Move to China with current profit | 2015 | 3300 | 2518.6 | 781.4 | 1000000 | 574521 |

In order to reach the same level of profits the company would have to sell around 2015 units, which would be an increase of 152% and would take about 4 years and 5