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GE and Competitive Analysis

GE and Competitive Analysis. James Oldroyd Kellogg Graduate School of Management Northwestern University j-oldroyd@northwestern.edu 801-422-7888 650 TNRB. Early experiments in transportation. Costs. Cost. Per Hour. Minutes. GE. 48. 17. 65. 32-38. Necchi. Matsushita. 32-38. 1.7.

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GE and Competitive Analysis

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  1. GE and Competitive Analysis James Oldroyd Kellogg Graduate School of Management Northwestern University j-oldroyd@northwestern.edu 801-422-7888 650 TNRB

  2. Early experiments in transportation

  3. Costs Cost Per Hour Minutes • GE 48 17 65 32-38 Necchi Matsushita 32-38 1.7 25 Sanyo, Hitachi, Toshiba 25 Under 30 Embraco-Matsushita 24 1.4 35

  4. Labor Material Non-US Plant SG&A Overhead New Costs Labor Material US Plant SG&A Overhead

  5. 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.

  6. BENCHMARKING(RELATIVE COST POSITION ANALYSIS) • COMPARISON OF PROCESSES AND PRACTICES TO • IDENTIFY LOW COST PRACTICES AND QUANTIFY • TARGET COST SAVINGS POTENTIAL • PLANT VS. PLANT • PROCESS VS. PROCESS • MACHINE VS. MACHINE • EMPLOYEE FUNCTION VS. EMPLOYEE FUNCTION $200 150 100 50 0 SG&A Overhead SG&A Direct Labor Overhead Manufacturing Cost Per Unit (Dollars) Direct Labor Material Material Client Plant Competitor Plant

  7. 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. Benchmarking 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/

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