1. GE and Competitive Analysis
James Oldroyd
Kellogg Graduate School of Management
Northwestern University
650 TNRB

2. Early experiments in transportation
Globalization: driven by advancements in transportation technology
Early experiments in transportation

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

4. New Costs Labor Labor Material US Plant Material Non-US Plant SG&A
Overhead
Non-US Plant
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
SG&A
Overhead
SG&A
Direct Labor
Manufacturing Cost Per Unit
(Dollars)
Overhead
Direct Labor
Material
Material
Client
Plant
Competitor
Plant

7. Benchmarking Expense Item Sources
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.

8. Globalization: also driven by communications technology
The modern lion

9. Key Globalization challenges: differences in language
“Matthews…we’re getting another one of those strange ‘aw blah es spanyol’ sounds.”

10. Today