GE's joint venture case

1459 words 6 pages
General Electric’s Joint Ventures
General Electric (GE) formerly entered a foreign market by either acquiring an established firm or establishing a greenfield subsidiary (which is a wholly owned from ground up turnkey project). Joint ventures with a local company were almost never considered. The prevailing philosophy was that without full control, the company didn’t do the deal. However, times have changed. Since the early 2000s joint ventures have become one of the most powerful strategic tools in GE’s arsenal. To enter the South Korean market, for example, GE Money, the retail lending arm of GE’s financial services business, formed joint ventures with Hyundai to offer auto loans, mortgages, and credit cards. GE has a 43 percent stake
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Nevertheless, joint ventures are no panacea. GE’s agreements normally give even the minority partner in a joint venture veto power over major strategic decisions, and control issues can scuttle some ventures. In January 2007, for example, GE announced it would enter into a joint venture with Britain’s Smith Group to make aerospace equipment. However, in September of the same year, GE ended talks aimed at establishing the venture, stating it could not reach an agreement over the vision for the joint venture. GE has also found that as much as it would like majority ownership, or even a 50/50 split, sometimes it has to settle for a minority stake to gain access to a foreign market. In 2003, GE entered into a joint venture with Hyundai Motor to offer auto loans, it did so as a minority partner even though it would have preferred a majority position. Hyundai had refused to cede control to GE.

Source: Charles W.L. Hill (2011). “Global Business Today”, pp.440-441 (ISBN: 978-007-813721-1)

Case Questions:
1. GE used to prefer acquisitions or greenfield ventures as an entry mode, rather than joint ventures. Why do you think this was the case?

GE used to prefer acquistions as an entry mode because GE could have complete control of all managerial decisions and gain all the revenue and move right into working into that particular foreign market. GE used to prefer greenfield ventures for the same