Longtime GE watcher James Schrager, professor of strategic management at University
of Chicago’s Booth School of Business, remarked: “They have not been successful [in
emerging markets], particularly in India which is such a vibrant place. They have
been late, flat-footed, and missing what the local market needs.” 6
Several factors contributed to GE’s missteps. First, with the exception of its successful
JV with Wipro in health care, the other JVs, such as Godrej GE for consumer appliances,
HDFC GE for consumer finance, and State Bank of India GE for credit cards, didn’t
perform well. In the appliance business, for instance, GE lost India to Samsung and
LG. Indians didn’t want the large refrigerators GE made. In the credit card business,
when GE tied up with the State Bank of India (SBI), India didn’t have a credit bureau.
That meant there was no credit history that companies could rely on to issue cards.
SBI suggested GE tap into the thousands of savings accounts SBI managed to vet a customer’s
track record. “GE just wouldn’t accept the idea. They insisted on getting the information
from a credit bureau and demanded that SBI stand as guarantor for all the cards issued.
You don’t ask for such guarantees in the US, why ask for it in India?” recalls a former
GE veteran, who steered that business for a while. (Note: The JV with SBI did not
perform well historically but with GE’s new approach, it has seen a major turnaround
in the past two years and is growing rapidly and very profitably.)
Executives at GE India found it exasperating to get headquarters’ buy-in for any proposal.
“They just couldn’t understand that in India, the payback time is longer,” says yet
another former GE executive who now heads a European company in India. The other mistake,
old-timers at GE say, was the company’s propensity to send in midlevel executives
from other markets to head the India business. India was far more complex than anything
those executives had handled, so GE needed more rather than less leadership capability
to grow the local market. Schrager points out that the powerful global business units
may also have been a challenge:
Jack Welch made one powerful change in GE, which is to have as small a corporate office
as possible. Division presidents run their global business with as little intervention
from corporate as possible. The great downside of the vertical system is that the
person in charge is very powerful. So if GE, the corporation, wants to go to India,
Immelt or whoever is running the place has to go to each president and lobby for that
business to go to that place. It’s clumsy.
To his credit, CEO Immelt recognized this. In 2009, he drove GE to embrace a radical
new organizational model in India. Explaining the changes in an interview with Forbes India , he says:
[Winning in] India is essential. For GE, winning with India requires a new business
model, one in which we are “local” in every sense of the word. That means migrating
P&L responsibility and major business functions [like R&D, manufacturing and marketing]
from a centralized headquarters to an experienced in-country team that is closest
to the action and uniquely in touch with local customers and capabilities. Shifting
power to where the growth is, putting more resources, more people and more products
in the country, and integrating all elements of the GE product and services pipeline
makes good business sense. This new One GE in India approach will speed progress.
With an integrated team, we can develop products and services designed specifically
to meet local needs and, potentially, for export to other markets. Since we’ve changed
the model in India to align with the market more directly, there’s great excitement.
It gives us entirely new opportunities to develop more products at more price points.
This will help open up access to large,