Why do you think that GE has Come to Prefer Joint Ventures in Recent Years?

General Electric

Q2:Why do you think that GE has come to prefer joint ventures in recent years?  Do you think that the global economic crisis of 2008-2009 might have impacted upon this preference in any way?  If so, how?

General Electric (GE) has been classified among the largest and profitable corporations in the US. Based in Fairfield, Connecticut, GE has been engaging in acquiring other firms to create a joint venture, which it termed as the most powerful strategic tool in the current world. According to Knight and Cavusgil, joint ventures are global-focused with specific resources aimed at undertaking international activities (124). Joint venture has allowed GE to share economic risks and gain domestic knowledge from the new acquisitions. Embracing joint venture has made GE advance its technological proficiency in information and communication, as well as reducing business transaction costs. Apart from financial muscles, political, as well as social aspects of business have made joint ventures seem constructive. For a multinational firm to succeed in the global market, it has to possess capability-driven strategies that include having unique knowledge-based resources (Tallman and Fladmoe-Lindquist 117).

The global economic crisis, which occurred in 2008-2009, had an effect on the joint ventures in GE, as the corporation discovered that the equity value had declined globally, making joint venture and generally, foreign investment, less preferable. At such period, a Greenfieldventure could have been extremely costly while the returns were relatively low.The firm opted to specialize on joint ventures because aimed at studying the foreign market through firms that were already in operation, in addition to sharing risks. Recently, GE investors have pushed for a change in the portfolio management to cushion the corporation against economic risks, such as the ones that occurred during the 2008 financial crisis, as this would enable the corporation to build its industrial base while moving away from financial situations (A hard act). With time, the firm would be capable of employing its architectural knowledge to coordinate its operations and attain its economic goals (Tallman and Fladmoe-Lindquist 120). In international business, knowledge is crucial in facilitating foreign market entry.

Works Cited

“A hard act to follow.” The Economist. General Electric, June 28, 2014. Web. 21 March 2015. http://www.economist.com/news/business/21605916-it-has-taken-ges-boss-jeffrey-immelt-13-years-escape-legacy-his-predecessor-jack

Knight, Gary A., and S. Tamar Cavusgil. “Innovation, organizational capabilities, and the born-global firm.” Journal of International Business Studies 35.2 (2004): 124-141.

Tallman, Stephen, and Karin Fladmoe-Lindquist. “Internationalization, globalization, and capability-based strategy.” California Management Review 45.1 (2002): 116-135.