The medical equipment industry where GE basically belongs experienced several challenges as it went through twenty first century. As a result, GE Medical Systems or GEMS was introduced into the industry and served as the source of its competitive advantage. The industry shift from hard to soft products was seen as the opportunity for GEMS to provide value into the corporation amid the maturity, saturation and economic pressure thrown into the traditional industry. As evidence of the positive contribution of GEMS, its 1996 revenue of $4 Billion consisted of at least half in services which grew larger than the total revenue itself.
The nucleus of GEMS existence was to produce activities where customer trust and loyalty can be achieved. Through major efforts in communication and learning, GEMS had successfully sold imaging, radiation and diagnostic medical systems to satisfied customers. Current Issue However, the road to success continuously surprised GEMS with difficulties that deter its shining brilliance. Supporting strategies were created such as selling products to non-US customers and intensify innovation in design and production.
In effect, the solution initiated by GEMS was not a one-time turnaround to pacify industry difficulties. Turning to centralized databases and digitalized medical records, GEMS recent revenue trends came slow because of coinciding calling from the industry such as care cost reduction, increased networking demands, consolidation to achieve economies of scale and preference of large customers in strategic suppliers. The soft product sector had also high demands for software-based technologies which makes the environment of GEMS more unpredictable.
The needed analytical approach should make internal strategies and resources in line with industry conditions. Porter’s Five Forces Rivalry (High) There are major large firms like Philips, Picker, Siemens and Toshiba. In addition, market growth especially in the US market is saturated. For GEMS alone, two thirds of AHA member hospitals were already covered. High fixed costs are obvious not only in the medical equipments sector but also in the emerging software-based sector due to research and development costs.
In the same reason of the latter sector, storage costs were attributable to ever-changing technology landscape since developments were necessary to increase productivity of the customers. Customers especially large hospitals were preferring strategic and long-term suppliers that switching costs were quite high. The industry has also low levels of product differentiation and the introduction of concept of service was the only source of thinking one supplier is better than the other. Globalization enabled international firms to compete domestic ones which contributed to high strategic stakes.
There is also high exit barrier due to asset specificity of the plant, human resources and other income-generating equipment of healthcare players. Diversity of rivals were not intensive since new players had a difficult time gaining market in a saturated industry motivated by loyalty and trust for suppliers. There is no industry shakeout particularly in the medical equipment sector. However, the software-based sector may attract enough concern from the market due to demand of one-stop supplier, modern equipments and value-adding services.