MGMT 479- Strategic Management ANALYZING A CASE STUDY (Revised January 25, 2016) Rubric for Case Study - Maximum Points Available (100 Points) The purpose of the case study is to let you apply the concepts you've learned when you analyze the issues facing a specific company. To analyze a case study, therefore, you must examine closely the issues with which the company is confronted. Most often you will need to read the case several times - once to grasp the overall picture of what is happening to the company and then several times more to discover and grasp the specific problems. The detailed analysis of the case study will include the following areas: 1. Analyze the company's history, development and growth (20 Points) 2. Identify the company's internal strengths and weaknesses and Evaluate the SWOT analysis (20 Points) 3. Analyze the external environment (20 Points) 4. Analyze corporate-level strategy Analyze business-level strategy Analyze structure and control systems (20 Points) 5. Make recommendations (20 Points) The following is a summary of the steps to take to analyze the case material: ~~\\.{ 1. Analyze the company's history, development, and growth. A convenient way to investigate how a company's past strategy and structure affect it in the present is to chart the critical incidents in its history - that is, the events that were the most unusual or the most essential for its development into the company it is today. Some of the events have to do with its founding, its initial products, how it makes new-product market decisions, and how it developed and chose functional competencies to pursue. Its entry into new businesses and shifts in its main lines of business are also important milestones to consider. o~~ l Identify the company's internal strengths and weaknesses. Once the historical profile is completed, you can begin the SWOT analysis. Use all the incidents you have charted to develop an account of the company's strengths and weaknesses as they have emerged historically. Examine each of the value creation functions of the company, and identify the functions in which the company is currently strong and currently weak. Some companies might be weak in marketing; some might be strong in research and development. Make lists of these strengths and weaknesses. The SWOT checklist giv~s examples of what might go in these lists. Evaluate the SWOT analysis. Having identified the company's external opportunities and threats as well as its internal strengths and weaknesses, you need to consider what your findings 1 mean. That is, you need to balance strengths and weaknesses against opportunities and threats. Is the company in an overall strong competitive position? Can it continue to pursue its current business- or corporate-level strategy profitably? What can the company do to tum weaknesses into strengths and threats into opportunities? Can it develop new functional, business, or corporate strategies to accomplish this change? Never merely generate the SWOT analysis and then put it aside. Because it provides a succinct summary of the company's condition, a good SWOT analysis is the key to all the analyses that follow. ~~~~ 3. Analyze the external environment. The next step is to identify environmental opportunities and threats. Here you should apply all information you have learned on industry and macroenvironments, to analyze the environment the company is confronting. Of particular importance at the industry level is Porter's five forces model and the stage of the life cycle model. Which factors in the macroenvironment will appear salient depends on the specific company being analyzed. However, use each factor in tum (for instance, demographic factors) to see whether it is relevant for the company in question. ~ 4. Analyze corporate-level strategy. To analyze a company's corporate-level strategy, you first need to define the company's mission and goals. Sometimes the mission and goals are stated explicitly in the case; at other times you will have to infer them from available information. The information you need to collect to find out the company's corporate strategy includes such factors as its line(s) of business and the nature of its subsidiaries and acquisitions. It is important to analyze the relationship among the company's businesses. Do they trade or exchange resources? Are there gains to be achieved from synergy? Alternatively, is the company just running a portfolio of investments? This analysis should enable you to define the corporate strategy that the company i.s pursuing (for example, related or unrelated diversification, or a combination of both) and to conclude whether the company operates in just one core business. Then, using your SWOT analysis, debate the merits of this strategy. Is it appropriate, given the environment the company is in? Could a change in corporate strategy provide the company with new opportunities or transform a weakness into a strength? For example, should the company diversify from its core business into new businesses? Other issues should be considered as well. How and why has the company's strategy changed over time? What is the claimed rationale for any changes? Often it is a good idea to analyze the company's businesses or products to assess its situation and identify which divisions contribute the most to or detract from its competitive advantage. It is also useful to explore how the company has built its portfolio over time. Did it acquire new businesses, or did it internally venture its own? All these factors provide clues about the company and indicate ways of improving its future performance. Analyze business-level strategy. Once you know the company's corporate-level strategy and have done the SWOT analysis, the next step is to identify the company's business-level strategy. If the company is a single-business company, its business-level strategy is identical to its corporate-level strategy. If the company is in many businesses, each business will have its own business-level strategy. You will need to identify the company's generic competitive strategy differentiation, low cost, or focus - and its investment strategy, given the company's relative competitive position and the stage of the life cycle. The company also may market different products using different business-level strategies. For example, it may offer a low-cost product 2 range and a line of differentiated products. Be sure to give a full account of a company's businesslevel strategy to show how it competes. Identifying the functional strategies that a company pursues to build competitive advantage through superior efficiency, quality, innovation, and customer responsiveness and to achieve its business-level strategy is very important. The SWOT analysis will have provided you with information on the company's functional competencies. You should further investigate its production, marketing, or research and development strategy to gain a picture of where the company is going. For example, pursuing a low-cost or a differentiation strategy successfully requires a very different set of competencies. Has the company developed the right ones? If it has, how can it exploit them further? Can it pursue both a low-cost and a differentiation strategy simultaneously? The SWOT analysis is especially important at this point if the industry analysis, particularly Porter's model, has revealed the threats to the company from the environment. Can the company deal with these threats? How should it change its business-level strategy to counter them? To evaluate the potential of a company's business-level strategy, you must first perform a thorough SWOT analysis that captures the essence of its problems. Once you complete this analysis, you will have a full picture of the way the company is operating and be in a position to evaluate the potential of its strategy. Thus, you will be able to make recommendations concerning the pattern of its future actions. However, first you need to consider strategy implementation, or the way the company tries to achieve its strategy. Analyze structure and control systems. The aim of this analysis is to identify what structure and control systems the company is using to implement its strategy and to evaluate whether that structure is the appropriate one for the company. Different corporate and business strategies require different structures. For example, does the company have the right level of vertical differentiation (for instance, does it have the appropriate number of levels in the hierarchy or decentralized control?) or horizontal differentiation (does it use a functional structure when it should be using a product structure?)? Similarly, is the company using the right integration or control systems to manage its operations? Are managers being appropriately rewarded? Are the right rewards in place for encouraging cooperation among divisions? These are all issues that should be considered. In some cases there will be little information on these issues, whereas in others there will be a lot. Obviously, in analyzing each case you should gear the analysis toward its most salient issues. For example, organizational conflict, power, and politics will be important issues for some companies. Try to analyze why problems in these areas are occurring. Do they occur because of bad strategy formulation or because of bad strategy implementation? Organizational change is an issue in many cases because the companies are attempting to alter their strategies or structures to solve strategic problems. Thus, as a part of the analysis, you might suggest an action plan that the company in question could use to achieve its goals. For example, you might list in a logical sequence the steps the company would need to follow to alter its business-level strategy from differentiation to focus. 3 ~ 5. Make recommendations. The last part of the case analysis process involves making recommendations based on your analysis. Obviously, the quality of your recommendations is a direct result of the thoroughness with which you prepared the case analysis. The work you put into the case analysis will be obvious to the professor from the nature of your recommendations. Recommendations are directed at solving whatever strategic problem the company is facing and at increasing its future profitability. Your recommendations should be in line with your analysis; that is, they should follow logically from the previous discussion. For example, your recommendation generally will center on the specific ways of changing functional , business, and corporate strategy and organizational structure and control to improve business performance. The set of recommendations will be specific to each case, and so it is difficult to discuss these recommendations here. Such recommendations might include an increase in spending on specific research and development projects, the divesting of certain businesses, a change from a strategy of unrelated to related diversification, an increase in the level of integration among divisions by using task forces and teams, or a move to a different kind of structure to implement a new business-level strategy. Again, make sure your recommendations are mutually consistent and are written in the form of an action plan. The plan might contain a timetable that sequences the actions for changing the company's strategy and a description of how changes at the corporate level will necessitate changes at the business level and subsequently at the functional level. After following all these stages, you will have performed a thorough analysis of the case and will be in a position to join in class discussion or present your ideas to the class, depending on the format used by your professor. Remember that you must tailor your analysis to suit the specific issue discussed in your case. In some cases, you might completely omit one of the steps in the analysis because it is not relevant to the situation you are considering. You must be sensitive to the needs of the case and not apply the framework we have discussed in this section blindly. The framework is meant only as a guide and not as an outline that you must use to do a successful analysis. 4 313-081-1 CASE DEVELOPMENT CENTRE Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 The Best of the Worst in the Financial Sector? Alan N. Hoffman Rotterdam School of Management/Erasmus University And Bentley University This teaching case was prepared with the support from Rotterdam School of Management Case Development Centre. We wish to thank Barbara Gottfried, Patrick DeCourcy. Keith Dugas, Kaitlin Mackie, Desiree Ouellette, Jason Tate and Will Hoffman for their research and contributions to this case. This case is based on published sources. It is to provide material for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The author has disguised identifying information to protect confidentiality. Copyright 2013 Rotterdam School of Management Case Development Centre, Erasmus University. No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner. case ecch centre Distributed by The Case Centre www.thecasecentre.org All rights reserved North America t +1 781 239 5884 f +1 781 239 5885 e info.usa@thecasecentre.org Rest of the world t +44 (0)1234 750903 f +44 (0)1234 751125 e info@thecasecentre.org Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. GE Capital and the Financial Crisis of 2008: 313-081-1 GE CAPITAL AND THE FINANCIAL CRISIS OF 2008: THE BEST OF THE WORST IN THE FINANCIAL SECTOR? Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 GE began in 1878 when Thomas Edison formed the Edison General Electric Company (EGEC). Though Edison was best known for inventing the first incandescent light bulb, he also pioneered systems design for generating and distributing electricity, eventually holding over 1000 patents. Within a few years, the rival Thomas Houston Company, which held key patents in the same area, challenged EGEC's position in the marketplace. In 1892, the two companies merged, forming General Electric. GE then parlayed the demand for electricity into the invention of home heating, stoves and other appliances, and refrigeration, transforming American households; and went on to become an innovator in a myriad of fields from medicine, aviation, and transportation to plastics and financial services. GE created the GE Credit Corporation [later GE Capital] in the wake of the Great Depression to facilitate the sale of household appliances and provide the option of extended payments for consumers. Innovation defined the organization and the 1 commitment to research and development remained key. GE was one of the original twelve companies that formed the Dow Jones Industrial Average and the only one of those companies still part of the DJIA in 2012. GE was also recognized for cultivating leaders such as Charles Wilson, Ralph Cordiner, Fred Borch, Reginald Jones, and John Welch.2 In the early 1970s under Fred Borch, GE was one of the first companies with a diversified infrastructure to formalize strategic planning at both a corporate and business unit levels with its creation of strategic business units.3 GE always saw itself as striving to create a world that worked better, \"making what few in the world can, but everyone needs.\"4 The company's strategic philosophy centered on innovation, superior technology, and demonstrating leadership in growth markets. GE sought to maintain a strong competitive advantage through innovation, smart capital allocation and solidifying customer relationships. The strategy also included transitioning from an industrial conglomerate to an infrastructure leader to maximize the core strengths of its existing businesses. Diversification and expansion of its business portfolio was a central focus, designed to minimize volatility and create stability through varying growth cycles. Another facet of GE's strategy was to invest for the long-term in high growth market opportunities that were closely related to its core businesses. For instance, in 2010 the company launched the GE Advantage Program that focused on process excellence and innovation to improve margins in industrial projects.5 One of GE's biggest operational strengths lay in its ability to cut costs and maximize return for shareholders. In the 1990's, GE CEO Jack Welch implemented the Six Sigma approach to business management. This approach helped decrease variability and errors to help cut down waste and build a consistent product, one of the many ways GE trained employees to succeed and build their expertise. GE was also able to cut costs because its reputation as a market leader with a large network of businesses and strong alliances with other major corporations enabled it to leverage long-standing relationships to employ the best human, equipment, and capital resources to ensure quality and consistency at a low cost. It acquired many businesses that provided useful resources, and sold off business units that did not contribute to its success. In 2011 GE's strategic accomplishments included 22% growth (defined as a 22% increase in operating EPS excluding impact of the preferred stock redemption) and a 20% rise in operating 1 "Explore GE Innovations by Title." General Electric Company. Web. 21 Apr. 2012. . 2 "GE Past Leaders." General Electric Company. Web. 21 Apr. 2012. . 3 Joseph, John and Ocasio, William. Rise and Fall-or Transformation? The evolution of Strategic Planning at the General Electric Company. 4 GE 2011 Annual Report. . 5 GE 2011 Annual Report. . 2 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. For more than a century, General Electric (GE) has been a global leader and iconic brand known for innovation and leadership in a wide range of endeavors. Its diversified portfolio of products is organized into four strategic business units: energy, technology infrastructure, GE Capital, and home and business solutions. 313-081-1 earnings; over the two year period through 2011, GE's dividends increased a total of 70%. GE was positioned for continued success in 2012 with a record industrial backlog of $200 billion, $85 billion cash and equivalents offering significant financial flexibility. Internationally, GE saw 18% growth in industrial revenue, and U.S. exports were up $1 billion from 2010. At the same time, GE's management demonstrated their continued commitment to innovation by investing 6% of the firm's industrial revenue in R&D.6 Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 By 2012, under the leadership of Jeffrey Immelt (see Exhibits 1 & 2), General Electric was a powerful conglomerate employing approximately 300,000 people globally and operating in more than 100 countries,7 ranked the sixth largest American corporation and the 14th most profitable by Forbes. Immelt had replaced the highly regarded Jack Welsh as CEO and Chairman of the Board in 2001 and had been named as one of the \"World's Best CEOs\" three times by Barron's. GE's board of directors was composed of 17 members, of whom two-thirds were considered to be \"independent.\" The board was in continuous dialogue with GE's top management. Together they emphasized strategy and risk management while monitoring strategic initiatives personally through site visits. Fast Company ranked GE the 19th most innovative company; Fortune listed GE as the 15th most admired company; and Interbred cited GE as the number 5th best global brand.8 General Electric's objectives were, and continued to, be earnings growth, increasing margins, and returning cash to investors, as well as organic growth, increased financial flexibility, and larger U.S. exports. While pursuing these ambitious objectives, GE, at the same time, committed itself to social and environmental responsibility GE's Diversified Industrial Products Competitors Diversified international industrial conglomerates, such as GE had, by definition, many strong, direct competitors spanning many industries, as the total market capitalization for this industry is over $137 billion.9 Aside from GE the three industrial conglomerates with the best relative performance (based on fundamental and technical strength) were Siemens, Phillips Electronics, and 3M.10 Siemens AG, the largest European electronic engineering and manufacturing conglomerate, based in Munich, Germany, and operating world-wide,11 was split into four sectors: Energy, Healthcare, Industry, and Infrastructure and Cities, yielding 19 divisions with over 360,000 employees and 73.5 billion ($96.2billion USD) in sales in 2011. Its focus was on sustainable value creation, innovation-driven growth markets, customer relations, and capitalizing on core competencies. Royal Phillips Electronics, based in the Netherlands, was split into three overlapping sectors: Healthcare, Lighting, and Consumer Lifestyle with many subdivisions in 60 countries,12 over 125,000 employees, and 20.1 billion ($26.3 billion USD) in sales in 2011. Phillips' focus was on improving people's lives through meaningful innovation, delivering a quality product and building value for customers and shareholders. 6 GE 2011 Annual Report. . GE 2011 Annual Report. . 8 "General Electric." Wikipedia. Wikimedia Foundation, 05 Apr. 2012. Web. 21 Apr. 2012. 9 "Industrial Conglomerates Industry Snapshot - NYTimes.com." NYTimes.com. New York Times, 02 May 2012. Web. 02 May 2012. . 10 Stone, Mallory. "Top 5 Companies in the Industrial Conglomerates Industry with the Best Relative Performance (SI, GE, PHG, MMM, TYC)." Comtex News Network. Comcast, 16 Mar. 2012. Web. 02 May 2012. . 11 Siemens USA. Web. 05 May 2012. . 12 Phillips Global. Web. 05 May 2012. . 7 3 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. General Electric was divided into six Operating Segments (5 Industrial): Aviation, Energy Infrastructure, Healthcare, Home & Business Solutions, Transportation, and GE Capital. 313-081-1 3M, based in Minnesota, operated in the markets of consumer goods, office supplies, display and graphics, healthcare, industrial goods, transportation goods, and safety, security, and protection services. With over 80,000 employees and a presence in more than 65 countries, 3M amassed more than $27 billion of sales revenue in 2011. As a diversified technology company, 3M focused on ingenious, innovative products and building global market share.13 Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 Renamed GE Capital in 1987, the former appliance financing unit grew to incorporate interests beyond those of its GE corporate parent, such as investment banking, retail stores, television channels, and auto/truck leasing. It also acquired a significant market share in private-label credit cards, including those of J.C. Penney, Montgomery Ward, and Wal-Mart. Particularly early on it its history, GE Capital benefited from its association with its GE parent's strong asset base and creditworthiness, garnering both lower borrowing rates easy access to cheap capital to generate investment beyond its profits. Through the early 2000's, GE Capital continued to expand its product lines, delving into property and casualty insurance, life insurance, mortgages, and real 15 estate. As the unit grew, GE Capital became an increasingly significant contributor to its GE parent's success. While in the past most people had thought of GE as an industrial company, GE Capital, a finance company, grew to represent nearly half of its GE parent's annual profits.16 As of 2012, there were five major components of GE Capital17: 1. Commercial Lending and Leasing: This division provided loans to outside businesses for a range of uses including company acquisition, internal restructuring, and even leasing office space. Additionally, the Commercial Lending unit maintained fleets of cars and heavy industrial equipment available for leasing. 2. Consumer Financing: Within the U.S., GE Capital's retail financing arm represented their private-label credit card interests, and retail purchase financing that included automobiles, furniture, and other costly items consumers often don't pay for with cash. 3. Energy Financial Services: GE Energy owned stakes in energy interests worldwide, providing financing for companies to invest and expand, often in conjunction with GE Parent's efforts to educate and supply companies with necessary equipment. 4. Aviation Services: GE Capital Aviation was involved in passenger aircraft purchasing and leasing, aircraft part financing including various engines GE Parent produced, and airport expansion financing. 5. Real Estate: GE Capital Real Estate specialized in various real estate transactions, including property acquisition, debt refinancing, and joint venture investments. Many of its properties were office buildings, but it also owned stakes in multi-family developments and hotels. GE Capital's Strategic Direction GE Capital's main expertise was in mid-market banking, providing financing for a range of industries from aviation and energy to healthcare, and for the purchase, lease, distribution, and 18 maintenance of large fleets and equipment. It also provided capital for corporate acquisitions 13 3M Global. Web. 05 May 2012. . Ramirez, Diane. \"General Electric Capital Corporation Profile.\" Hoovers D&B Company. 15 Ramirez, Diane. \"General Electric Capital Corporation Profile.\" Hoovers D&B Company. 16 Colvin, Geoffrey. "GE under Siege (pg. 2)." CNNMoney. Cable News Network, 10 Oct. 2008. Web. 23 Apr. 2012. 17 GE Capital: Our Businesses. 2012. General Electric. 18 "Start Building." GE Capital Business Model & Fact Sheet. Web. 21 Apr. 2012. . 14 4 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. GE Capital, the largest of GE's four strategic business units in 2012, was created in 1932 as GE Contracts, an internal business unit to help finance consumer purchases of GE appliances.14 Particularly in the midst of the Great Depression, consumers were hesitant to invest in what at the time were considered superfluous products. To encourage consumers, GE Contracts offered comparatively low monthly payments to make its parent company's products more affordable. 313-081-1 and restructuring. It was GE Capital's vision to be more than just a bankerto align itself with GE's corporate objective of supporting growth not simply by providing capital, but by helping customers invent more and build more19 through leveraging its global experience and industry expertise.20 By 2012, GE Capital was smaller, leaner, and more focused on specialty financing especially 21 mid-market lending and leasing. However, like its parent company, GE Capital hoped to see continued sustainable earnings growth with growing margins and lower portfolio risk, and to return money to investors and resume paying dividends to its parent company.22 GE Capital's Competitors Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 GE Capital's main competition came primarily from specialty corporate financial lenders, such as CIT Group, and larger companies that offered diverse and comprehensive financial services, such as Bank of America and Citigroup, according to Hoovers.23 In 2012, Bank of America24 was one of the largest and most identifiable banks in the United States with over $2.1 trillion in assets. Its goal was to be accessible to every sort of customer at any stage of their financial lives by offering both a variety of products and easy accessibility with over 5,700 locations and 17,000 ATMs. Beyond the arena of specialty lending, Bank of America served consumers and companies ranging from small sole proprietorships to multinational global corporations with banking, investments, and asset management. While the company was successful in building market share, it faced a multitude of difficulties from major lawsuits deriving from its acquisitions of Countrywide and Merrill Lynch, and from its \"robo-signing\" foreclosure practices. Bank of America attempted to return to profitability after declaring a $2.2 billion loss in 2010 and only a $1.5 billion profit in 2011, focusing on strengthening its capital reserves and integrating lean initiatives to cut costs and improve efficiency. However, legislation that reduced its two major sources of revenue, interest earnings and fee revenue, in conjunction with depressed consumer and investor confidence levels, heralded a difficult road ahead for the company. Like Bank of America, Citigroup was a behemoth in the financial services industry made up of a number of units including a brokerage, investment bank, and wealth management and consumer lending divisions with over $1.9 trillion in total assets; and maintaining over 200 million customer accounts in over 160 countries. The 2008 financial crisis and its aftermath hit Citigroup particularly hard, resulting in $90 billion in losses, which led to selling off or divesting from underperforming industries. Citigroup then sold several commercial lending lines to GE Capital, fully exited the student loan market, and planned to sell its CitiMortgage and CitiFinancial 19 "GE Capital: The Capital Difference." Fact Sheet. General Electric Company. Web. 21 Apr. 2012. . "GE Capital: The Capital Difference." Fact Sheet. General Electric Company. Web. 21 Apr. 2012. . 21 GE 2011 Annual Report. . 22 GE 2011 Annual Report. . 23 Ramirez, Diane. \"General Electric Capital Corporation Profile.\" Hoovers D&B Company. 24 Ramirez, Diane. \"Bank of America Corporation Profile.\" Hoovers D&B Company. 20 5 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. However, the financial services industry was, by definition, volatile, and GE Capital was particularly hard hit by the economic recession of 2008. With the credit markets illiquid and financial markets falling, GE Capital found that it was overexposed to commercial real estate and foreign residential mortgages. At this point, GE's parent corporation stepped in, began reorganizing GE Capital, and significantly downsized the unit. GE Capital sold most of its insurance lines, completely left the US mortgage market, and substantially tightened its consumer underwriting guidelines. However, the company still was on the lookout for underpriced assets, and purchased several lending lines from even more troubled Citigroup and a large commercial real estate portfolio from Merrill Lynch financing. 313-081-1 divisions. Going forward, Citigroup refocused on traditional banking and continued unloading toxic assets and non-core business units. Perhaps most similar to GE Capital, CIT Group Inc25 specialized in commercial lending and financing for small and mid-sized businesses, managing $45 billion in total assets. In addition to its general corporate finance arm, CIT group offered transportation equipment financing, vendor finance, and a smaller branch of consumer lending. Hit severely by the financial crisis, CIT Group briefly declared chapter 11 in 2009 stemming from extreme losses in its subprime mortgage and student loan portfolios. It subsequently improved its balance sheet and reduced debt obligations, refocusing on its commercial lending division by building up its loan and lease accounts and hoping to increase deposit accounts by acquiring already established banks. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 With operations in over 100 countries, and 53% of revenues coming from outside the United States, GE's growth depended on its ability to successfully navigate the political risks associated 26 with international business dealings that could affect its growth and profitability. Change and instability in the financial markets had a significant effect on GE, especially GE Capital. Historically, GE had relied on commercial paper and long-term debt as major sources of its funding, but the increasing difficulty and cost of obtaining those sources of funding potentially threatened GE's ability to grow and maintain its level of profitability.27 After the financial crisis of 2008, the deterioration of the real estate market, for example, adversely affected GE Capital. GE Capital subsequently tried to secure other sources of funding, including bank deposits, securitization and other asset-based funding to mitigate its risks. These economic setbacks affected not only GE and GE Capital, but trickled down to the corporations, large and small, they did business with, and GE's governmental customers around the world. Nevertheless, GE's credit rating with the major analysts helped stem the tide of negativity and control the costs of funds, margins, and access to capital markets. As of 2012 GE boasted a AA+ Rating (2nd out of 21 ratings) from Standard and Poor's and an Aa2 rating (3rd out of 21 ratings) from Moody's, solidifying its rating with the major analysts. Any reduction in these ratings would 28 negatively impact GE's profitability. In the three years after the financial crisis of 2009 to 2011 both GE and GE Capital's sales revenue declined sharply (see also Exhibits 3-8). GE Capital 2011 (in millions) Revenues Net Income 2010 2009 2008 2007 45,730 6,549 46,422 3,158 48,906 1,325 65,900 7,841 65,625 12,179 GE (Parent Company) 2011 (in millions) Revenues 147,300 Net Income 13,120 2010 2009 149,593 11,344 154,438 10,725 Consistent quarterly revenue losses slightly rebounded beginning in Q1 2010 (from double digit to single digit losses in both GE and GE Capital), yet sales revenue at GE Capital declined again from $12.814 billion to $10.745 billion from Q4 2010-Q4 2011, a return to double digit quarterly revenue losses. GE Capital's Q1 2012 revenue loss shrank again to single digits at 6.6%, while revenue grew at GE as a whole in Q1 2012 by 3.4% from the industrial division's strong 25 Ramirez, Diane. \"CIT Group IncProfile.\" Hoovers D&B Company. GE 2011 Annual Report. . GE 2011 Annual Report. . 28 GE 2011 Annual Report. . 26 27 6 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Financials 313-081-1 Despite the overall top line losses, GE was organized as a global corporation that generated revenue in a number of regions worldwide. Although US revenues were down 7.9% in 2011 (from $75.8 billion in FY2010 to $69.8 billion in FY2011) and Western European revenues decreased 12%, global revenues (excluding USA) increased 4% overall from $74.5 billion in 2010 to $77.5 billion in 2011.32 The strong international performance was tied to revenue growth in emerging markets such as Latin America (29%), China (28%), and Australia (46%). Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 GE recorded massive net income losses from FY2007 - FY2009, peaking between FY2008 and FY2009 (with net income losses of 38% for GE and 78.3% for GE Capital), driven by the global financial crisis and recession. The performance of GE as a whole was largely tied to that of GE Capital, its largest and formerly most profitable business unit. GE Capital had become deeply ensnared in both the collapse of the credit markets through the excessive use of leverage leading up to FY2009, and the subprime mortgage crisis because it had bought a subprime mortgage company and heavily invested in commercial real estate.33 GE Capital had made some ill-advised marketing decisions prior to the financial collapse in 2008. Rather retaining its focus on the middle market and specialty finance for GE industrial product customers, GE Capital began to market itself as a credit card financing entity as well as a mortgage financier.34 Financing subprime mortgages and commercial real estate soon followed, and eventually GE Capital was engaging in the financing of very risky assets, including derivatives and credit default swaps. This market strategy led to the highly leveraged structure that almost caused the entire corporation to collapse in 2008 during the financial crisis. GE's long term debt began growing in FY2007and hit a high of $377 billion in 2009, but was reduced slightly in FY2010-FY2011, resulting in flat growth for the five years from 2007-2012. Most of the debt (equal to 70% of total assets?)) on GE's balance sheet was from GE Capital. During the financial crisis of 2008-2009, GE Capital's highly leveraged structurecombined with its risky ventures in interest rate swaps, subprime mortgages, commercial real estate, and massive commercial paperalmost led to the financial collapse of the entire GE Corporation.35 A record influx of equity capital and sale of preferred stock stabilized a 10% daily haemorrhage in the stock price that began on Oct 1, 2008. After that, GE capital aggressively cut its long-term debt from $304 billion in FY2007 to $234 billion in FY2011 through strategic de-leveraging and restructuring of the scope of its financing activities. Both GE and GE capital also took steps to significantly increase their cash balances to better manage risk. From FY2007 to FY2011, GE increased its cash balance from $18 billion to $87 billion, and GE Capital's increased from $11 billion to $43 billion. However, as of 2012, neither 29 General Electric. GE Q1'12 Earnings. Www.ge.com. General Electric Company, 20 Apr. 2012. Web. 25 Apr. 2012. . 30 Protess, Ben. "Revenue Drops at GE Capital." The New York Times. The New York Times Company, 20 Apr. 2012. Web. 23 Apr. 2012. . 31 GE 2011 Annual Report. Page 5 . 32 GE 2011 Annual Report. Page 47 . 33 Protess, Ben. "Revenue Drops at GE Capital." The New York Times. The New York Times Company, 20 Apr. 2012. Web. 23 Apr. 2012. . 34 Colvin, Geoffrey. "GE under Siege (pg. 2)." CNNMoney. Cable News Network, 10 Oct. 2008. Web. 23 Apr. 2012. . 35 Colvin, Geoffrey. "GE under Siege (pg. 2)." CNNMoney. Cable News Network, 10 Oct. 2008. Web. 23 Apr. 2012. . 7 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. performance (14% quarterly revenue growth).29 Annually from 2010 to 2011, GE and GE Capital respectively reported 1.9% and 1.5% sales revenue losses. Much of the poor performance was attributable to macroeconomic risk factors causing unstable demand for the products of the industrial business units as well as restrictions in the global credit markets, which severely hampered GE Capital's ability to perform as it did prior to the recession ($65.435 billion revenue in FY 2007, $45.730 billion in FY 2011). From FY2009 on, GE Capital began strategically transforming its portfolio to be less focused on risky lending and more focused on middle market lending and specialty finance to industrial division customers.30 This strategy required reducing leverage, improving liquidity, and shedding assets - all of which cut into previous top line sales revenue performance.31 313-081-1 GE nor GE Capital was on completely solid footing, with a LT Debt to Equity ratio of 2.67 and 2.93 respectively. GE Capital had been forced to scale back in the wake of the recession, and pressures to meet stricter regulatory standards. These strictures streamlined GE Capital's operations, helping it to better understand its best practices for lending and its other financial endeavors. GE Capital also moved to expand its operational base in the aftermath of the recession by creating new partnerships with companies like Ducati and Sophos. These new partnerships were important to GE Capital's operations to offset its \"shrinking its asset base and tightening underwriting standards.36\" Nevertheless, the decrease in year-over-year earnings was evidence that GE Capital had to operate with fewer resources and adjust its internal infrastructure to utilize more limited resource availability. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 New Directions for Growth: Green Energy And Healthcare In the new millennium, General Electric was uniquely positioned to take advantage of financial incentives, subsidies, and lucrative partnerships available for innovators in the green energy sector.37 It was spurred both by an interest in the environment, and the desire for financial security from the volatility in fossil fuel prices and concerns over climate change. Having spent more money than any other single corporation on governmental lobbying, General Electric used its political capital for growth opportunities.38 For example, GE, especially its electrical energy divisions, was able to leverage its political strength to benefit from tax incentives associated with the green energy movement. In addition, the GE Energy Group took a leadership role in the manufacture and distribution of wind turbinesa critical component of the renewable energy sector, particularly in Oregon, where the largest wind turbine farm in the USA was powered entirely by GE built wind turbines.39 GE also branched out into the management and financing of solar energy projects, including a solar farm in Australia developed by a consortium of companies, including GE.40 GE was one of the leading manufacturers of LED lighting and had signed a distribution deal with Marriot hotels which saved it 66% in power use for lighting without compromising on the look or quality of the light.41. GE perceived the opportunity to become the best-in-class manufacturer and distributor of certain elements of clean energy infrastructure, as well as other innovative forms of clean energy, and was poised to continue to innovate as the sector grows. Over the past decade GE Healthcare Group established itself as a leading innovator in emerging healthcare technology. Diagnostic medicine became a key area of healthcare sector investmentthe market is projected to grow 11% annually from $232 billion,42 and GE developed some creative tools for diagnostic imaging, including a handheld ultrasound device, with which primary care doctors could be more accurate in their initial diagnoses, prior to ordering expensive follow up diagnostics.43 GE also launched a $100 million open innovation competition related to cancer diagnostics and44 invested in life science offerings, with a $4 billion portfolio that projects 36 Andrejczak, Matt. "Industrial Operations Key to GE Earnings Report." Market Watch. Wall Street Journal, 19 Apr. 2012. Web. 29 Apr. 2012. . 37 "DSIRE: DSIRE Home." DSIRE USA. Web. 28 Apr. 2012. . Mosk, Matthew. "General Electric Wages Never-Say-Die Campaign for Jet Engine Contract." ABD News 7 March 2012. GE 2011 Annual Report. Page 18 . 40 "GE Set To Soar On Clean Energy Projects - Seeking Alpha." Stock Market News & Financial Analysis. 17 Apr. 2012. Web. 28 Apr. 2012. . 41 "GE Set To Soar On Clean Energy Projects - Seeking Alpha." Stock Market News & Financial Analysis. 17 Apr. 2012. Web. 28 Apr. 2012. . 42 "$232 Billion Personalized Medicine Market to Grow 11 Percent Annually, Says PricewaterhouseCoopers." -- NEW YORK, Dec. 8 /PRNewswire/ --. Web. 28 Apr. 2012. . 43 "DOTmed.com - GE Launches Handheld Ultrasound Tool." Dotmed.com. 2010. Web. 28 Apr. 2012. . 44 GE 2011 Annual Report. Page 27 . 38 39 8 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. GE Capital returns some of its profits to the GE Parent Company through the issuance of a dividend. GE Capital resumed paying a dividend to GE in May, 2012.46 313-081-1 to double over the next few years.45 As the Baby Boomer generation entered retirement age, healthcare demand began to rise, expanding the need for new healthcare technologies. GE Healthcare was poised to capitalize on the new demand. GE's key strengths: its operational efficiencies, sheer size, history, and reputation all worked to create competitive advantages for GE. One of GE's biggest operational strengths lay in its ability to cut costs and maximize return for shareholders. In the 1990's, GE CEO Jack Welch implemented the Six Sigma approach to business management. This approach helped decrease variability and errors to help cut down waste and build a consistent product, one of the many ways GE trained employees to be succeed and build their expertise. GE was also able to cut costs because its reputation as a market leader, large network of businesses, and strong alliances with other major corporations, enabled it to leverage long-standing relationships to employ the best human, equipment, and capital resources to ensure quality and consistency at a low cost. It acquired many businesses that provided useful resources, and sold off business units that did not contribute to its success. In addition, GE's history of innovation, from Edison inventing the incandescent light bulb to its pioneering of green energy medical diagnostic technology contributed to GE's long-term success. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 In addition to the operational excellence that came from GE's experience and unparalleled commitment to growth, the sheer size of GE also created a tremendous competitive advantage, from distribution channels in over a hundred companies to dozens lines of business. Few other companies were big enough to compete with the variety and breadth of resources GE brought to the table. Globally recognized and ubiquitous in American homes, GE's history and reputation was also a key competitive advantage. Its reputation, and political influence garnered favorable treatment from the US and other governments. Smaller firms tried to compete with GE in individual industries, but GE's reputation and brand awareness made it difficult to succeed. Finally, GE's strong company culture empowered and motivated employees, creating a workforce that stayed with the company long-term and moved internally, building a strong, knowledgeable employee base, and its focus on sustainability and the greater community helped inspire employees and improve GE's image overall. Challenges Facing GE By the end of 2012, GE faced many challenges. First, the parent company's comfort in mature industries such as industrial appliances and jet engines rendered it reluctant to explore different markets, or identify and move into innovative industries at the beginning of their lifecycles when potential growth and earnings are greatest. While this defensive strategy was more pronounced under former CEO Jack Welch, under whose direction GE maintained a near-zero marketing budget and focus on efficiency, many within the company perceived that there was still room for growth in innovative markets, particularly the green energy market, where GE could utilize its strength of scalability to establish a competitive advantage. Secondly, for many years, GE relied on its staunch traditional methods to train workers, especially general managers. Throughout the 1990's,CEO Jack Welch focused on the bottom line through lean practices and overall cost cutting, creating an extremely efficient, process conscious organization that prioritized meeting budgets, but lagged in innovation. While these strategies did increase net earnings, it became clear that they would not yield sustainable growth, as cutting additional costs began to outweigh the savings. GE began to see that the long-term solution was to train employees and management to focus on creating new technology and products that both earn profitable returns and open new growth opportunities. 45 GE 2011 Annual Report. Page 5 . 9 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Core Competencies 313-081-1 GE also needed to acknowledge potential weaknesses stemming from being such a large and diverse organization. GE occasionally underperformed in Asian and European markets. Greater understanding of the operational differences and difference in business practices between the US and these countries could explain in part why GE's growth there did not meet projections. Although GE had a strong global brand associated with product excellence and market leadership in several industrial categories, it came under attack for being synonymous with corporate greed. GE was accused of not paying its fair share of taxes, and protestors forcefully interrupted Jeff Immelt's speeches alleging that47 using legitimate accounting techniques to pay lower effective tax rates, GE only paid an effective tax rate of 2.3% for more than ten years, and that GE realized $14 billion in profits yet paid no taxes in 2011.48 Also, GE was the recipient of a $140 billion bailout in 2008, to cover massive losses at GE Capital.49 These allegations did not help the brand name, tarnishing the reputation of an otherwise well- managed brand. Furthermore, GE was the fourth largest producer of air and water pollution globally. Although top management's focus on sustainability was considered a strength, GE needed to develop ways to become more \"green\" without hurting its bottom line. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 What to do with GE Capital? Despite General Electric's market-leading portfolio and strong brand name recognition, in the recent financial crisis, the dangers of a company's reliance on financial services became apparent. What had begun as a financing arm to catalyze GE appliance sales had grown into a dominating financial services company that surpassed the earnings of the rest of the company to account for over 50% of GE's total net income (in what year?). This concentration of resources in GE Capital paid excellent dividends during strong economic times, yet the financial sector's volatility rendered GE Capital vulnerable to large, rapid losses. Unless GE hedged against financial slowdowns by reducing its exposure to GE Capital, it may occasionally suffer losses that could put the company as a whole at risk. Further, like many financial firms, GE Capital was tempted by the large potential returns of what were later seen as risky investments, such as mortgage-backed securities and real estate. Unless GE Capital decreased its portfolio of risky assets, it may be prone to future losses that would have a negative impact on its GE parent. In the years leading up to the financial crisis, GE, according to some industry analysts, had become complacent, and corporate growth and earnings consequently stagnated. GE focused too heavily on cutting costs and relied too heavily on the fortunes of GE Capital, which suffered from massive losses during the 2008-2009 financial crisis. When the recession forced GE to reduce the scope of GE Capital's activities, GE was not able to invest and innovate elsewhere to bolster its financials and satisfy stockholders. GE also did not have enough significant new ideas to mitigate GE Capital's financial setback, such that GE Capital's losses had a major negative impact on the growth and earnings of corporation as a whole. 46 McCormack, John. "GE Filed 57,000-Page Tax Return, Paid No Taxes on $14 Billion in Profits." Weekly Standard 17 November 2011. 47 Shepardson, David. "GE CEO Defends Tax Rate after Protestors Disrupt Speech." The Detroit News. 24 Apr. 2012. Web. 24 Apr. 2012. . 48 "GE Filed 57,000-Page Tax Return, Paid No Taxes on $14 Billion in Profits." The Weekly Standard. 17 Nov. 2011. Web. 24 Apr. 2012. . 49 Hill, Vernon. "General Electric Gets a $140B Bailout - What's the Point of AAA? - Seeking Alpha." Stock Market News & Financial Analysis. 14 Nov. 2008. Web. 24 Apr. 2012. . 10 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Another challenge for GE was potential changes to the tax code. In 2012 GE filed a 57,000 page tax return, the single largest tax return in the United States.46 While GE benefited from a number of tax incentives, tax code reform constantly loomed on the horizon, and GE would be one of the companies most affected by changes to the tax code. 313-081-1 Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. They key question facing GE's top management and board of directors at the end of 2012 was to what degree should they reduce GE Capital as a percentage of the entire company; or, more to the point, should GE Capital be spun off altogether to allow the GE parent corporation to focus on the industrial products segment it has historically excelled in and where there is less competition and government regulation? 11 313-081-1 Exhibit 1: GE Management Keith S. Sherin Vice Chairman and Chief Financial Officer, GE Keith S. Sherin has been senior vice president and GE's chief financial officer since 1998. He was named vice chairman in 2007. Mr. Sherin first joined GE in 1981 through the GE Financial Management Program in Medium Steam Turbine. After three years he joined the Corporate Audit Staff where he progressed to executive audit manager and later manager of Programs and Planning. Mr. Sherin was promoted to manager of Finance for Commercial Engine Operations at GE Aircraft Engines in early 1992, and the following year he was named director of finance for GE Plastics Europe in Bergen op Zoom, the Netherlands. In the fall of 1995, Mr. Sherin joined GE Medical Systems as manager of Global Finance and Financial Services, and less than a year later he was promoted to vice president of Finance and Financial Services Operation. Mr. Sherin earned his B.A. from the University of Notre Dame and an M.B.A. from Columbia University. Michael A. Neal Chairman and CEO, GE Capital Vice Chairman, General Electric Company Michael A. Neal is a Vice Chairman of General Electric Company. He is also the Chairman & Chief Executive Officer of GE Capital Services. GE Capital Services, which provides financial products and services to businesses and consumers globally, finished 2011 with a net income of $6.5 billion and assets in excess of $584.5 billion. Neal joined GE in 1979, working on the Company's industrial side. In 1987, he was named Vice President and General Manager of Vendor Financial Services. Three years later, Neal became General Manager of GE Commercial Equipment Financing (CEF). Under his leadership, CEF became the world's largest provider of financing for equipment of all types. Neal served as GE Capital Executive Vice President from 1994 to 1999 - a period of enormous growth for GE's financial services businesses. In 2000, he was named GE Capital's President and Chief Operating Officer. In 2002, Neal became President and CEO of GE Commercial Finance and President of GE Capital Services. Three years later, he was named a Vice Chairman of General Electric Company and Chairman of GE Capital Corporation. Neal is a graduate of the Georgia Institute of Technology. William H. Cary Senior Vice President, General Electric Company Chief Operating Officer, GE Capital William H. (Bill) Cary is the Chief Operating Officer of GE Capital, the financial services unit of the General Electric Company. GE Capital provides financial products and services to businesses and consumers globally. GE Capital finished 2010 with a net income of $3.3 billion and assets in excess of $575 billion. Cary is also a Senior Vice President of GE. Cary joined GE in 1986 as a member of the Financial Management Program and served in a variety of financial positions. In 1988 he joined GE Capital-Corporate Finance Group, and following increasingly responsible assignments in Corporate Finance, moved to Singapore in 1994 and became Senior Vice President - Capital Markets and Finance for GE Capital Corporation - Asia. In 1995, he was named Chief Financial Officer for GE Global Consumer Finance. Cary then became Vice 12 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 Jeffrey R. Immelt Chief Executive Office and Chairman of the Board CEO Jeffrey R. Immelt was the ninth chairman of GE, a post he has held since September 7, 2001. Immelt has held several global leadership positions since coming to GE in 1982, including roles in GE's Plastics, Appliance, and Healthcare businesses. In 1989 he became an officer of GE and joined the GE Capital Board in 1997. A couple years later, in 2000, Mr. Immelt was appointed president and chief executive officer. Immelt has been named one of the "World's Best CEOs" three times by Barron's, and since he began serving as chief executive officer, GE has been named "America's Most Admired Company" in a poll conducted by Fortune magazine and one of "The World's Most Respected Companies" in polls by Barron's and the Financial Times. Immelt served as chair of President Obama's Council on Jobs and Competitiveness. He was also a member of The Business Council. Immelt earned a B.A. degree in applied mathematics from Dartmouth College in 1978 and an M.B.A. from Harvard University in 1982. He and his wife have one daughter. 313-081-1 Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. President and Manager - Corporate Financial Planning and Analysis at GE Capital's headquarters in Stamford, CT. Cary was appointed a GE Officer during this assignment in December 1999. Following this role from January 2001 until October 2002, he served as President and CEO of GE Capital Vendor Financial Services. Cary then became the Corporate Vice President for Financial Planning and Analysis for GE Company until February 2004 when he was named the Vice President of Corporate Investor Communications. In March 2006 Cary was posted to London and appointed President and CEO of GE Money EMEA region. He was elected a Senior Vice President of GE in November 2006. Cary was promoted to President of GE Money (Global) in February 2008, and Chief Operating Officer for all of GE Capital in November 2008. Cary is a member of GE's Corporate Executive Council. He is a National Honors graduate of the GE Financial Management Program and holds a BS in Finance from San Jose State University. Cary's interests include playing golf and traveling with his family. 13 313-081-1 Exhibit 2: GE Board of Directors W. Geoffrey Beattie Independent Director Dr. James I. Cash, Jr. Independent Director Marijn E. Dekkers Independent Director Ann M. Fudge Independent Director Dr. Susan Hockfield Independent Director Jeffrey R. Immelt Chairman of the Board and Chief Executive Officer, GE Alan G. (A.G.) Lafley Independent Director Robert W. Lane Independent Director Ralph S. Larsen Independent Director Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F264968 Rochelle B. Lazarus Independent Director James J. Mulva Independent Director Sam Nunn Independent Director Roger S. Penske Material Relationship with GE Robert J. Swieringa Independent Director James S. Tisch Independent Director Douglas A. Warner III Independent Director 14 Purchased for use by Brandon Carroll on 27-Jan-2016. Order ref F264968. You are permitted to view the material on-line and print a copy for your personal use until 27-Jan-2017. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Andrea Jun