Ge Case

Caterpillar Case

1) What historically have been the sources of GE’s competitive advantage over Westinghouse?

General Electric and Westinghouse are the two leaders of the US turbine generator industry. A large turbine generator is a sophisticated equipment which converts steam into electrical power. 80% of the US power supply was produced via these turbine generators. Most part of the operating cost of a plant was determined by the cost of a turbine generator because the costs of these were quite high. Large turbine generators need to be customized according to the needs of customers but these specific customizations done on capacity, design, accessorizes and such characteristics are reflected directly on the cost of the equipment, up to 10%. Therefore, efficiency concept is a significant factor.

Since, the increase in the size of the turbine generator decreases the cost per kilowatt and the operating costs, producers of the mentioned era preferred production of large sizes of turbine generators. In this context, we have to underline the fact that technologically leading producers were a step further. In late 1950s, turbine sizes increased due to this fact. As the size doubled, price per kilowatt decreased by 7%.

When we have a look at the customer types, we see that mainly there were big players. In early 1960s, the top 25 utilities-24 investor owned ones and the Tennessee Valley Authority demanded 55% of turbine generating capacity. On the other hand, utilities owned by the government both federal state and local level had a remarkable effect on the market. Thus, it is not surprising that large quantity orders is the basic method in purchasing and nationalized economy effects the expectation about growth trends. Sales consultants determined the turbine prices and they used price books. Manufacturing was directly affecting the 65% to 75% of the Sales Revenues. The period that started by the end of the WW II and ended in 1962, the industry capacity grew...