Case Discussion and Internet Exploration Questions

Closing Case General Electric in Hungary

Website — http://www.ge.com

Case Discussion Questions

What does GE's experience in Hungary tell you about the relationship among economic systems, political systems, and national culture?
Given the problems GE experienced with Tungsram, in retrospect might it have chosen a better strategy to attack the Western European lighting products market?
How important to the economic development of Hungary are investments such as GE's? What are the benefits that GE brings to Hungary?
If Tungsram had continued under local ownership, what do you think would have been its fate?

Internet Exploration Question

This case focuses on GE's decision to expand into Eastern Europe through the purchase of Tungstram, a Hungarian lighting company. GE's interest in Tungstram was prompted by the fall in communism in Eastern Europe in 1989. Like many other Western companies, GE believed that that the shift from communism to democracy in Eastern Europe would lead to enormous long-run business opportunities. At the time that GE purchased Tungstram, many observers felt that GE would show other Western companies how to turn a company once constrained by communism into a vibrant, profitable, well-run organization. To do this, GE transferred some of its best management talent to Hungary and waited for Tungstram to take off. Regrettable, it was a long wait. As GE settled in and became more familiar with Tungstram, what it found was a company with an embedded culture of waste, inefficiency, and indifference about customers and quality. These are attributes that are hard to change. For example, GE wanted strong sales and marketing functions that would pamper customers. Tungstram's employees, used to life in a centrally planned economy, believed that these things would take care of themselves. In addition, GE and Tungstram found themselves at odds over basic issues like wages. The Hungarians expected GE to deliver Western-style wages, while GE wanted to take advantages of the country's low wage rate.

Although it was a long road, GE now believes it has turned the corner with Tungstram. Despite a 50 percent cut in the work force, production volume is now double the 1989 level. Looking back, however, GE admits that they underestimated how long it would take and how much it would cost to turn Tungsram around.

This case illustrates the challenges that a company even as large and experienced as GE faces when entering an unfamiliar foreign market. GE Lighting, the division of GE that owns Tungstram and similar lighting companies, periodically updates the status of its international operations at {http://www.ge.com/ibeu12a18.htm}. Read the information that is contained at this site and then answer the following questions. First, despite its slow start with Tungstram, has GE remained aggressive in building market share in the European lighting industry? Explain your answer. Second, how would you describe GE's strategy in Europe? Is GE purchasing European companies outright, or is GE entering into alliances with European companies? Finally, if you believe that GE is going the alliance route, what advantage does this strategy give GE in terms of learning the "culture" of the countries in which they are entering?

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