Comment on What Is Ge's Source of Competitive Advantage in the Large Turbine Industry

1.Comment on what is GE's source of competitive advantage in the large turbine industry.

G.E. had a large competitive advantage in the large turbine industry for three primary reasons: better r&d and hence improved technology, a clear focus on larger, more technologically sophisticated units, and its status as a price leader in the market. GE had almost twice the R&D budget of both of its major competitors, while simultaneously spending less on R&D as a percentage of sales. This allowed it to have the best technology in the most important market segment in terms of growth: large, complex units that had the lowest per-megawatt cost. In addition, these turbines were built far in advance, and were not subject to price volatility of the more competitive small turbine landscape. Finally, its status as the price leader allowed it to set more consistent prices in both upturns and downturns in its market and not be subject to intense negotiation.

2.Please note and comment on each firm's relative experience in the industry.

GE and Westinghouse were both large players in the diversified manufacturing of electrical products. They both entered the market in the late 1940s and had their primary facilities in the mid-atlantic. Both had a primary market of the U.S, thogh GE had some experience in Canada. Allis-Chalmers focused on small turbines for small utilities and was the smallest player.

3.How does each firm's product mix (unit size) come into play?

GE focused on large turbines that had lower-per megawatt costs than Westinghouse. This was an important consideration for buyers who were larger, and could justify the higher costs with per unit sales. Westinhouse focused on standardization of frequently ordered sizes, which looked to be a popular solution, but then declined from 30% of the market very quickly. It captured the middle of the market and some of the smaller market.

4.How does the scale / size of each firm relate to competitive advantage?

GE was about 1.5 times as big as Westinghouse, which gave it a considerable advantage in terms of overhead. This allowed R&D spending to be much higher and still be about the same or less as a percentage of sales than Westinghouse. In addition, Westinghouse had a considerable