Innovation and Business Development Report: GE Aviation (MGMT20132)

This report provides a comprehensive analysis of GE Aviation's current business challenges, focusing on issues such as high fuel consumption, low engine efficiency, and intense market competition from rivals like Rolls Royce and Pratt & Whitney. It delves into the background of these problems, providing evidence from financial statements and industry trends. The report identifies strategic options, including investments in research and development, resource optimization, and aggressive marketing campaigns, to address these challenges. A detailed cost impact analysis is used to select the best solution. The report also assesses the impact of these strategies on various stakeholders and provides a financial analysis to support the recommendations, ultimately aiming to improve GE Aviation's revenue, market share, and overall profitability. Appendices include a value proposition canvas, business model canvas, and financial model.

Running head: INNOVATION AND BUSINESS DEVELOPMENT
Innovation and Business Development
Name of the Student:
Name of the University:
Authors Note:

1
INNOVATION AND BUSINESS DEVELOPMENT
Executive summary:
General Electric Aviation is a subsidiary company of General Electric. GE Aviation is one of the
leading aircraft engine suppliers in the world with its capability of supplying engines to majority
of the commercial aircrafts. A detailed discussion below shows the number of problems that the
company is currently facing and how these problems can be dealt with by the management. The
ever increasing competition in the market has compelled most of the companies to remodel their
entire working structure to suit the need of the hour. The companies that have been successful in
making necessary changes as per the requirements and demands of the situation have stayed in
the market and still competes with substantial success in the market. GE Aviation is in the field
where the innovation and technological up-gradation has changed the face of the industry
completely unlike many other industry. The document reflects on the importance for the
company to take proper decisions to deal with the existing problems that the company is facing
at present.

2
INNOVATION AND BUSINESS DEVELOPMENT
Contents
Executive summary:........................................................................................................................1
Introduction:....................................................................................................................................3
Problem:...........................................................................................................................................3
Background of the problem:........................................................................................................3
Definition of the problem:...........................................................................................................4
Evidence of the problem:.............................................................................................................4
Timing and context of the problem:............................................................................................9
Benefits:.........................................................................................................................................10
Expected benefits:......................................................................................................................10
Significance of benefits:............................................................................................................10
Realization of benefits:..............................................................................................................10
Interdependencies of benefits:...................................................................................................11
Strategy:.........................................................................................................................................11
Strategic approach and interventions:........................................................................................11
Strategic options:.......................................................................................................................12
Recommended strategy:.............................................................................................................13
Analysis of Options:......................................................................................................................13
Stakeholders and the effects of these options on stakeholders:.................................................14
Impact on society:......................................................................................................................15

3
INNOVATION AND BUSINESS DEVELOPMENT
Impact on environment:.............................................................................................................15
Economic impact:......................................................................................................................15
Financial analysis:.....................................................................................................................15
Recommendation and probability of success of such recommendation:.......................................15
References:....................................................................................................................................17
Appendix A: Value proposition canvas:........................................................................................19
Appendix B: Business model canvas:............................................................................................19
Appendix C: Financial model:.......................................................................................................19

4
INNOVATION AND BUSINESS DEVELOPMENT
Introduction:
Despite being one the largest aircraft engine manufacturer and supplier in the world, GE
Aviation faces tough competition from Rolls Royce and Pratt & Whitney in the commercial
aircraft engine market. The effects of innovation and ever evolving modern technology on the
aviation industry is beyond any measurement. As the whole industry is very much ran on
technology and innovation. In this document specific problems faced by the GE Aviation in
recent times shall be discussed to assess implication of these problems on the business operations
of the company. In addition to identification of the problems an effort shall be made to provide
appropriate solutions to the problems identified to help the company solve these issues swiftly
and in a timely manner (Berbegal‐Mirabent, 2013).
Problem:
The company at present is facing number of problems which have affected the ability of the
company to generate revenue and earn profit from business operations. These problems include
extreme competition in the market, high fuel consumption, low efficiency of engines, and high
operating expenses of the company (Blair & Marcum, 2013).
Background of the problem:
The aviation industry is highly competitive industry and requires significant amount of
expenditure to run day to day affairs of companies operating in the industry. The ever increasing
influence of innovation and technology has also contributed to the complexities of entities
operating in the industry. As a result the competition in the market, fuel price and consumption,
low efficiency of engine and high operating costs of the companies in the industry are all part of

5
INNOVATION AND BUSINESS DEVELOPMENT
the problem to GE Aviation ("Employers Starting 2018 in a Much More Pro-Business
Environment", 2018).
Definition of the problem:
High fuel consumption:
Due to high fuel consumption of engines the weight of the engines increase which further
troubles the aerodynamic movement of an aircraft. In addition the high consumption of fuel
increases air fare with negative impact on the profitability of an aircraft company (Fan & Hou,
2012).
Low efficiency of engines:
The efficiency of engines reduce significantly with complexities in aerodynamic movement due
to high consumption of fuel. In addition the capacity of engines reduced significantly.
Hughley competitive market:
The aircraft engine supplier industry is a highly competitive industry with number of large
competitors such as Rolls Royce and Pratt & Whitney operating in the market with significant
success over the years. The high competition in the market means competitive pricing resulting
in lower profit for the company.
Financial performance of the company adversely affected:
As a result of the company is facing significant difficulties to maintain its profitability. In fact in
last financial year ending in 2018 the company has end up incurring significant loss from
business operations. This is a huge cause of concern for the company (Goh & Ryan, 2008).

6
INNOVATION AND BUSINESS DEVELOPMENT
Evidence of the problem:
The evidence of the problem can be seen from the financial statement of the General Electric
which is the parent company of GE Aviation. The declining profit of the entire group is mainly
contributed by other subsidiaries of General Electric. The income statement of the company for
last five years is reproduced below as an evidence to see the declining profitability of the group.
INCOME STATEMENT OF GENERAL ELECTRIC CO
US$ millions 2014-12 2015-12 2016-12 2017-12 2018-12
Gross revenue 147,811.
00
115,158
.00
119,687
.00
120,468.
00
121,616.
00
Less: Cost of revenue 89,708.
00
84,994
.00
91,273
.00
95,079.
00
95,653.
00
(A): Gross profit 58,103.
00
30,164
.00
28,414
.00
25,389.
00
25,963.
00
Operating expenses
S,G & A 17,831
.00
18,377
.00
18,280.
00
16,011.
00
Merger and acquisition expenses 2,100.
00
Operating expenses (Others) 3,215. (2,227. (4,005. (1,625. (2,100.

7
INNOVATION AND BUSINESS DEVELOPMENT
00 00) 00) 00) 00)
(B): Total operating expenses 3,215.
00
15,604
.00
14,372
.00
16,655.
00
16,011.
00
Operating income (A-B) 54,888.
00
14,560
.00
14,042
.00
8,734.
00
9,952.
00
Interest Expense 1,085.
00
1,162
.00
1,234
.00
1,724.
00
2,077.
00
Other income (expense) (36,574.
00)
(5,212.
00)
(3,778.
00)
(15,801.
00)
(28,009.
00)
Earnings before taxation 17,229.
00
8,186
.00
9,030
.00
(8,791.
00)
(20,134.
00)
Income tax provision 1,772.
00
6,485
.00
(464
.00)
(3,043.
00)
583
.00
Other income (1
.00)
Earnings after taxation 15,457.
00
1,700
.00
9,494
.00
(5,748.
00)
(20,717.
00)
Earnings from discounting
operations
(112.
00)
(7,495.
00)
(954
.00)
(309.
00)
(1,726.
00)
Other (112. (331 29 271 88

8
INNOVATION AND BUSINESS DEVELOPMENT
00) .00) 1.00 .00 .00
Net income from business 15,233.
00
(6,126.
00)
8,831
.00
(5,786.
00)
(22,355.
00)
Earnings per share
Basic
1.51
(0
.62) 0.90
(0.
72)
(2.
62)
Diluted
1.50
(0
.62) 0.89
(0.
72)
(2.
62)
The above income statement shows the inability of ten company to maintain its profitability as a
group however, the graph below shall show the gross revenue and operating profit of GE
Aviation only over last few years (Jacob, 2011).

9
INNOVATION AND BUSINESS DEVELOPMENT
As can be seen from the above that the revenues of GE Aviation has showed constant growth
since 2013 however, the problem is that compared to its competitors such as Rolls Royce and
Pratt and Whitney the growth in revenue of the company is significantly low (Jaros, 2016).
Further in order to understand the performance of the Aviation business of GE the following
graph indicating the operating income of the company shall be followed.

10
INNOVATION AND BUSINESS DEVELOPMENT
The operating revenue of the company has also maintained same trajectory as the gross revenue
of the company since 2013. However, as mentioned earlier that as compared to its competitors in
the market the growth in operating income and revenue of the company are significantly lower.
Timing and context of the problem:
The ability of GE Aviation to grow at a rapid speed is nowhere to be seen from the financial
performance of the company. One of the important thing to be remembered while discussing the
ever increasing competition in the Aviation industry is the fact that the competition is only
within the existing competitors as the high cost of the industry works as an efficient barrier for
the new entrants to the industry. Thus, the ability of an existing company in the industry to use
effective and modern technology to achieve organizational objectives is to a large extent
determines the ability of the company to improve its market share. In this case the inability of
GE Aviation to increase its market share is very much visible from its revenue and operating
income (Jarzębowicz & Marciniak, 2017).

11
INNOVATION AND BUSINESS DEVELOPMENT
Benefits:
The benefits are expected to accrue to the company in the form of higher revenue and operating
income in the future.
Expected benefits:
The expected benefits from the strategic intervention by using appropriate strategic options are
listed below:
I. Significant growth in the revenue of the company.
II. Significant increase in the amount of profit earned by the company.
III. Effective use of innovation and technology to improve the quality of aircraft engines
supplied by the company to the commercial aircrafts.
IV. Increase in the overall market share of the company in the Aviation industry
(Nadkarni, 2015).
Significance of benefits:
The benefits will have number of significance to different stakeholders of the company. The
benefits to different stakeholders shall be discussed latter.
Realization of benefits:
The benefits shall be realized in the form of improved revenue and operating profit of the
company from the point of view of the company itself. In case of shareholders they will received
higher amount of dividend in the future (Pandian, 2012).