GE structure tackles global changes in regional demand and cost trends

August 11, 1993

The world of medical imaging is changing fast. Competition amongimaging system vendors is hot. Price pressures are high and mounting.To stay viable, scanner suppliers must learn to react faster andoperate more efficiently. They must pick technical

The world of medical imaging is changing fast. Competition amongimaging system vendors is hot. Price pressures are high and mounting.To stay viable, scanner suppliers must learn to react faster andoperate more efficiently. They must pick technical features thatadd value as well as glitz and approach markets with a coherentproduct plan that will maximize their global bottom line. Welcometo the world according to GE.

GE Medical Systems initiated a major restructuring of worldwideoperations this spring in reaction to a changing marketplace.Tops among changes at the giant medical imaging systems vendorare:

  • allocation of worldwide financial and strategic responsibilitiesto product-line businesses;

  • vertical integration of regional development and manufacturingoperations into these product businesses; and

  • creation of an Americas regional organization focusingon market requirements in the U.S., Canada and Latin America.

The Americas group, the head of which has not yet been chosen,will function in the same manner as GEMS in Europe and Asia, accordingto Paul J. Mirabella, general manager of GE's MR business. Regionalinput will be provided to the six product businesses for the developmentof global business plans. Product strategies developed at thecenter will then be implemented by regional managers providingsales and service tuned to the needs of individual markets.

GE's six product-line businesses include the five imaging modalitiesof MRI, CT, x-ray, nuclear medicine and ultrasound as well asa separate unit devoted to x-ray tubes. Within the MRI business,operations such as the GE magnet plant in Florence, SC, and YokogawaMedical System's Japanese MRI manufacturing facility report directlyto Mirabella in Milwaukee. Regional MRI facilities will maintaina dotted-line, non-hierarchical relationship with the GEMS regionalbusiness units, Mirabella said.

"We have organized on a global basis as though the worldwere one. Now GEMS is one," he told SCAN. "We can'tafford in this marketplace to have duplications of effort. Wehave to add value everywhere."

GE is resizing, restructuring and reprioritizing its worldwideMRI business in order to focus on the areas where the vendor addsvalue, Mirabella said.

"If we have any duplications, we will eliminate them,"he said. "Where there are unique things that we do, we willvertically integrate those. If we don't (add value), we will finda way to outsource."

GEMS previously operated with product businesses reportinginto a marketing and engineering division based in Milwaukee.Officially, that division was responsible for products on a globalbasis, but its activities tended to focus on the American businesswhile servicing the needs of other regions, Mirabella said.

One reason GEMS evolved in this manner was that world medicalimaging markets were in diverse stages of maturity, he said. TheAmericas region, primarily the U.S., had the largest and mostmature market. Europe was also relatively mature, but the GE organizationwas new. Demand in all of Asia except Japan was in its infancy.

Over the last three years, however, the GEMS-Asia organizationmatured rapidly--as did the fast growing Asian market for medicalsystems--and has become more integrated into the worldwide GEstructure. GEMS-Europe has also more fully absorbed and developedthe business acquired with Thomson-CGR of France six years ago(SCAN 8/05/87).

While international markets have grown in importance for GEand other vendors, declining MRI prices in the U.S. have forcedcompetitors to trim down and explore alternative markets.

"We see many radical changes in the (medical imaging)marketplace. There has been a lot of restructuring on the partof suppliers and on the part of customers as well," Mirabellasaid.

As the U.S. imaging market sags and Asia booms, there is growingpressure to rationalize product lines, reallocate marketing resourcesand streamline product development and manufacturing costs. GE'srapid development of a 1-tesla Signa MRI system this year wasin large part a response to the growing importance of internationalmarkets and concern in those regions over system cost (SCAN 7/28/93).

"There has been an internal shift in the way we mix andallocate our resources," Mirabella said. "Our priority--inaddition to technology--is to reduce cost and (introduce products)a lot faster. We are not going to tolerate duplications in ourproduct line. Where they exist, we are going to have a plan torationalize the products over time. We are going to cover allthe price points and emphasize (servicing of) the installed base."

Creating a product business structure with global profit-and-lossresponsibilities will encourage managers to reduce duplicationsof effort and create a product line that maximizes worldwide revenueand profit, he said.

MRI system features still must be developed to satisfy advancedusers while encouraging proliferation of the technology into newmarkets. GE will continue to work with its MRI research sitesin the U.S., but will also look to increase the number of luminariesin other regions, he said.

The industry faces a current overcapacity of MRI manufacturingworldwide and saturation of installations in some regions. Marketconditions vary tremendously from country to country, however,he said.

"You wouldn't make that (overcapacity) statement in southernChina, but you might make it in southern California," Mirabellasaid.

Although low MRI reimbursement in many international markets,along with system siting difficulties, may create demand for low-fieldpermanent magnets, that demand is likely to be fleeting, he said.Eventually, the price range of superconductive magnets will broadento meet the level of permanent magnets and many similar features,such as cryogenless operation and open bores, will become available.

"That point technologically is out there," Mirabellasaid. "It is just a question of when it becomes cost-effectiveto bridge the gap. I can't say if that point is three or fouryears out, or sooner."

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