General Motor’s Strategic Analysis

General Motors’ Strategic Analysis
By Cyriac Thomas (cpg07bm025)

development. The industry is also facing increasing external competition from the public transport sector. In 2008. marketing. 2. Almost all of the regulations come from consumers increasing concerns for the environment and the concern for safer automobiles. industries such as the automotive industry.9 million in Europe.4 million in the Middle East and 1.5% of light vehicle sales when compared to the top three foreign companies which accounted for 36.4 million in Africa. The United States is the world’s largest consumer market for light vehicles.1% 2004 and 61. Factors affecting the Automotive Industry (PEST Analysis) 1. market in 2006. 21. with rapidly rising oil prices. In 2007. Overall the Big Three account for 54.9 million new automobiles were sold worldwide: 22. In 2007. as consumers re-evaluate their private vehicle usage. including cars and commercial vehicles were produced worldwide. Of the major markets. What has currently started to happen in the recent years is that the Big Three are starting to lose market share to other rivals within the industry. a total of 71. Economic . Political Laws and government regulations have affected this industry since the 1960s.2% in 2005.8% in 2003. These three account for roughly a little over half of the production of cars and light trucks in the industry. 4. more than million motor vehicles. This was down from 58. 19. The markets in North America and Japan were stagnant.9% of the U. while those in South America and Asia grew strongly.6% (Toyota. 60. Russia. Brazil and China saw the most rapid growth.General Motor’s Strategic Analysis Automotive Industry The automotive industry is the industry involved in the design. The United States auto industry is dominated by the Big Three or General Motors.4 million in USA and Canada. 2. are experiencing a combination of pricing pressures from raw material costs and changes in consumer buying habits. passenger cars and light trucks. This trend is expected to continue but to taper off in the coming years. & Nissan). In 2006 the Big Three accounted for 41. Honda. manufacture. Ford Motors and Daimler/Chrysler.4 million in Latin America.4 million in Asia-Pacific. and sale of motor vehicles.S.

The study also showed that for every autoworker there are seven other jobs created in other industries. GM is the world's largest automaker as measured by global industry sales and has been the global sales leader for the last 77 years. and Wuling. iron. Holden. Chevrolet. vinyl. Hummer. Society does not like to admit to this but it is very true. plastics. The study showed that 60% of the buyers referred to the internet before making their purchases and out of that 60%. and seek consistent global regulatory standards General Motors General Motors Corporation (GM) is a multinational automobile manufacturer founded in 1908 and headquartered in the United States. textiles. including a 38 billion dollar loss in 2007. No one wants to be seen driving an unattractive piece of junk because of what other people will think of him or her. Cadillac. A study was conducted by J. five years from now Gen X will account for at least 30% of vehicle sales. Global General Motors.D. Demographics For many years now. Saab. Business-to-business marketplaces have given the industry many opportunities because of the internet. Daimler Chrysler. Saturn. the goals of the associations were to work together on public policy matters of common interest to provide credible industry information and data.General Motor’s Strategic Analysis The automobile industry has a huge impact on every country’s economy. It manufactures its cars and trucks in 35 different countries and sells them under the brands of Buick. Volkswagen. the baby boomers generation has been the main target market for just about every product. Ford Motor Company. copper. 5. the automakers are looking at the younger generations. and rubber. In recent years the company has endured significant financial turmoil. General Motors is the ninth largest publicly traded company in the world. Vauxhall. General Motors employs about 266. Anyone who drives a nice vehicle is thought to be wealthy. GM Daewoo.000 people around the world. As their generation is getting ready to retire and spend less money. BMW. such as more efficiency and lower cost. and Nissan Motor Company come together to create a new trade association created the Alliance of Automobile Manufacturers. Sociocultural Today’s society judges people on the type of car you drive. Technology The internet has affected just about every industry in the world and has also had a huge impact on the automobile industry.000 new vehicle buyers. These industries include anything from the aluminums to lead to vinyl. According to various studies this industry is the major user of computer chips. steel. the focus is starting to turn towards the baby boomers children (Generation X) who are in their mid 20’s and 30’s. Pontiac. 88% went to the auto websites before going and taking a test drive. Consumers also just feel better when they are driving a nice or new car. Power and Associates in 2002 and involved more 27. lead. GMC. 3. According to Analysts. Toyota. Right now. Opel. if makes them feel better about themselves. 6. As of 2008. 4. . The organization was to replace the American Automobile Manufactures Association that only consisted of American manufacturers. Mazda. aluminum. As of 2008. Volvo. Manufactures know this happens and targets their markets by these thoughts.

and environmentally friendly company. such as global warming. Competitor’s Analysis . The auto industry is being hit by a weak US and global economy. due to rising fuel prices. To regain lost market share that was lost to foreign competition. At the same time provide GM stakeholders pride and financial incentives to remain with GM. GM has just too much at risk in not becoming an industry leader in alternative fuel technology. revenue. Fuel-economy legislation is sparking the race. rising fuel prices. teamwork. The next several years will redefine GM. brands. vehicles that turn consumers into customers. GM must use these threats as opportunities. and environmental worries. electric. This is a critical time in auto industry with many threats. and hybrid. fuel cell. and cost effectiveness through the implementation of global common metrics and best practice sharing. i. To do this GM must portray an image that states that GM values what the consumer wants and what the environment needs. quality. Listen to what consumers are saying directly and indirectly about GM’s current products. and where all other industry competition strives to imitate. In order to overcome these potential threat. GM will earn our customers’ enthusiasm through continuous improvement driven by the integrity. Values Statement The auto industry just like the global economy is going through tremendous change. and social and political environmental concerns and issues. GM needs to change consumer perception of the company. and create innovative. Vision Statement The GM vision is as follows: GM’s vision is to be the world leader in transportation products and related services. The proposed new vision for GM is as follows: For GM to become the automotive industry leader in alternative fueled vehicles and providing superior quality products that global consumers call to mind when they think of quality and innovation. poor quality. but opportunities as well. vehicles to innovative. The new proposed mission statement will be as follows: GM will become an industry leader. GM should consider mass producing a range of alternative fueled vehicles. people. not a follower. from a dull. As stated. and take advantage of changing consumer buying habits. In today’s global economy and highly competitive auto industry GM has no time to procrastinate.e.General Motor’s Strategic Analysis GM needs a sense of urgency regarding revising a strategic plan that incorporates the next generation of vehicles. My vision for GM is to be the industry leader in innovation. and innovation of GM people. Mission Statement The current GM mission statements are as follows: Drive improvements in market share. green. Environmental Analysis GM and the entire auto industry are currently challenged with the perfect storm. and once again be the auto industry leader in sales and market share in today’s global market. responsiveness.

Honda has a reputation for producing high quality products from cars to motorcycles. It is just a matter of the correct planning and proper implementation of those plans that will decided whether or not GM's goals are achieved. Japan caught up the U. By having these three distinct brands. and Scion. trucks and service parts. Toyota has three major brands underneath the company umbrella. manufacture. Ford has been focusing on cutting costs to increase margins more than its competitors. Mercedes Benz. Chrysler. There are many strengths to Honda. It has used reverse engineering in the development of their products. The Automotive business consists of the design. Their automobiles are reliable and generally fuel efficient. This means DaimlerChrysler has strong brands that are recognizable in almost every part of the world. DamilerChrysler As the number two auto manufacturer in total revenues DaimlerChrysler has positioned itself as an industry leader. Ford Motor Company Ford Motor Company is a global company with two core businesses: Automotive and Financial Services. Honda has won many awards for initial quality and customer satisfaction. auto makers during the 1980s. Thus Ford has been an innovator in the auto industry. Lexus. . development. They have been a worldwide company for nearly a century now and have established themselves as the global leader for most of them. Originally know for motorcycles. By using the Kaizen theory of continuous improvement. If you recall I mentioned above that a current opportunity for GM is to expand globally and as we can see they already have the experience to do so. Toyota has traditionally also been the leader in Total Quality Management or TQM. Global Experience As explained above even with GM's recent decline they still have the market share and the experience to bounce back. Honda Motor Company Honda motor company is not your average Japanese car manufacturer. and Jeep. Large Market Share Although GM's market share in the US has dropped it is still very much competitive at 26 percent. SWOT Analysis Strengths 1. sale and service of cars.General Motor’s Strategic Analysis The major competitors of General Motors are domestic companies like DamilerChrysler & Ford Motor and foreign companies like Toyota Motor & Honda Motor. The DaimlerChrysler umbrella covers many wellknown brands such as Dodge.S. with this come many strengths. Honda has managed to elude the dominate keiretsu system in Japan and become one of the dominant automobile manufactures in the world. Their research has afforded them competitiveness in innovative products. 2. They also have an increasing share in the Chinese market. Toyota Motor Corporation The Toyota Motor Corporation was incorporated in 1937 and has many strengths being one of the industry leaders in the automotive industry. Toyota. it lets the company reach many sectors of the globe in a choice of vehicle for customers. With the right decisions there is no reason for GM to not become the automotive leader it once was.

Stagnant Profitability Looking at GM's profit we see that they are certainly struggling with respect to the size of their company. This technology allows the vehicles to be tracked in the event of an emergency or theft. Opel. Daewoo. Overly Dependent on General Motors Acceptance Corporation (GMAC) Financing GM has become too dependent on its financing program. Poor Organizational Structure As we can see in exhibit 1 of the case GM's organizational structure seems to be too vertically integrated. 3. Their profit margin was about 1. This is a situation that shareholders will not be pleased with. Weaknesses 1. and Holden. Saturn. Hummer. The alternative energy/hybrid trend has begun to take place in the automotive industry and GM has been one step behind the competition in terms of alternative energy vehicles. 5. Behind on Alternative Energy Movement This is GM's biggest weakness. The competition is becoming too strong to focus on just one country. 4. the seriousness of the matter is certainly apparent. The current GM brands include: Chevrolet. OnStar Satellite Technology Developed in 1996 OnStar currently has over 3 million subscribers and is standard on all GM vehicles. GMAC Customer Financing Program Since its establishment in 1919 it has proven to be GM's most reliable source of revenue. Cadillac. It also allows the driver and or passengers the ability to communicate with OnStar personnel at the click of a button. Although. 2. In order for any automotive company to be successful from this point forward they must be Hybrid friendly and fuel efficient. Buick.5% and the ROE has dramatically decreased over the recent years dropping to 10% in 2004. GMC. 4. Saab. A large reason for that is the wide variety of quality brand names that appeal to all target markets. Overly Dependent on US market GM has become too dependent on the US market and must take advantage of the opportunity to expand globally. This has led to many problems including loss of market share and a decrease in company profit. Their current ratio is just barely above 1 and their acid test is even lower. Poor Credit Status GM's credit status has like everything else has been steadily declining. however they once again cannot rely solely on financing in order to turn profit. This causes a lack of communication between employees from top to bottom and may have played a part in GM falling behind on the alternative energy movement. 5. I don't see them getting denied based on their credit at this point. Pontiac. especially if they want to compete with Honda and Toyota who are rapidly growing. 6. Opportunities .General Motor’s Strategic Analysis 3. Granted it is a great strength for GM. Variety of Brand Names GM as I mentioned has been the automotive leader for the majority of the last century.

(2) threat of entry by new competitors. meaning that GM should always be attempting to develop the automotive world's most popular vehicles. Part of this threat is their own doing and the other is simply unavoidable. One of the most efficient ways to assess competitive issues is to consider Michael Porter's five-force analysis. 2. Threats 1. 4. Alternative Energy Movement It is obvious that GM was behind its competition with regards to the research and development of hybrid vehicles. Increased Health Care Costs GM. which proves their needs to be more emphasis put on foreign markets. (3) price . Low Interest Rates With the right marketing strategy the low interest rates have the potential to generate an immediate increase in sales. As I mentioned earlier Toyota took the first step in the direction of hybrid technology and has since drastically grown and become the questionable automotive frontrunner to start the 21st century. 4. like many large companies with quality employee health care benefits. 3. Develop New Vehicle Styles and Models This is an opportunity that will never be satisfied. what is in today will be out tomorrow.e. Rising Fuel Prices With GM being a large producer in both trucks and SUV's. However hybrid technology is still very much new giving GM the opportunity to once again become the automotive industry's leader in innovation and technology.General Motor’s Strategic Analysis 1. Pension Payouts. 1985) has highlighted five such factors: (1) rivalry between existing competitors. The rise in fuel prices has played a significant role in creating the opportunity for development of both hybrid and more fuel efficient vehicles. 2. Rising Supply Costs. If GM can infiltrate these markets and successfully grow along with their continuing focus on the US market they will be headed in a positive direction. i. 3. Porter’s Five-Forces Analysis The competitive structure of an industry is another important component of identifying factors that are a threat to diminish profitability. GM is responsible for providing generous pension benefits to its employees. Recently GM saw an increase in the Chinese automotive market. however they are now experiencing problems as more and more people begin to collect. As you will find with most threats. Continuing to Expand Globally. sales have drastically decreased due to the lack of fuel efficiency. Growth of Competitors GM no longer has the luxury of being the known leader in the automotive industry and faces the reality that they are in serious trouble. Porter (1980. which at the time seemed like a great idea. and as we know. Steel Once again this threat affects the entire automotive industry and forces each company to cut manufacturing and production costs as much as possible. without taking away from the quality of the product. is experiencing a large financial hit that only gets worse as time continues. 5. an equal opportunity will usually emerge as is the case here with GM's opportunity mentioned above.

A change in the price of a complementary product (e. another indication of rivalry and its very strong threat to profits. it does consider two factors that influences demand ― substitutes and complements. The price competition erodes profits by drawing down price-cost margins while non-price competition (e. Nevertheless. Threat of entry by new competitors The presence of new firms in an industry may force prices down and put pressure on profits. and if it does not. Ford Motor and Daimler-Chrysler) whose most profitable models are energy inefficient pick-up trucks and sports utility vehicles. and with little cost. The rising price of gas.g. There are. an important complementary product. Price pressure from substitute or complementary products While five-forces do not directly consider demand. Furthermore. they will have little bargaining power with manufacturers and therefore pose a weak threat to industry profit. 5. Firms compete on both price and non-price dimensions. gasoline. One would expect the production of automobiles to require significant economies of scale. In recent years there has been significant market share variation. and tires) could have a significant impact on the demand for automobiles. While the evidence suggests that economies of scale in the auto industry are substantial. trucks or SUVs.. One of the other reasons there is such high rivalry is that there is a lack of differentiation opportunities. Customers can easily. 2. Bargaining Power of Suppliers . On balance. switch to other auto dealers.. Individual consumers have some influence over price within a given dealership. each representing a small proportion of total sales.General Motor’s Strategic Analysis pressure from substitute or complementary products. and (5) bargaining power of suppliers. barriers to entry that tend to protect established firms. suggesting few real substitutes (e. the overall impact on "industry" profitability from substitutes and complements is weak to moderate. Although new cars generally are slightly price elastic. (4) bargaining power of buyers. Rivalry between existing competitors With the rise of foreign competitors like Toyota. new car rebates and interest free loans) drives up fixed cost (new product development) and marginal cost (adding product features). the demand for a particular model is highly sensitive to price because of the availability of close substitutes for a given model. it may be at a significant cost disadvantage. however. 4. there are also indications that large size may not be as important as commonly assumed.. rivalry in the American auto industry has become much more intense. But when you have many individual customers. 1.g. an important barrier to entry. Honda and Nissan in the 1970's and 80's. batteries.g. entry is currently a weak threat to profitability. The new entrant would have to achieve substantial market share to reach minimum efficient scale. Consequently. Bargaining Power of Buyers Buyer power refers to the ability of individual customers to negotiate prices that extract profit from the seller. The competitors are compared to one another constantly. customers now have access to market information (prices and costs) from the Internet that enhances their negotiating power. entry would represent a large capital investment to any new firm and the body of research still indicates that economies of scale represent a substantial barrier to entry. All the companies make cars. is likely to affect some firms more than others depending upon the vehicle composition. bus and rapid transit). Recent rising fuel prices are likely to have a greater impact on the big three (GM. but little power over manufacturers. 3.

parts. Due to this factor. Then in 1926. has historically exerted a great deal of leverage over the benefits and wages provided by the big three. Other new car concepts include minicars such as Chevy Aveo. at least in this segment of the American market. Financial Results Based on the GM’s consolidate net sales and revenue. as a strong threat to profits. one has to characterize supplier power. the interest went up by the Federal Reserve to quell the stock market and a severe stock market decline following the September 11.General Motor’s Strategic Analysis Auto manufacturers require inputs-labor. it shown that General Motor Corporation revenue has been falling to $ 192. raw materials and services. In the last 1990s. since 1908. In 2000. This is the driving force behind its $190 above turnover. The following table summarizes the results of a five-forces analysis of the automobile industry. General Motors was unable to keep up to the pace of the market demand. the United Auto Workers (UAW).5 billion in 2004. The auto manufacturers have large supplier networks that appear to exert little bargaining power. 2001 attacks. compared to net income of $ 2. In 1996 General Motors introduced OnStar satellite technology which allows equipped vehicles to be tracked in case of an emergency or theft and allows the passengers to communicate with OnStar personnel. engineered and commercialized the self-starter engine for the first time. Nevertheless. it conceptualized. Five-Forces Analysis FORCE Internal Rivalry Entry Substitutes and Complements Buyer Power Supplier Power THREAT TO PROFIT Strong Weak Weak to Moderate Weak Strong Core Competence The core competence of General Motors is innovation. moderate or strong depends on how much bargaining power they can exert. Whether the strength of suppliers is weak.8 billion in 2004.6 billion. its product Cadillac was the pioneer in devising a nationwide service strategy. the only supplier of labor. General Motors has been utilizing innovation in service ad technology to secure itself a dominant position in the automobile industry. However in the case of hybrid vehicles. Because of this historical dominance by the UAW and the uncertain results of their current negotiations with the big three. it affected a pension and benefit crisis at General . GM had regained market share up $ 80 a share. The cost of these inputs can have a significant effect on profitability. In 1911.6 billion in 2007 from 193. GM incurred a consolidated net loss in 2007 of $ 10.

Restructuring the product development pace would be a start as well as cutting back on employees because the company is growing in size but not in profit. The company has taken a large hit in recent years and needs to find a way back to the top. sales. Prime example of their idea for a Hybrid SUV. Liquidation would clearly help out the financial parts of the organization. Last but not least is restructuring.7 in 2004. General Motors needs to take a step back and take look at how they want to position themselves and towards what market since what they have been doing is no longer in favor for the company. Reasons for product development being at the top of priorities is that GM has to create a type of Hybrid vehicle that will allow it to keep up with the pace of the competitive environment. General Motors North America market share in 2007 fell to 25. but GM has been strong for many years that it is very possible for the company to come above these issues.$29 per share. If General Motors could provide a "futuristic" vehicle before Toyota has the chance to hit the market with theirs GM would be a step ahead of the competition. Market Development 2. which has been heard in rumors from Toyota about their next plan of action. Liquidation Implementations: Recommended strategies for General Motors would start with product development then market development. it fits the GM profile with maintaining the SUV portion. but allows the firm to stay with trend patterns. GM must also re-evaluate the market they are trying to approach. Liquidation is important to GM because their assets are a lot higher than revenues. Retrenchment 6.S. which only include 2/3 of that market and their financing tactic wouldn't be as much of a risk.5% compared to 26. This is only going to be achieved if something drastic is changed. The unfavorable results of GM’s consolidate net loss in 2007 were driven primarily by losses at GMNA due largely to unfavorable volume and product mix. but now that times are changing their original target market is not looking for what they once were. An example of what GM could possibly do is produce a futuristic vehicle.General Motor’s Strategic Analysis motors and many other American companies. which General Motors most desperately needs to review possibilities. Product Development 4. and if GM could turn assets into cash then their would be more readily available funds and then GM would not have to depend some much on their U. The current stock market price of General Motors are falling between $28. which causes a red flag for GM. because for so long they have continued with a tradition outlook for automobiles. Restructuring 5. Evaluation: . and restructuring. Suggested Strategies Below is a list of possible strategies General Motors could use to redirect profits and be able to maintain survival for the future. The company needs to be reevaluated in many ways. liquidation. mid-sized utilities. It has been falling down gradually in the past six years. Decreased in market share also due to sales declines in segment where GM has high volume such as large sport utilities. and mid-sized cars. 1. Market Penetration 3. but must be a product that stands out from the crowd at the same time.

it's just a matter of product development being maintained and refocusing products to the correct target markets. . Creating a Hybrid SUV is a brilliant idea and if GM can pull that off by the end of 2007 the future could look very bright for them. The company has a huge background proving that they can maintain being number one.General Motor’s Strategic Analysis The biggest thing for General Motors is to develop a Hybrid vehicle that will maintain the pace of the competition for the firm as well as one that will stand out from the crowd to make the product new and exciting.

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