International Journal of Management and Social Sciences Research (IJMSSR)
Volume 5, No. 5, May 2016
The American Auto-Market Leaders in Comparison: A study of
Strategies and Business Models of Ford Motor Company and
General Motors Company
Abeer Alhalabi, MBA Student, University of Bahrain, Kingdom of Bahrain
Mariam Ali, MBA Student, University of Bahrain, Kingdom of Bahrain
Dr. Shaju George, Assistant Professor, Department of Management & Marketing, College of Business Administration,
University of Bahrain, Kingdom of Bahrain
ABSTRACT
The purpose of this comparative research is to firstly,
screen the definition of a strategy and a business model of
a company according to many researchers. Secondly,
concentrate on two automotive companies’ strategies and
business models, namely Ford Motor Company and
General Motors Corporation, to identify similarities and
differences and analyze their competitive environment
using SWOT analysis and Porter’s Five Forces Model.
Ford and GM are deliberately chosen due to their strong
position in the US auto-industry. This industry is very
competitive where all players need to stay strong and
maintain a high market share in order to survive. The final
section of this paper involves a short comparison of the
two companies’ overall profiles, financial situations
including their financial key statistics. They are compared
to examine the commonalities and differences of the two
companies operating in the same industry facing almost
the same threats, and having similar opportunities. This
allows for a better understanding for the two out of the
‘big-three’ major American automotive industry (GM,
Ford and Chrysler).The data was collected from
secondary sources like published journals, books,
websites, case studies and annual reports of the two
companies. The final findings show that Ford concentrates
on cost leadership strategy aligned with its business model
of ‘One Ford’, whereas GM emphasizes on the
differentiation strategy aligned with its ‘Pyramid Profit’
business model.
INTRODUCTION
Over the years since the strategy terminology was used,
many of the scholars are trying to define the word strategy
in different ways. However, all definitions were meeting at
the end to be defining strategy as designing the future on
solid bases today, gathering all the strengths and the
available opportunities you have, in addition to study all
possible threats and weaknesses existing in order to plan
ahead the future events in a proper way that matches your
vision and mission
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According to Mintzberg (1996), a strategy describes how
the end goals will be achieved by the means of resources.
This is generally tasked with determining strategy.
Strategy can be intended or can emerge as a pattern of
activity as the organization adapts to its environment or
competes.
Strategy concept goes by age to the terminology, which
was used by the Greeks in their military implication. The
term derives from the Greek “strategos”, translated as the
general in command of troops or the plan of the
destruction of enemies through effective use of resources.
This term in itself contained the idea of objectives to be
achieved and plan of actions to be performed in various
scenarios, depending on the enemy‟s behavior (Bracker,
1980). However, it was extended later to a larger scope to
be used in business management. Strategy commonly
comprises of setting goals and defining actions to achieve
that goals, and utilizing resources by executing the actions.
Many scholars have defined strategy in different words,
but all together form at the end the same meaning that
cross anyone‟s mind when the word “Strategy” is heard.
That is why a “Strategy” is defined depending on the
situation or the status of each one differently.
In general strategy is an art and in order to able to build
strategies, a strategist has to tailor, draw, paint, design, and
polish his/ her ideas and thoughts and turn them into a
bright full, well-designed and meaningful strategy. And
whenever that strategy is no longer effective, it has to be
revised and rebuilt to cope with the current environmental
changes.
LITERATURE REVIEW
Definition of Strategy
Steiner (1979) notes that strategy entered the management
literature as a way of referring to what one did to counter a
competitor‟s actual or predicted moves. He points out in
his notes that there is very little agreement as to the
meaning of strategy in the business world. Steiner has
defined strategy with several definitions, one of which is
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International Journal of Management and Social Sciences Research (IJMSSR)
Volume 5, No. 5, May 2016
that strategy describes what top management does that is
of great importance to the organization. Also he referred to
strategy as the basic directional decisions, that is, to
purposes and missions. Each strategy involves the
important actions necessary to realize these directions. A
strategy isoughtto answer the questions „what should the
organization be doing?‟ and „what are the ends that the
management seek and how should they achieve them?‟
Porter (1996) argues that competitive strategy is about
being different. Also he says, it means deliberately
choosing a different set of activities to deliver a unique
mix of value. In brief, Porter argues that strategy is about
competitive position, about differentiating yourself in the
eyes of the customer, about adding value through a mix of
activities different from those used by competitors. It
means deliberately choosing a different set of activities to
deliver a unique mix of value. Earlier Porter (1980)
defined competitive strategy as a combination of the goals
for which the firm is striving and the means by which it is
seeking to get there. Thus, Porter comprises strategy as
plan and position.
Andrews (1980) defined corporate strategy as the pattern
of decisions in a company that determines and reveals its
objectives, purposes, or goals, produces the principal
policies and plans for achieving those goals, and defines
the range of business the company is to pursue, the kind of
economic and human organization it is or intends to be,
and the nature of the economic and non-economic
contribution it intends to make to its shareholders,
employees, customers, and communities.Strategy is
defined as a pattern in a stream of decision. However, the
usual definition of "strategy"encourages the concept that
strategiesare deliberate plans considered in advance of the
making of specific decisions (Mintzberg, 1978).
According to Chandler Jr. (1962) strategy is the
determination of the long-run direction of goals and
objectives of a business, the adoption of courses action
and the allocation of resources essential for carrying out
those goals.
Definition of Business Model
A business model is portrayed as a plan that an
organization executes to produce income and earn profit
(Investopedia, 2016). ). A business plan is also seen as the
way a business profits or expects to profit. It has only been
well known in the late 90's which was predominantly
because of the expanded inflation in the IT and Telecom
Industry (Osterwalder, 2005). Business Models are said to
be connected to technological development, nonetheless,
they are still separate from innovation. A business model
is characterized as "a system that solves the problem of
sensing customer needs, engaging with those needs,
delivering satisfaction and monetizing the value" (Baden-
Fuller & Haefliger, 2013).
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A business model can be both simple and complex
(Investopedia, 2016) A more complex definition of a
business model is that it is seen as a set of decisions forced
by the senior management of a firm (Masanell & Heilbron,
2015). The business model of a firm thus helps the senior
management detail the decisions that a firm imposes on
the agents who work for it (Amit & Zott, 2001).
Strategy Perspective
According to Zellman (2016), a strategic perspective
determines how the company views and solves important
issues. Putting the word perspective before the word
“strategy” indicates a tactical, carefully formulated
approach.
The challenge of differentiation is to identify salient points
of differences that are not cosmetic or transitory, but
rather, are sustainable. This can be an elusive quest given
the ability of companies to quickly imitate one another in
the contemporary environment, yet some companies have
achieved such sustainable differentiation through their
business models. Sustainable strategic positions tend to be
designed around one of the following five bases of
differentiation: operational excellence, product capabilities
(e.g., quality, selection, availability, features), innovation
leadership, low cost, or intimate customer relationships or
experiences. (Morris, Schindehutte, Richardson, & Allen,
2006)
Mintzberg (1987) has introduced strategy as 5 Ps – plans,
ploys, patterns, position and perspective. He described a
plan as some sort of consciously intended course of action.
This definition appeals to logical viewers of strategic
management rather thank opportunistic viewers. A ploy, is
a sub-set of a plan, and is a strategy in the sense of a
stratagem. While a pattern, is the consistent behavior and
processes, which emerge from strategic thinking whether
by intended or unintended actions. Position, refers to an
acceptable location for the organization in relation to its
competitors in the environment and its market share.
Perspective is described as looking inside the organization,
indeed inside the heads of the collective strategist. It
consists of an ingrained way of perceiving the world.
Those five Ps dominate together Mintzberg view of
strategy.
According to Cole (1997) as demonstrated by Johnson and
Scholes (1993) there is another view of strategy that
categorises a number of different approaches to strategy.
Different views are the natural selection view, when
organizations are under great environmental pressure and
have constantly to adapt to changes in their environment.
The planning view, where strategy comes about though
highly systematised forms of planning; this is the rational
approach to strategy. On the other hand is the logical
incremental view, which is an evolutionary step-by-step
approach to strategy. The cultural view that is an approach
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International Journal of Management and Social Sciences Research (IJMSSR)
Volume 5, No. 5, May 2016
to strategy based on the experiences, assumptions and
beliefs of management over time. Moreover, the political
view, where strategy emerges after a variety of internal
battles of trading interest and information. Last is the
visionary view, where one individual, or a small group
who have a particular vision of where the organization
should be dominates the strategy.
At the end of the day, each company decides on the
perspective depending on its type of business and other
factors that determine the best perspective to be used.
Business Model Perspective
With the increased need to define and study different and
new types of businesses, the concept of business model
began at the end of the 20th century (Alt & Zimmermann,
2014).
A business model is conceptualized as a system of
dependent activities that surpasses the vital company and
lengthens its borders. The activity system perspective of
business model is seen to create value and also to
appropriate a share of the value. Two sets of parameters
are recommended when using the activity system in
designing a business model; design elements and design
themes. This perspective on business model design is
consistent with the literature associated with this topic.
There are several advantages to using the activity system
perspective. First, focusing on activities is a natural
perspective. Second, it supports the firm in systematic and
holistic thinking in designing business models, and not
concentrate on disengaged decisions. Third, gives us the
chance to reduce several assumptions made in the
transaction cost economics (TCE) literature. Fourth, it
provides opportunities for further theoretical and empirical
development and modification (Zott & Amit, 2010).
Another perspective to designing business models is
sustainability (Schaltegger, Hansen, & Freund, 2015). The
business model perspective is increasingly inspiring in the
context of sustainability due to the aim of value creation of
a firm and its effects, which results in forming a
reasonable profit making model (Porter & Kramer, 2011).
Further research must be made on business models for
sustainability to develop the theories so as to contribute
viably to the improvement of the economy and the society
(Schaltegger, Hansen, & Freund, 2015). Future research
areas that are considered crucial for the improvement of
business research model are innovation, change and
evolution (Wirtz, Pistoia, Ullrich, & Gottel, 2015).
OBJECTIVES OF THE STUDY
1. To scan the competitive environments of General
Motors and Ford.
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2. To identify the strategies adopted by General
Motors and Ford.
3. To identify the business models of General Motors
and Ford.
4. To compare the strategies and business models of
General Motors and Ford.
METHODOLOGY
The methodology used in this paper comprises two main
steps. First, collecting relevant secondary data and
information for each company from published journals,
books, websites, case studies and annual reports. And
second, comparing the two companies by assessing the
commonalities and differences of each among their
strategies, business models, competitive environments,
and their financial positions in the market and their market
share in the automotive industry.
COMPANY BACKGROUND
Ford
The Ford Motor Company is an American multinational
automaker, headquartered in Dearborn, Michigan. It is
directed by William C. Ford, Jr. as an Executive chairman
and Mark Fields as a President and CEO to Ford.
(Wikipedia, 2016)
The company was found by Henry Ford and was
incorporated on June 16, 1903. Ford is a global automotive
industry leader. It manufactures and distributes
automobiles across all the world. Ford was the first behind
the idea of mass production. Ford's ability to make
automobiles affordable for the masses is cited as a driving
force behind both the automobile industry and the creation
of a middle class in America. Ford introduced methods for
large-scale manufacturing of cars and large-scale
management of an industrial workforce using elaborately
engineered manufacturing sequences typified by moving
assembly lines; by 1914 these methods were known
around the world as Fordism. (Letha, 2013)
With about 199,000 employees and 67 plants worldwide
(Ford Motor Company, 2015), the company‟s automotive
brands include Ford and Lincoln. The company sells
automobiles and commercial vehicles under
the Ford brand and most luxury cars under
the Lincoln brand. In addition to trading motors, Ford
affords financial services through Ford Motor Credit
Company. Ford products are mainly automobiles, luxury
vehicles, commercial vehicles and automotive parts,
perhaps no longer, in the past it has produced tractors.
However it provides other services such as automotive
finance, vehicles leasing and vehicles service. (Wikipedia,
2016)
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International Journal of Management and Social Sciences Research (IJMSSR)
Volume 5, No. 5, May 2016
Ford went public on Jan. 17, 1956 when Ford motor stock
had been traded as “F” on the New York Stock Exchange
NYSE and become one of the world's most widely held
and most actively traded. The 1956 IPO was a rousing
success. (Henry, 2003)
While Ford is publicly listed on the NYSE, the Ford
family remains controlling it. Although they have minority
ownership, but the special class of stock “Class B” voting
stock - which was introduced to circumvent the
inheritance taxes - represented only 5% of the company
had entitled them to the 100% of the shareholder votes.
Today the Fords collectively own less than 2% of the
automaker, but they remain firmly in control with 40% of
the voting power. (Muller, 2010)
Besides Ford‟s own business, it possesses also the
Brazilian SUV manufacturer, Troller, and the Australian
performance car manufacturer FPV. Additionally, Ford
owns a 2.1% stake in Mazda of Japan, an 8% stake
in Aston Martin of the United Kingdom, and a 49% stake
in Jiangling of China. It also has a number of joint
ventures in China (Changan Ford Mazda), Taiwan (Ford
Lio Ho), Thailand (AutoAlliance Thailand), Turkey (Ford
Otosan), and Russia (Ford Sollers). (Wikipedia, 2016).
General Motors
General Motors Company (GM) is an American
multinational enterprise headquartered in Detroit,
Michigan, USA. It plans, manufactures and offers autos,
hybrids, trucks and vehicles parts. It also offers autos and
trucks to merchants for consumers, including day by day
car rental organizations, leasing organizations, and
governments. It also offers associated security and
mobility solutions and information technology services.
The company through its auxiliary, General Motors
Financial Company, Inc. gives car financing services. It
has around 215,000 employees and present in 6 continents.
It has more than 20,000 merchants in 140 nations (General
Motors, 2016).
There are 9 distinctive automotive brands owned by
General Motors Company, namely, Chevrolet, GMC,
Buick, Cadillac, Opel, Vauxhall, Holden, Baojun and
Wuling and Jiefang. In 2015, GM delivered over 9.8
million vehicles world-wide, earning a total revenue of
152.4 billion US dollars, and a net income of 9.687 billion
US dollars (Yahoo.Finance, 2016).
The beginning of GM can be followed back to the year
1908. Its founders include William C. Durant and Charles
Stewart Mott. It became a public company and was
incorporated in the year 1916, and is listed in several stock
exchanges like in New York, Toronto, Frankfurt,
Euronext, Paris and London (Reference for Business,
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2016). The current CEO of GM is Mary T. Barra who was
elected as CEO in January of 2016 and had been serving
GM as their General Manager since January of 2014
(General Motors, 2016).
COMPETITIVE ENVIRONMENT
Michael Porter has developed the Five Forces analysis
model for analyzing the external factors in firms‟ industry
environments. In this paper, this analytical model is used
to analyze the competitive environment of GM and Ford.
The following summarizes the automotive competitive
environment using Porter‟s five forces analysis (Ferguson,
2015; UK Essays, 2015).
Competitive Rivalry: This refers to the competing firms
that influence the industry environment. The automotive
industry is highly competitive. Some of the top
competitors of GM and Ford include Toyota, Chrysler,
Honda and Nissan. The figure on next page shows the US
market shares of the top automobile producers as of
February 2016.
The tough competition arises from rivals who aggressively
innovate and market their products. Also, the automotive
industry has high exit barriers, which means that firms
would rather keep competing in the industry than to close
their business, because of the high costs and investments.
Bargaining Power of Customers: The bargaining power
of buyers in the industry is high. This is because of the
increased use of technology and globalization. Customers
of this industry have moderate switching costs that they
can easily transfer to other firms. In addition, the moderate
availability of substitutes gives customers the option to
move away from Ford and GM. Auto-buyers these days
know what they are buying and how much they should pay
for what they buy. This induces dealers to provide extreme
discounts giving the buyers higher bargaining power.
Bargaining Power of Suppliers: The bargaining power of
suppliers in the industry is moderate. The moderate overall
supply and moderate population of suppliers give suppliers
significant but limited bargaining power on firms like Ford
and GM. Suppliers have the power to reduce quality or to
raise prices. But the number of suppliers in the automotive
industry is enormous. For Ford, the suppliers‟ bargaining
power is weakened because of its backward vertical
integration through the Ford River Rouge Complex.
Through the Complex, Ford produces some of the
materials it uses to manufacture cars and related finished
products. For GM, raw materials and machine parts
suppliers‟ threat is very low, because there are a lot of
suppliers for those parts.
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Source: www.statista.com
Threat of Substitutes: The threat of having substitutes is
high in this industry due to the recent high increase in oil
prices, lack of credit and increased environmental
awareness. There are considerable substitutes including
public transportation and bicycles. In addition, the
switching costs are low because, even though Ford‟s and
GM‟s customers can shift to using these substitutes, they
cannot easily do so when they are still paying for their car
loans. Also, in many instances, these substitutes have
lower performance than the companies‟ products in terms
of convenience and safety.
Threat of New Entry: The threat of entry in the industry
is weak. The barriers of entry are high and the capital
available is minimal. These companies committed to huge
spending to set up and maintain their businesses and
facilities. These costs are a barrier to entry that weakens
the threat of new entrants. In addition, it is costly to
develop a strong brand comparable to Ford‟s and GM‟s,
thereby making it difficult for new entrants to effectively
compete against industry giants.
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COMPANY STRATEGIES
Ford
The organization of Ford is using differentiated strategy in
their businesses. This strategy is to target two or more
segments by developing marketing mix for each segment.
Ford Motor Company is designed to appeal to many
different types of consumers and to satisfy many different
needs in the form of economy cars, sports cars, luxury
cars, station wagons, vans, trucks, and so on. Ford
produced Ford Fiesta car, which was focused on young
people and ladies. (Letha, 2013)
Ford has applied Six Sigma to control systems by
eliminating data-driven defects. Particularly, Ford has
been regarding DMAIC approach of Six Sigma projects
that includes following steps of the process; which are
Define, Measure, Analyze, Improve and Control
(Thompson, 2007).
Ford has been using different promotional strategies to
maintain their marketing edge over the competitors. The
advertisements and logos with attractive strap line,
amazing designs and advertisement are giving edge over
competitor‟s activities. Ford‟s promotional strategy has 2
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International Journal of Management and Social Sciences Research (IJMSSR)
Volume 5, No. 5, May 2016
types of promotion such as above the line promotion and
below the line promotion (Letha, 2013).
By means of its promotional strategy, Ford builds long
lasting relationships with its previous and loyal customers
as well as with new potential customers. Even though Ford
has no longer been sponsoring sporting events, this
exclusive opportunity gave them a unique advantage in the
competitive market. Sponsorship times had helped them to
tap the sports passion of the customers and soared its
brand name and image high in the eyes of fans and
customers alike. They had been successfully handling the
promotional side of the business with tactics to develop
their brand image. And recently Ford has introduced
certain changes in its promotional strategy notably it will
use “push” strategies for traditional segments and “pull”
strategies for new segments (David, 2015).
Sponsorship campaigns play a vital role in Ford`s public
relation strategy and has two major objectives. One is to
reinforce and further build the Ford brand recognition, the
other is to achieve a good connection between Ford and its
potential customers (BusinessCaseStudies, 2016).
Ford has implemented its own pricing strategies, which are
more demand, or market based pricing. Ford used new
strategies called “Blue Tag”, the reduction in the
recommended list price of small and medium cars in
addition to reducing the dealers‟ discount; is expanding
from its large car to the small car range. The price
reductions are between 6%-15% on the Ford Fiesta. The
Ford Motor Company is setting two types of price, which
is price skimming and penetration pricing in the market
industry (Letha, 2013).
Ford applies penetration-pricing strategy wherein prices
are artificially low in order to attract a large number of
buyers quickly and to gain market share. This is a good
strategy to use if there are many competitors. Profits are
not a concern under this strategy. The most important
thing is to get your product known and worry about
making money later. (David, 2015).
Ford's pricing strategy for passenger vehicles (PV) and
commercial vehicles (CV) is set to strengthen the brand's
appeal for retail customers and is called up to bring
benefits to ultimate consumers. Ford strives to maintain a
balance between quality and technically advanced features
that eventually results in a competitive price. The
reasonable prices of the products and its capacity of saving
via low fuel consumption and low maintenance costs have
also made it a favorite with low-income group of
consumers (Bhasin, 2016).
Business challenges such as minimizing warranty costs
related to software, managing the growing amount of
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software in vehicles, reducing escalating software
development costs require Ford to come up with a new
way of doing business, a new way of testing, validating
and managing the software content that goes on Ford‟s
vehicles. This has been a key deliverable affecting future
quality as well as the future cost of Ford products. Since
reprogramming a controller is much quicker than a
hardware replacement, this reduces the cost of repairs. It
also eliminates concerns about a part being out of stock, or
the customer having to leave the car overnight, or the
introduction of a squeak or rattle during the repair
(Siemens, 2016).
Ford classified the brand names of midsize, elegant and
generous cars by research techniques. Ford uses the blue
oval that designates Ford brand to determine price and
value added to the cars. The Ford oval symbol has a
historical value for Ford Motor Company and it is one of
the most recognized trademarks in the world. (Letha,
2013)
Source: www.slideshare.net
General Motors
General Motors is seen to be the largest automobile
producer in the world since 1908. In the beginning, GM‟s
strategy used to be product differentiation, by having a
wide variety of vehicles. This strategy was indeed planned
as mentioned by GM‟s CEO in the 1920‟s that “GM
makes a car for every purse and purpose”. This strategy
proved to be successful up until the 20th century where
level of competition rose significantly and different types
of threats emerged. It seemed to be no longer effective
because GM couldn‟t give each brand the resources and
attention they needed (Boe, Ketler, O'Keefe, Rubenstein ,
& Siverio, 2009).
GM reduced the expenses of some brands like Saturn and
Hammer. They also reduced the pay of employees. GM
also had a cultural change where they reduced the number
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International Journal of Management and Social Sciences Research (IJMSSR)
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of board members which was done to improve the day-to-
day activities and the efficiency of employees (Hashim,
2014).
According to Mathew Norton (2015), GM was compelled
to take on certain strategies due to the economic crisis in
recent years. However, GM followed three main strategies
and was able to recover its market share and remain one of
the top three auto-producers in the world. Some of the
strategies GM followed were that it started to consider
green movements and the effects of global warming on
society. It thus is aiming at being more sustainable and
environmentally friendly and was forced to catch up with
auto-producers who were environmentally friendly. GM
began to consider fuel efficient vehicles including electric,
hybrid and FLEX fueled automobiles.
Lower cost strategy, which is the ability of a company to
design, produce and market its products more efficiently
than its competitors; and differentiation strategy, which is
the ability of a company to provide unique and superior
value to its customers; remained the mostly used strategies
by GM over the years. GM follows different strategies like
applying technology to its vehicles, producing at the
lowest cost possible, improving the R & D of the
company, and increasing its market share and global
presence. GM‟s long-term strategies include reduce
recalls, increase innovation and improve technology,
increase market share, remain one of the top 3 auto
producers in the US, engage with the community and
perform social responsibility (Whalen, 2014).
Source: www.slideshare.net
COMPANY BUSINESS MODEL
Ford
In 2008, the Ford Motor Company established its "One
Ford" business model; a comprehensive plan to sell
numerous models globally, where previously some models
were designed for local markets only. Ford has recently
closed down or divested itself of several makes including
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Lincoln, Volvo, Jaguar and Land Rover. As gas prices
surged to the highest levels during the latest financial
crisis, Ford found itself needing to change its business
model to remain solvent and to respond to changing
customer tastes. At the end of 2008, Ford management
announced the One Ford business plan known formally as
"One Ford: One Team, One Plan, One Goal" identifying
that the company needed to streamline its operation by
unifying its global business (Keegan, 2016).
At Ford, sustainability strategy is integrated with the
business model to create value consistent with the long-
term preservation and enhancement of environmental,
social and financial capital. Leading to being consistent
with Ford‟s aim to deliver Great Products, a Strong
Business and a Better World (Ford Motor Company,
2015).
Ford believes that by reducing the number of brands and
consolidating the number of vehicle platforms upon which
various models are built, it can become more efficient and
more innovative. In 2007, Ford had 27 different vehicle
platforms across the world; in 2015, it has 12 with a goal
to consolidate down to 8 by 2019. Ford embraced the
hybrid electric vehicle trend and produced hybrid models
of several of its vehicles, such as the Escape and Focus.
Revenue and profit generation through vehicle financing
and leasing arrangements is critical to Ford‟s business
model. Ford operates Ford Credit; this financing arm
serves to provide purchase and leasing financing to the
company's customers. In 2014, Ford Credit
generated pretax profits attributable to Ford of $1.9 billion
(Strider, 2015).
General Motors
GM‟s business model is said to design, build and offer
automobiles, to reinvest in a world-wide perspective
(Whalen, 2014). GM‟s purpose began with the statement
“We are here to earn customers for life”. They look to
invest in their brands worldwide to create desire and
trustworthiness. They look for new technologies to use in
their vehicles for people to enjoy. They look to encourage
the GM team in serving and developing the community
(General Motors, 2016).
To induce further development, GM is making strategic
investments to produce more innovative, efficient and
technological vehicles. Another way of moving ahead and
staying in business is by cutting huge expenses through
discontinuing some brands like Oldsmobile, Pontiac,
Daewoo, Saturn, Hummer and Saab. GM also looks to
serve the community in a positive manner by producing
fuel efficient and environmentally friendly vehicle like the
Chevrolet Volt, which won awards for outstanding
efficiency and innovation (Strider, 2015).
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International Journal of Management and Social Sciences Research (IJMSSR)
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GM uses the Pyramid Profit Model as its business model,
as it offers a scope of products within the same market for
all levels of consumers, from inexpensive to luxury.
General Motors offers different brands of cars, for
different consumer classes. To make sure that this model
generates profit, a company must first start with a base
level, “firewall” product, where the product is sold at a
very low price, and with as little resources as possible, so
that no competitor can compete with the price. The
company then builds up the pyramid by offering different
products at higher prices to different consumer classes,
ending with luxury products at the very top of the
pyramid. The company makes the most profit at the top of
the pyramid and vice-versa (Kringler, 2014).
For GM, Cadillac is at the top of the profit pyramid, which
is for the top of the line buyers. Chevrolet is at the bottom
of the pyramid, which is for the bottom of the line buyers.
Clearly, GM recognizes that keeping customers through
the strength of their brand is a strong profit model (Hebert,
2015).
COMPARISON OF STRATEGIES AND
BUSINESS MODELS OF FORD AND GM
Ford and GM are two of the largest market share leaders in
the US (Big Three) but not worldwide. Toyota is first,
followed by Volkswagen, then GM and in sixth place
stands Ford (Strider, 2015). Both Ford‟s and General
Motors‟ main business is manufacturing automobiles for a
global marketplace. Their product mix includes electric
cars, hybrid vehicles, automobiles, light and heavy-duty
trucks (Sousa, 2011).
The corporate cultures of the social media strategy are not
similar For Ford and Gm. The former uses the social
media not only to communicate but also to connect and
listen to its customers. However, GM does not rely on this
new world of social media. Ford is more active on social
media than is GM (Carter, 2012). In 2016, Ford has (app.
3.5m) followers in Facebook, and GM has only (app.
700k).
Social responsibility is a major interest for Ford and GM.
General Motors created the GM Foundation as the source
of their social responsibility work. GM focuses on
Education, health and human services, environmental and
energy and Community Development (General Motors
Company, 2011). Ford maintains its annual Sustainability
report focusing on economy, environment and society
(Ford Motor Company, 2011). Bill Ford Jr. states
“Creating a strong business and building a better world are
not conflicting goals – they are both essential ingredients
for long-term success.” (Ford Motor Company, 2010).
According to Miller (2013) when Ford and GM found that
their brands were too costly and inefficient and lacked
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compelling marketing to stay profitable, they adapted the
“less for more” strategy that implies having less brands for
more profits. They were to cut slacking brands and refocus
on their core to rebuild a strong portfolio after the latest
economic recession in US.
GM has led the US auto industry having a high market
share of 50% for more than half a century with its low-cost
leadership before Ford‟s Model T and his cost leadership
strategy made Ford the low-cost leader in manufacturing
autos. However, GM‟s differentiation strategy later was
the reason that spelt doom of Henry Ford‟s Model T
(Aslam, 2015).
The main difference between the two companies is the
way they make profit referring to their business models.
Ford follows the “One Ford” plan, where it reduces the
number of brands it owns and operates around the world
(Keegan, 2016). To achieve one overall company target,
Ford‟s message is clear that there is one team that will
implement the one plan in order reach it.GM on the other
hand owns and operates a large number of differentiated
brands around the world, following the „Pyramid Profit‟
business model. They have different vehicles for different
market segments. (Kringler, 2014)
The two companies‟ profit generation comes from their
financing and leasing activities as well, making it an
important part of their business models. Ford has the Ford
Credit and GM has its General Motors Financing
Company. Ford and GM have been interested in producing
fuel efficient cars by using new technologies. Ford
produced some hybrid models such as the Escape and
Focus. GM produced their version of hybrid vehicles like
the Chevrolet Colt which won awards for exceptional
efficiency and invention (Strider, 2015).
RESEARCH FINDINGS AND COMMENTS
Ford has been seen to follow the cost leadership strategy,
while GM follows the differentiation strategy. As
evidenced by their financial statements (2013-2015), both
maintain their strong financial performance, which can
categories them as two of the „big-three‟ auto-
manufacturers in the US, superior to Chrysler.
With regards to their market share, although Ford and GM
have discarded some of their brands like Ford when it sold
Jaguar and Land Rover, and GM sold its shares in Fiat and
Suzuki they both maintained the US auto market dominants.
The social media is a very trending phenomena in the whole
world these days, Ford is doing very well with its socializing
with the people in general and serving their customers in
precise directly through questions and answer all over the
social media channels like Facebook, Twitter and Instagram.
However, GM needs to get more socialized on media and be
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International Journal of Management and Social Sciences Research (IJMSSR) ISSN: 2319-4421 44
Volume 5, No. 5, May 2016

closer to customers in order to manage the direct

communication aligned with new technologies.

Ford and GM financing and leasing activities allow them

to generate a substantial profit in addition to their core
business of manufacturing vehicles.

Both Ford and GM employ large numbers of employees,

operate world-wide and are looking for different
techniques to power up cars other than fuel, which is why
both have been interested in successfully producing their
hybrid cars.

Even though both operate in a similar manner and are

global, their way of making their money is quite different.
Ford believes in producing one ford and sell it to the
world. GM believes in producing a number of brands at
different prices and for different types and levels of
customers.

FINANCIAL DATA

Source: Yahoo! Finance.

(Balance Sheets and Income Statements of Ford and GM)

1. Profitability

2. Liquidity

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International Journal of Management and Social Sciences Research (IJMSSR)
Volume 5, No. 5, May 2016
3. Leverage
3-yr Stock Prices
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