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General Motor s Strategic Analysis Automotive Industry The automotive industry is the industry involved in the design, development

, manufacture, marketing, and sale of motor vehicles. In 2007, more than million motor vehicles, including cars and commercial vehicles were produced worldwide. In 2007, a total of 71.9 million new automobiles were sold worldwide: 22.9 million in Europe, 21.4 million in Asia-Pacific, 19.4 million in USA and Canada, 4.4 million in Latin America, 2.4 million in the Middle East and 1.4 million in Africa. The markets in North America and Japan were stagnant, while those in South America and Asia grew strongly. Of the major markets, Russia, Brazil and China saw the most rapid growth. In 2008, with rapidly rising oil prices, industries such as the automotive industry, are experiencing a combination of pricing pressures from raw material costs and changes in consumer buying habits. The industry is also facing increasing external competition from the public transport sector, as consumers re-evaluate their private vehicle usage. The United States is the world s largest consumer market for light vehicles, passenger cars and light trucks. The United States auto industry is dominated by the Big Three or General Motors, Ford Motors and Daimler/Chrysler. These three account for roughly a little over half of the production of cars and light trucks in the industry. 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. In 2006 the Big Three accounted for 41.5% of light vehicle sales when compared to the top three foreign companies which accounted for 36.6% (Toyota, Honda, & Nissan). Overall the Big Three account for 54.9% of the U.S. market in 2006. This was down from 58.2% in 2005, 60.1% 2004 and 61.8% in 2003. This trend is expected to continue but to taper off in the coming years. Factors affecting the Automotive Industry (PEST Analysis) 1. 1. Political Laws and government regulations have affected this industry since the 1960s. Almost all of the regulations come from consumers increasing concerns for the environment and the concern for safer automobiles. 2. Economic Amrita School of Business General Motor s Strategic Analysis The automobile industry has a huge impact on every country s economy. According to various studies this industry is the major user of computer chips, textiles, aluminum, copper, steel, iron, lead, plastics, vinyl, and rubber. The study also showed that for every autoworker there are seven other jobs created in other industries. These industries include anything from the aluminums to lead to vinyl. 3. Sociocultural Today s society judges people on the type of car you drive. Society does not like to admit to this but it is very true. Manufactures know this happens and targets their markets by these thoughts. Anyone who drives a nice vehicle is thought to be wealthy. No one wants to be seen driving an unattractive piece of junk because of what other people will think of him or her. Consumers also just feel better when they are driving a nice or new car, if makes them feel better about themselves.

Cadillac. but opportunities as well. the focus is starting to turn towards the baby boomers children (Generation X) who are in their mid 20 s and 30 s. 88% went to the auto websites before going and taking a test drive. It manufactures its cars and trucks in 35 different countries and sells them under the brands of Buick. Global General Motors. the baby boomers generation has been the main target market for just about every product. 5. and innovation of GM people. Daimler Chrysler. Fueleconomy legislation is sparking the race. Chevrolet. BMW. 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. Saab.D. Hummer. Ford Motor Company. Toyota. GM will earn our customers enthusiasm through continuous improvement driven by the integrity. Business-to-business marketplaces have given the industry many opportunities because of the internet.000 people around the world. As of 2008. Holden. Volvo.000 new vehicle buyers. . Amrita School of Business General Motor s Strategic Analysis GM needs a sense of urgency regarding revising a strategic plan that incorporates the next generation of vehicles. According to Analysts. and Nissan Motor Company come together to create a new trade association created the Alliance of Automobile Manufacturers. Saturn. 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. the goals of the associations were to work together on public policy matters of common interest to provide credible industry information and data. and Wuling. GM has just too much at risk in not becoming an industry leader in alternative fuel technology. General Motors employs about 266.4. Technology The internet has affected just about every industry in the world and has also had a huge impact on the automobile industry. As of 2008. Right now. As stated. GM Daewoo. In recent years the company has endured significant financial turmoil. In today s global economy and highly competitive auto industry GM has no time to procrastinate. 6. Pontiac. Vision Statement The GM vision is as follows: GM s vision is to be the world leader in transportation products and related services. the automakers are looking at the younger generations. As their generation is getting ready to retire and spend less money. Mazda. five years from now Gen X will account for at least 30% of vehicle sales. The next several years will redefine GM. A study was conducted by J. Volkswagen. including a 38 billion dollar loss in 2007. teamwork. Demographics For many years now. The organization was to replace the American Automobile Manufactures Association that only consisted of American manufacturers. such as more efficiency and lower cost. Opel. GMC. Vauxhall. This is a critical time in auto industry with many threats. Power and Associates in 2002 and involved more 27. General Motors is the ninth largest publicly traded company in the world. The study showed that 60% of the buyers referred to the internet before making their purchases and out of that 60%.

poor quality. This means DaimlerChrysler has strong brands that are recognizable in almost every part of the world. It has used reverse engineering in the development of their products. and where all other industry competition strives to imitate. and environmentally friendly company. Thus Ford has been an innovator in the auto industry. Mercedes Benz. i. responsiveness. The new proposed mission statement will be as follows: GM will become an industry leader. Ford Motor Company Ford Motor Company is a global company with two core businesses: Automotive and Financial Services. vehicles that turn consumers into customers. To do this GM must portray an image that states that GM values what the consumer wants and what the environment needs. and hybrid. The DaimlerChrysler umbrella covers many well. and once again be the auto industry leader in sales and market share in today s global market. and create innovative. Mission Statement The current GM mission statements are as follows: Drive improvements in market share. electric. In order to overcome these potential threat. brands. sale and service of cars. development.known brands such as Dodge. revenue. Competitor s Analysis Amrita School of Business 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. At the same time provide GM stakeholders pride and financial incentives to remain with GM. Ford has been focusing on cutting costs to increase margins more than its competitors. people. GM must use these threats as opportunities. not a follower. Values Statement The auto industry just like the global economy is going through tremendous change. DamilerChrysler As the number two auto manufacturer in total revenues DaimlerChrysler has positioned itself as an industry leader. The Automotive business consists of the design. and cost effectiveness through the implementation of global common metrics and best practice sharing. Chrysler. My vision for GM is to be the industry leader in innovation. and Jeep.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. GM should consider mass producing a range of alternative fueled vehicles. quality. rising fuel prices. GM needs to change consumer perception of the company. The auto industry is being hit by a weak US and global economy. To regain lost market share that was lost to foreign competition. such as global warming. vehicles to innovative. from a dull.e. and social and political environmental concerns and issues. due to rising fuel prices. fuel cell. . manufacture. trucks and service parts. Environmental Analysis GM and the entire auto industry are currently challenged with the perfect storm. green. with this come many strengths. Listen to what consumers are saying directly and indirectly about GM s current products. and environmental worries. and take advantage of changing consumer buying h abits.

Saturn. Honda has won many awards for initial quality and customer satisfaction. Daewoo. In order for any automotive company to be successful from this point forward they must be Hybrid friendly and fuel efficient. Variety of Brand Names GM as I mentioned has been the automotive leader for the majority of the last century.Honda Motor Company Honda motor company is not your average Japanese car manufacturer. 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. Global Experience As explained above even with GM's recent decline they still have the market share and the experience to bounce back. This technology allows the vehicles to be tracked in the event of an emergency or theft. 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. 5. With the right decisions there is no reason for GM to not become the automotive leader it once was. Toyota has traditionally also been the leader in Total Quality Management or TQM. Their automobiles are reliable and generally fuel efficient. it lets the company reach many sectors of the globe in a choice of vehicle for customers. Weaknesses 1. Toyota has three major brands underneath the company umbrella. A large reason for that is the wide variety of quality brand names that appeal to all target markets. auto makers during the 1980s. Japan caught up the U. . They have been a worldwide company for nearly a century now and have established themselves as the global leader for most of them. Behind on Alternative Energy Movement This is GM's biggest weakness. Amrita School of Business General Motor s Strategic Analysis 3. GMAC Customer Financing Program Since its establishment in 1919 it has proven to be GM's most reliable source of revenue. GMC. and Holden. SWOT Analysis Strengths 1. Opel. 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. Toyota. 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. Lexus. and Scion. Pontiac. By having these three distinct brands. This has led to many problems including loss of market share and a decrease in company profit. By using the Kaizen theory of continuous improvement. Cadillac.S. It also allows the driver and or passengers the ability to communicate with OnStar personnel at the click of a button. They also have an increasing share in the Chinese market. Large Market Share Although GM's market share in the US has dropped it is still very much competitive at 26 percent. Buick. Honda has managed to elude the dominate keiretsu system in Japan and become one of the dominant automobile manufactures in the world. 4. Hummer. Honda has a reputation for producing high quality products from cars to motorcycles. Their research has afforded them competitiveness in innovative products. There are many strengths to Honda. 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. 2. Originally know for motorcycles. Saab.

Develop New Vehicle Styles and Models This is an opportunity that will never be satisfied. Poor Organizational Structure As we can see in exhibit 1 of the case GM's organizational structure seems to be too vertically integrated. which proves their needs to be more emphasis put on foreign markets. 2. Opportunities 1. however they once again cannot rely solely on financing in order to turn profit. .2. 4. Stagnant Profitability Looking at GM's profit we see that they are certainly struggling with respect to the size of their company. Overly Dependent on General Motors Acceptance Corporation(GMAC) Financing GM has become too dependent on its financing program. Alternative Energy Movement Amrita School of Business General Motor s Strategic Analysis It is obvious that GM was behind its competition with regards to the research and development of hybrid vehicles. 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. 6. Granted it is a great strength for GM. the seriousness of the matter is certainly apparent. 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. Threats 1. 5. 4.5% and the ROE has dramatically decreased over the recent years dropping to 10% in 2004. what is in today will be out tomorrow. 3. Although. 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. Poor Credit Status GM's credit status has like everything else has been steadily declining. Overly Dependent on US market GM has become too dependent on the US market and must take advantage of the opportunity to expand globally. an equal opportunity will usually emerge as is the case here with GM's opportunity mentioned above. This is a situation that shareholders will not be pleased with. especially if they want to compete with Honda and Toyota who are rapidly growing. Their profit margin was about 1. As you will find with most threats. sales have drastically decreased due to the lack of fuel efficiency. 3. meaning that GM should always be attempting to develop the automotive world's most popular vehicles. 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. 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. Low Interest Rates With the right marketing strategy the low interest rates have the potential to generate an immediate increase in sales. The rise in fuel prices has played a significant role in creating the opportunity for development of both hybrid and more fuel efficient vehicles. Their current ratio is just barely above 1 and their acid test is even lower. and as we know. Recently GM saw an increase in the Chinese automotive market. I don't see them getting denied based on their credit at this point. Rising Fuel Prices With GM being a large producer in both trucks and SUV's. Continuing to Expand Globally. The competition is becoming too strong to focus on just one country. 2.

One of the most efficient ways to assess competitive issues is to consider Michael Porter's five-force analysis. 1. The competitors are compared to one another constantly. and (5) bargaining power of suppliers. Nevertheless. Consequently. Rivalry between existing competitors With the rise of foreign competitors like Toyota. In recent years there has been significant market share variation. entry is currently a weak threat to profitability. like many large companies with quality employee health care benefits. (2) threat of entry by new competitors. Firms compete on both price and non-price dimensions. A change in the price of a complementary . trucks or SUVs.e. suggesting few real substitutes (e. without taking away from the quality of the product. 3. All the companies make cars. The price competition erodes profits by drawing down price-cost margins while non-price competition (e. Price pressure from substitute or complementary products While five-forces do not directly consider demand. bus and rapid transit).3. 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. (3) price Amrita School of Business General Motor s Strategic Analysis pressure from substitute or complementary products. 1985) has highlighted five such factors: (1) rivalry between existing competitors. 2. Steel Once again this threat affects the entire automotive industry and forces each company to cut manufacturing and production costs as much as possible. Porter (1980. One would expect the production of automobiles to require significant economies of scale. new car rebates and interest free loans) drives up fixed cost (new product development) and marginal cost (adding product features). and if it does not. 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. another indication of rivalry and its very strong threat to profits.g.g. an important barrier to entry. Increased Health Care Costs GM. Although new cars generally are slightly price elastic. While the evidence suggests that economies of scale in the auto industry are substantial. 5. Honda and Nissan in the 1970's and 80's. barriers to entry that tend to protect established firms. it does consider two factors that influences demand substitutes and complements. 4. rivalry in the American auto industry has become much more intense. however they are now experiencing problems as more and more people begin to collect. is experiencing a large financial hit that only gets worse as time continues. There are. however. Rising Supply Costs. The new entrant would have to achieve substantial market share to reach minimum efficient scale.. Threat of entry by new competitors The presence of new firms in an industry may force prices down and put pressure on profits. there are also indications that large size may not be as important as commonly assumed. Pension Payouts. Part of this threat is their own doing and the other is simply unavoidable. GM is responsible for providing generous pension benefits to its employees. One of the other reasons there is such high rivalry is that there is a lack of differentiation opportunities. 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.. i. (4) bargaining power of buyers. which at the time seemed like a great idea.

the interest went up by the Federal Reserve to quell the stock market and a severe stock market decline following the .6 billion in 2007 from 193. gasoline. On balance. In 1911. The cost of these inputs can have a significant effect on profitability. the only supplier of labor. The rising price of gas. customers now have access to market information (prices and costs) from the Internet that enhances their negotiating power. switch to other auto dealers. But when you have many individual customers. GM had regained market share up $ 80 a share. at least in this segment of the American market. Customers can easily. Whether the strength of suppliers is weak.product (e. The following table summarizes the results of a five-forces analysis of the automobile industry. FiveForces Analysis FORCE THREAT TO PROFIT Internal Rivalry Strong Entry Weak Substitutes and Complements Weak to Moderate Buyer Power Weak Supplier Power Strong Core Competence The core competence of General Motors is innovation. one has to characterize supplier power. Individual consumers have some influence over price within a given dealership.5 billion in 2004. the overall impact on "industry" profitability from substitutes and complements is weak to moderate. engineered and commercialized the self-starter engine for the first time.6 billion. General Motors has been utilizing innovation in service ad technology to secure itself a dominant position in the automobile industry. In 2000. compared to net income of $ 2.8 billion in 2004.g.. 4. raw materials and services. it conceptualized. Because of this historical dominance by the UAW and the uncertain results of their current negotiations with the big three. it shown that General Motor Corporation revenue has been falling to $ 192. since 1908. and with little cost. 5. GM incurred a consolidated net loss in 2007 of $ 10. an important complementary product. Ford Motor and Daimler-Chrysler) whose most profitable models are energy inefficient pick-up trucks and sports utility vehicles. However in the case of hybrid vehicles. Financial Results Based on the GM s consolidate net sales and revenue. batteries. moderate or strong depends on how much bargaining power they can exert. is likely to affect some firms more than others depending upon the vehicle composition. Bargaining Power of Buyers Buyer power refers to the ability of individual customers to negotiate prices that extract profit from the seller. each representing a small proportion of total sales. has historically exerted a great deal of leverage over the benefits and wages provided by the big three. Then in 1926. Nevertheless. as a strong threat to profits. The auto manufacturers have large supplier networks that appear to exert little bargaining power. Other new car concepts include minicars such as Chevy Aveo. but little power over manufacturers. Recent rising fuel prices are likely to have a greater impact on the big three (GM. In the last 1990s. and tires) could have a significant impact on the demand for automobiles. Bargaining Power of Suppliers Amrita School of Business General Motor s Strategic Analysis Auto manufacturers require inputs-labor. the United Auto Workers (UAW). General Motors was unable to keep up to the pace of the market demand. its product Cadillac was the pioneer in devising a nationwide service strategy. parts. 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. Furthermore. This is the driving force behind its $190 above turnover. they will have little bargaining power with manufacturers and therefore pose a weak threat to industry profit.

and mid-sized cars. it fits the GM profile with maintaining the SUV portion. which General Motors most desperately needs to review possibilities. Due to this factor. Liquidation Implementations: Recommended strategies for General Motors would start with product development then market development. Retrenchment 6. Market Penetration 3. 2001 attacks. but must be a product that stands out from the crowd at the same time. The company has taken a large hit in recent years and needs to find a way back to the . mid-sized utilities.S.7 in 2004. Decreased in market share also due to sales declines in segment where GM has high volume such as large sport utilities. Restructuring 5. Last but not least is restructuring. 1. 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. The current stock market price of General Motors are falling between $28. 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. liquidation. Amrita School of Business General Motor s Strategic Analysis General Motors North America market share in 2007 fell to 25.September 11. 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. It has been falling down gradually in the past six years. and restructuring. 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 the ir U. Liquidation is important to GM because their assets are a lot higher than revenues. but now that times are changing their original target market is not looking for what they once were. because for so long they have continued with a tradition outlook for automobiles. Prime example of their idea for a Hybrid SUV. Product Development 4. which has been heard in rumors from Toyota about their next plan of action. An example of what GM could possibly do is produce a futuristic vehicle.5% compared to 26. which only include 2/3 of that market and their financing tactic wouldn't be as much of a risk. 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. 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. but allows the firm to stay with trend patterns. GM must also re-evaluate the market they are trying to approach. it affected a pension and benefit crisis at General motors and many other American companies.$29 per share. Market Development 2. Liquidation would clearly help out the financial parts of the organization. sales.

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. which causes a red flag for GM. The company needs to be reevaluated in many ways. it's just a matter of product development being maintained and refocusing products to the correct target markets . The company has a huge background proving that they can maintain being number one. 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. Evaluation: 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 Amrita School of Business General Motor s Strategic Analysis new and exciting. This is only going to be achieved if something drastic is changed.top. but GM has been strong for many years that it is very possible for the company to come above these issues.