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Case Analysis

General Motors (GM): Its changing


Organization Design (OD).

Summary
Competitive forces around the world & lack of morale & goal
achieving mentality causes market leadership & sales decline
of GM motors in early 1980s last time after 1921.
Mismanagement & inappropriate 5 divisional organizational
approaches by Alfred P Sloan J suffered a loss. Lack of
commitment and wrong strategies by employer & employees
causes crash of this dynamic company. 6th CEO Roger
Smith developed 2 autonomous groups named BOC & CPC.
BOC focuses on design, production & sells where CPC
focuses on centralized authority, matrix & communication in
functional times. Traditional divisional design by CEO Alfred
creates massive corporate staffs & endless discussion but
fail to quick market response. Robert Smith the 6th CEO
reduces the number of staffs but also fail to control
declining market share. Jack Smith another CEO of GM
centralized purchasing & production & decentralizes
marketing but also fail to raise profit curve.

Critical Analysis

After world war-2 when political condition around the world


stabilized GM grew up. When Alfred P Sloan Js 5 divisional
theories falls short to quick response to market. Roger Smith the
6th CEO changes the organizational structure. Smith gives
authority to the managers to take any decision to regain GMs
competitive, growing & profitable state. In 1993 Robert Stample
replaced Roger Smith. But he was also replaced with in 2 years
because he was deliberate to management style & for slow
response. GMs market share falls due to lack of effective
strategies. Alfreds 5 division model increases the number of
staffs which response to market change & changed by Roger Smith
later on.
From Roger Smith to Jack Smith both of them tried hard but fail
to up warding profit curve due to taking wrong decision regarding
the organization strategy.

Q: 1) Identify the environmental forces that have


driven General Motors (GM) to change its
organizational design (OD).

There are a lot of environmental forces that have driven GM to


change its organizational design. They are as follows:
The sales and market leadership has declined in the early 1980s.
This sudden fall in their organizational performance has produced
an adverse impact on their overall organization morale and goal
achieving mentality.
Competitive forces throughout the world has also produced a
pressure upon GM. Being one of the leading car producers in the
world, GM believes that they have the expertise, technological
developments in manufacturing, smooth information processing
system. However they were challenged by competitors from Asia &
Europe.
Loss incurred in 1921 which again took GM into the back foot.

The change in organizational structure brought in further


operation of GM by the CEO named- Alfred P Sloan Jr., was
that the approach of divisional organizational structure which
was not at all appropriate at that moment of time where they
had just suffered a loss and by giving complete authority to the
each 5 divisions of the car production lines.
Mismanagement in organizational design, use of inappropriate
approach towards resolving a problem.
Wrong strategies applied in circumstance where necessary
changes were required to regain the market leadership as well
as increase sales.
Lack of commitment shown by the employees, managers and CEO
has lead to crash to such a dynamic company like- GM.

Q: 2) Have the changes in structure been in the


appropriate direction? Have they been misguided?
Explain your answer & your reasoning?
Well, there have been a lot of changes brought about by the
different CEOs in GM under their reign. First of all, Alfred
P Sloan Jr. brought the idea of developing a divisional
organizational structure competing product strategy giving
authority in each 5 division of car independently. But
increase in income has encouraged the buyers to buy
expensive cars like- Pontiac, Oldsmobile, Buick & Cadillac
rather than the cheaper cars of Chevrolet. Therefore this
change in structure has not been in the appropriate
direction. Here they were misguided in the sense that the
authority was completely given to the staff managers under
each divisions as a result there were no overall coordination
in the production and maintenance process. Bureacratic
style of organizational design was involved in his approach.

When Roger Smith cam to the reign as the sixth CEO of


GM. He came up with the idea of redesigning GMs
organizational structure with the specific purpose of
pushing decision making down into the operating divisions
and reducing the number of staff at corporate
headquarters. He developed 2 autonomous groups of
divisions of car line- BOC & CPC. Where BOC focuses on the
complete authority to design, produce and sell cars. And CPC
focuses on centralized authority, matrix and communication
in functional lines. He tried to use the marketing mix
blending marketing units, product design and purchasing into
a single unit.

However, though the above 2 approaches


developed by 2 different CEOs are mentioned
states negativity and positively towards the
organizations performance but one of them have
been appropriate in direction in the long run. Both
been misguided and led GM to suffer a great deal
in becoming the top in car producing industry.
However, now they are still the leading car
producers in the world due to more of
commitment towards work, technological
advancements has made work easier for the
workers. Competitive edge and cost advantage.

Q: 3) Discuss the possibility that redesigning the


organizational structure is actually an irrelevant
response to what ails General Motors (GM).
After the traditional divisional design, GM grew largest but
lost its way by implementing divisional structure. The
divisional structure as it evolved over time began to be
identified as an impediment to progress and market
response. One of the outgrowth of the structure was the
development of a massive corporate staffs, which when
created was supposed to provide expert advice and
consultation to the divisions. Staff members were making
major business decisions at that time. Endless discussions,
endless committee meetings at corporate headquarters also
produced adverse effects on the production criteria.

The relevant part of the case was that


when Robert Smith became the CEO, he
came up with the idea of redesigning GMs
organizational structure with the specific
purpose of pushing decision making down
into the operating divisions and reducing
the number of staff at corporate
headquarters. He created two autonomous
groups of production line- BOC & CPC.

But again when another CEO called Robert Stempel Came to


the power, GM even deteriorates even further making a
decline in market share of only 29% which is the lowest
ever in GMs history. His idea was to produce in a single unit.
However, last cam Jack Smith as a CEO, he focused on
enormous number of job cuts. Even though bureaucracy
persists, Jack smith produced massive efforts to make the
company more to market conditions and technological
developments. Centralizing some functions like- purchasing
& production, decentralizing other functions likemarketing. This is how it proves the possibility that
redesigning the organizational structure is actually an
irrelevant response to what ails GM.

Conclusion
The dynamic General Motors faces sober &
market headship declining since 1981 where
different CEOs tried to reorganizes its
organizational design. They used marketing mix
blending product design in a way to regain their
position. Unfortunately all of their efforts fall
short. Re-designing the organizational strategy
which should be practical & well suited for the
current market situation. GM have to motivate its
employees to work forward goals. Managers
should be clearly identified about the strategies t
regain proper stock price.