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What organizational changes must GM implement in the North American market to earn above average returns and improve its ability to compete in future, developing markets?

Case analysis focus on North American market Must first develop a successful domestic strategy to be able to compete internationally


- Reducing legacy cost with the United Auto Workers agreement

- Increasing vehicles resale value by reducing sales to fleet operations

- Sold off stakes as well as the General Motors Acceptance Corporation

To decrease exposure to failing international operations and to increase liquidity

Current Strategic Plan

Four Point Turnaround Plan 1. Reduce labour expenses 2. Cut legacy costs 3. Decrease production capacity 4. New designs and marketing strategies

Costs reduction do not guaranty successful competition GM must differentiate its products for customers to get a value-added sense of

Must appeal to needs and trends of local markets instead of using a global

Internal and External Analysis

Strengths -Extensive cash reserves
-Global network of suppliers and distributors -Low cost suppliers through competitive bidding process -Technological know-how for SUVs. -Only company to have invested in all 5 alternative fuel technologies -Developed internet distribution channels

Weaknesses -Poor corporate reputation for green technology -Customer perception of low quality -Bureaucratic processes create delays -Fixed investment in SUV production -Inadequate experience in smaller vehicle production Threats
Economy fluctuations affect sales -Devaluation of the American dollar -Increasing regulations on CO2 emissions and recyclable parts -Decreasing demand for SUVs -Increasing oil prices -Rise in commodity prices The Continuing Global Recession Intense competition

Increasing demand for smaller cars and CUVs -Emerging world markets -Reduce costs through JIT -Demand for environmentally friendly cars -Government subsidies -Increasing public awareness of green technology. Rising Demand for Hybrid Vehicles .

Exploiting Opportunities

Market for green automobiles

Shift in consumer preferences, government subsidies and regulation

Corporate reputation Bureaucratic decision making

Defending From Threats

Global supply chain system

Dollar devaluation Increasing commodity prices Solutions Implementation of JIT

Provide value to customers through other means

Porters Five Forces

Threat of New Entrants:
Low Car manufacturing takes extremely large amount of capital to enter. To compete at GMs level is next to impossible.

Bargaining Power of Suppliers:

Moderate GM has the largest market share in the US which could give it much power over suppliers but it has not used that and looks at suppliers and their needs as equal.

Intensity of Rivalry:
Very High GMs other divisions cannibalize their own sales as well as all others. Each company will do what it takes to real in customers

Bargaining Power of Customers:

High Tens of Millions of car buyers per year and over twenty companies to choose from. Public is increasingly drawn in by costly incentives.

Threat of Substitutes:
Very High GMs market share is continually dropping. Most other car makers offer higher quality and other benefits. Many substitutes available in the market

GMs Competitors

GMs Competitive Advantage

2004 Sales Revenue 2004 Sales Revenue Employees At 2004 Year-end

$193 Billion 324,000

$16.2 Billion 37,000

$170.98 Billion 384,723

$175.48 Billion 324,864

Business Level Strategy

Integrated BLS

Failed application
Trade-off between cost and differentiation Implications of unionized labour force and legacy costs

Corporate Level Strategy

Multi Divisional Structure Centralization of key processes Regions represent autonomous Strategic Business units

Brands are a subdivision of the SBUs with minimum control over processes
Minimal links to identical brands in different regions

Corporate Level Strategy

Problems with current structure : Structure focuses on cost reductions Direct conflict with the intended integrated differentiation/cost leadership strategy Brand level management is almost inexistent at the SBU level which results in lack of differentiation Regional SBUs do not have enough control over their regions.

Corporate Level Strategy

Alternative 1
Keep all brands but differentiate effectively Decrease model portfolios of each brand Engineer an organization change to make the company more flexible and able to select the right brand for the right market Increases product differentiation amongst brands and reduces interbrand competition

Marketing for each brand will be more efficient and customer loyalty can be captured
Each brand will have a more specific market trend to address thus will be more competent in predicting demand Lower inventory costs

Alternative 1

Alternative 1
Uses 8 brands to capture customer loyalty Enables brands to focus on specific market niches Allows for reaching economies of scale and scope throughout the whole organization No extensive organizational restructuring is needed

Slow process, would take long before we see if the differentiation efforts have succeeded As the market demand changes and market niches are exploited or eliminated, brands might start competing with each other once again Very difficult for GM to control all these brands consistently Organization structure is could result to be less flexible

Alternative 2
Divest some brands but keep rich model portfolios for remaining brands and reform the companys structure to provide each brand division with more autonomy
-Divest 4 brands: Buick Saab Hummer Pontiac -Restructuring in to a decentralized organization in order to put more emphasis on individual brands rather than regional divisions - Market research, internal and external analysis required in order to make this alternative successful - Unit sold by brand in 2010
Hummer: 56 789 Saab: 133 167 Pontiac: 145 183 Cadillac: 220 000 - growth of 290% compared to 2005 Saturn: 226 375 Buick: 403 690 - bright spot in China (280 000 units) but overall lost 13 billion in the past 7quarters GMC: 542 000 Chevrolet: 1 180 000

Alternative 2
Focused resources on less brands Distinct target markets which define brand equity More capital to invest in R&D for each specific brand More autonomy to brands which decrease decision making time

Shut down plants and lay off workers Loss of brand loyal customers Large amount of resources required to settle distribution contracts Initial decrease in sales and profits will affect shareholder value in the short term

Analysis of potential synergies within brands and corporate organization and market research to determine market segments for each remaining brand to target
Begin to phase out brands Begin organizational change Formulation of tactical and strategic decisions to be implemented Develop yearly goals, new corporate vision and mission Invest heavily in to R&D for new designs

Recommendations contd.

Introduce new brand images and marketing campaigns Begin to clear inventories

Distribution system alterations

Develop new concepts for vehicles within each brand and begin marketing Develop long term supply chain arrangements Monitor transitional period from old to new organizational structure

Recommendations contd.

Begin fixed investments in specialized assets required for future vehicles Realize potential synergies

Continuous quality control and customer feedback