Research Report: Company Case Study and Industry Analysis
Research Report: Company Case Study and Industry Analysis
Part 1- Applied Supply and Demand Analysis
1.1 Company Overview
The current decrease in the overall gasoline prices has struck many great organizations, but the impact on Truck/SUV, and car sales is drastic. Many automotive manufacturers and producers have launched new manufacturing units for the alternate fuel vehicles and the decrease in prices has caused shifts in the overall demand for these hybrid and alternative fuel cars. The company chosen for the analysis is General Motors that are an American multinational corporation with headquarters in Detroit, Michigan. The company has thirteen brands including Alpheon, Buick, GMC, Chevrolet, Cadillac, and others. The paper discusses the operations of the brand of General Motors named Chevrolet .
Chevrolet is the division of General Motors that was formed back in 1911 by Louis Chevrolet and William C. Durant (founder of General Motors). The motive and aim of the company are to provide services and products featuring high-end technology for affordable cars and trucks. The adoption of the technologies helped Chevrolet to build its name throughout the world. The company is fortunate to provide affordable and high-performance cars to its customers. The company holds the edge to produce unique and iconic car designs that represent the culture of America. The company provides its cars to the worldwide market except Oceania. The company offers different ranges of cars, performance tools, crossovers and SUVs, trucks, commercial vehicles, and electric vehicles including Chevrolet Volt. The company started producing electrical cars to facilitate a safe and secure environment. The Chevrolet Volt is an electrically driven car that leads the group in the second century. The recent decrease in gasoline prices has struck the sales of Chevrolet Volt, but the company has not lost hope in its masterpiece .
The report by Paul A. Eisenstein about the recent decrease in gasoline prices have resulted in a layoff process by General Motors in two plants in Michigan. The reporter states that the plants that face the layoff issues are the ones that produced the fuel efficient cars, pickups, SUVs, and different multipurpose vehicles (Eisenstein, 2014). The report also highlights the shift from manufacturers to smaller and more fuel-efficient vehicles (alternate fuels) due to the recommendations of industry and economic analysis. All these forecasts and recommendations have been ineffective since the prices of gasoline have fallen all over the world. The decrease in gas prices has led to a decline in demand for small cars, light trucks, high-tech vehicles, and other battery electric vehicles. The sales of all the alternate fuel cars have been tumbling in the last few years .
1.2 Supply &Demand General Industry
The supply and demand curve is in equilibrium, and the quantity demanded Chevrolet Volt an alternate fuel car is constant. The automotive company (General Motors) started shifting their lines and added new manufacturing units for Volt to earn more profits (Ball & Seidman, 2011).
Figure 1 - S&D General Industry (before decrease in gasoline price)
Source: (Ball & Seidman, 2011).
Now let us consider the effects of a decline in the price of gas and its impact on the automotive industry.
Figure 2 - S&D General Industry (after decrease in gasoline price)
Source: (Ball & Seidman, 2011).
The reduction in gasoline prices causes the demand curve to shift from D0 to D1 (i.e. a shift on the left) that results in a decrease in prices for Chevrolet Volt (from P0 to P1). The quantity demanded the alternative fuel SUV and Trucks (Chevrolet Volt) also fell with the shift in the demand curve. The primary reason for the decline in quantity demanded is the elasticity, customers of alternate fuel cars know that the gasoline prices are down, and they can get their favourite cars at lower costs, and their maintenance is also low. The availability of substitutes and low switching costs allows the customers to stop purchasing alternate fuel vehicles. Therefore, the damage to General Motors is higher.
Part 2: Company and Industry Analysis
2.1 Business Outlook
General Motors is one of the largest automotive company in the world and provides quality products under different brand names. The products range from Truck and SUVs, customizable cars, and alternative fuel vehicles. The analysis of the general outlook of General Motors gives a fair idea that the company is efficient in its operations and consistently earns revenues greater than other competitors. The key performance indicators also show a significant increase in the profit margin for 2015with an increase by 6.36 percent. The company is also able to earn a return on the investments and equity. The year-end revenues of the business were 152.36 billion and the gross profits are equal to 18.30 billion. The company maintain its cash and cash equivalents and can provide exceptional dividends to its stakeholders. The current stock price for General Motors is 29.63 (Yahoo! Finance, 2016). The overall growth of the business is maintained, and future speculations are also active for General Motors (GM). Analysts believe that the stock of the company will eventually increase in the upcoming years, and they recommend buying the shares. The business operations of General Motors are more customer-centred, and the company provides better and more efficient cars for the customers .
The biggest competitors of General Motors are Ford Motors, Toyota, FCA US (especially in the US), and others. The comparison of the two competitors one across the globe (i.e. Ford Motors) and one in the US (i.e. FCA US) explains that General Motors is the market leader in the US and is ranked second in the world after Toyota. The revenue generation, Net income, and EPS for the company is greater than Ford and FCA. The results show that the customers all over the world and in the US are satisfied with the products and services of GM.
Source:
2.2 Industry Type
General Motors operate in a pure competitive industry. There are many rivals and competitors in the market and the barriers to entry are almost zero. It means that the companies have to distinguish their products and services to make their mark and leave a position in the minds of the customers. General Motors is a giant in the Automotive Industry but the fact that other large organizations are also present to compete, and therefore, it is essential for General Motors maintain their image in the long run. The prices of the products and the product range (i.e. from big to small cars) provide the company to attract almost all the markets/customers.
2.3 Data Analysis
The analysis of the data includes profitability ratios, efficiency ratios, and highlights of 2015. The analysis is beneficial as it provides the quality of the business operations and also to aware the global investors about their investment decision.
Profitability Ratios
The profit margin for the company in 2015 is 6.36%, which shows that a progressive increase and is noticeable. The increasing profit margin is due to the increase in customer orientation and quality of the cars and services of General Motors. The operating margin also shows a positive increase that is the primary cause of the increase in profitability. Operating margins mean that the operations of the business are much more efficient than 2014.
Efficiency Ratios
Source: Yahoo! Finance. (2016).
The efficiency ratios are helpful to develop an understanding of the performance of the business regarding the resources available to the company. The return on assets shows an increase that represents that the company utilizes its assets in an efficient manner and can increase the productivity. The increase in productivity and efficiency results in higher profits, on the other hand, return on equity also increases. Return on equity presents the percentage amount of profits earned from the investments of the investors. The company is efficiently utilizing the equity and can collect more benefits from them.
Highlights 2015
Source: Yahoo! Finance. (2016).
The financial highlights of General Motors for the year 2015 shows that it is a productive year for the business with revenues of 153.36 billion and 9.69 billion as the net income available to common stockholders. The company flourished in its operations and increased the adoption of latest technology to facilitate their customers. The company can maintain its profitability and also expanded its product line to most parts of the world. The highlights suggest that the company can maintain its position in the market, and the investors are recommended to invest in the stocks. The expectations from the business are high for the future and therefore, higher returns are expected.
2.4 Conclusion
The overall analysis of General Motors, its division Chevrolet, and Chevrolet Volt explains that due to the decrease in gasoline prices the quantity demanded Volt has declined. The company has not lost hope in the alternate fuel car and has launched a new and more stylish model. The company believes that the production process may slow down, but the product line will not be reduced. The analysis of profitability, earnings, competitors, and a stock price of General Motors explains that the company is a success, and the investors must invest in the business. The profitability of the enterprise is maintained, and the future forecasts represent a consistent improvement in the coming few years. The company is advised to design and implement some effective advertisements regarding Volt as the gasoline prices will always fluctuate, and the car must be advertised to attract new customers. The company is also recommended to expand its business to other developing countries to increase the target markets and customers.
References
Ball, M. K., & Seidman, D. (2011). Supply and Demand. New York: The Rosen Publishing Group.
Chevrolet. (2016). Chevrolet Cars, Trucks, SUVs, Crossovers and Vans. Retrieved from http://www.chevrolet.com/
Eisenstein, P. A. (2014, November 14). Gas Prices Dent Demand for Fuel-efficient cars. Retrieved from http://www.cnbc.com/2014/11/14/gas-prices-dent-demand-for-fuel-efficient-cars.html
General Motors. (2016). General Motors | Offical Global Site | GM.com. Retrieved from http://www.gm.com/index.html
Yahoo! Finance. (2016). GM Key Statistics General Motors Company S Stock - Yahoo! Finance. Retrieved from http://finance.yahoo.com/q/ks?s=GM+Key+Statistics
