The lack of interest in General Motors, Chrysler, and Ford (Big Three) in performing on the small cars market through innovative and competitive new products led them to losing market share, registering lower sales, losing their leading spots and facing bankruptcy (Bennett, 2013). Because of their lack of competitive edge in the small cars market, the Big Three were overpassed in North America sales by the Japanese competitors (Bennett, 2013). Another causes that produced the general effect of the decreasing sales figures in all three companies on the United States territory mostly was the advancement of the financial crisis starting with 2007 (Katz, MacDuffie & Pill, 2013). The general decrease of interest of the American consumers in investing in American produced cars preceded the economic downturn and it contributed to shrinking the market share of the Big Three (Katz, MacDuffie & Pill, 2013; Bennett, 2013).
The top three American producers’ lack of interest in designing competitive and appealing cars resulted in designing models such as Chevy Prizm, Chrysler Sebring or the revived Ford Thunderbird, considered as mediocre automobiles produced out of complacency while focusing on the SUV market (Bennett, 2013).
These three companies were heavily relying on their strengths, such as their presence and brand reputation in North America, their consistent line – up of dealers and plants and the cost efficiency compared to mass production of high quality products (IBS Case Development Centre “Catalogue”).
The changing environment, lifestyles and unforeseen events generated a climate wherein the three organizations had to face their weaknesses. One such weakness refers to the increasing power of the unions that requested higher salaries, increased pensions and unemployment benefits for the workers in the detriment of the quality of the issued products (Katz, MacDuffie & Pil, 2013; Bennett, 2013). An obvious weakness for all three can manufacturers was the low, mediocre quality of the produced automobiles, which drifted the customers apart from the American brands in the favor of the Asian cars, which speeded their decline (Bennett, 2013; Dornbach - Bender, Slade & Thorpe, 2009). A significant weakness was the overly dependence on the domestic market, with little reach in the international markets, which allowed the Asian companies to threaten the leading positions of the Big Three (Dornbach - Bender, Slade & Thorpe, 2009). Bennett (2013) indicates that the fact that General Motors or Ford allowed their individual brands to develop individually, developing distinct research, design or marketing has led to redundancies and unjustifiable expenses, which weakened the companies’ financial performances.
Referring at the external factors, the three organizations (GM, Chrysler and Ford) had growth opportunities of capitalizing on the external markets by distributing their automobiles to Asia or other emerging economic regions. Moreover, all the three organizations had the financial capabilities to support competitive product development and could rely on the international market not solely for placing their products, but also for sourcing. Talented labor market could have been found around the globe and local plants could have been placed in emerging territories, wherein the labor costs would have been much cheaper than in the domestic market.
A common threat that all three companies faced was the penetration of the Asian automakers in the United States market, which started to produce market share shrinks for the Big Three in the beginning of the 21st century. Moreover, the competitors’ lower wages and additional costs for the workers represented a threat for the Big Three that resulted in the low quality production of small cars (Bennett, 2013; Katz, MacDuffie & Pil, 2013). Currently, the research and development and the marketing strategies of their Asian rivals that produce feasible cars with attractive design for less money than the American producers due to the incorporated lean technology represents a major threat for the depreciation of their market share (Katz, MacDuffie & Pil, 2013). Another concern for GM, Ford and Chrysler is raised by the trends in the virtual world that have reduced the need for transportation for real life meetings, reducing the interest for driving for the new generation of potential drivers to 69,5% from 75.5% registered two years earlier (Bennet, 2013).
Currently, the organizations have recovered from the economic downturn and started registering profits (Bennett, 2013). The situation was redressed due to their interest on rethinking the small cars market, improving the quality of the produced designs, aware of the losses they accumulated from treating this market with low interest (Bennett, 2013). Moreover, Ford has changed its scheme of wage and additional contribution to its employees, reducing the salaries from $70 to $55 per hour, starting March 2009 (Dornbach – Bender, Slade & Thorpe, 2009). The Union of Automaker Workers (UAW) was also pressured by the U.S. Government to settle for lower salaries, making also GM and Chrysler competitive again (Katz, MacDuffie & Pil, 2013).
For answering the current trends and threats while seizing the opportunities that the external environment created, the three American automakers need to adjust to the consumers’ transforming needs. In the 21st century consumers evolve differently, influenced by the type of media that they virtually consume. Adjusting to different types of consumer needs implies adopting the agile management, which implies integrating a flexible design and engineering that would speed up the manufacturing and allowing diversification (Whyte, 2015). Moreover, market diversification, with General Motors, Ford and Chrysler entering the smartphones or virtual technologies market would represent a revolutionary business move, meant to assure these companies’ development by pursuing the diversification strategy. Other approaches of the market development can be found also in the Ansoff Matrix, namely the market development, which would imply placing the existing products on new markets (Meldrum & McDonald, 2007).
Works Cited
Bennett, D. (2013) GM, Ford, and Chrysler: The Detroit Three are back, right? Retrieved from http://www.bloomberg.com/bw/articles/2013-04-04/gm-ford-and-chrysler-the-detroit-three-are-back-right#p3.
Dornbach – Bender, R., Slade, B. & Thorpe, J. (2009) Strategic report for Ford Motor Company. Oasis Consulting.
IBS Case Development Centre. (n.d.) Catalogue. Retrieved from http://www.ibscdc.org/case-catalogues/Case_Studies_in_Strategy(Catalogue_III).pdf.
Katz, H., MacDuffie, J.P. & Pil, F.K. (2013) “Crisis and recovery in the U.S. auto industry: Tumultuous times for a collective bargaining pacesetter”. In: Collective bargaining under duress: Case studies for major North America industries, edited by Sanger, H.R., Clark, P.F., Frost, A.C. U.S.: Cornell University Press.
Meldrum M. & McDonald, M. (2007) Marketing in a nutshell: key concepts for non – specialists. Burlington: Elsevier.
Whyte, A. (2015) Integrated design and cost management for civil engineers. Boca Raton: Taylor & Francis Group.
