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Brief Introduction
General Motors is one of the biggest names in the automotive industry for more than 100 years. The General Motors Company (GM) is a global American automotive group headquartered in Detroit – Michigan. GM is one of the finest and largest automobile designer and manufacturer as it markets, distributes and sells vehicle parts, vehicle, and financial services across the globe. General Motors was founded by Frederic L. Smith, William C. Durant and Charles Stewart Mott in Flint, Michigan in 1908. It was founded as a holding corporation for Buick and McLaughlin Car Company of Canada Limitedand was initially controlled by William C. Durant. Mary Barra is the existing CEO and Chairwoman of General Motors since January 2014 with Dan Ammann as the President.
GM is currently operating in 37 countries under 13 different brand labels and subsidiaries which include Chevrolet, Alpheon, Cadillac, HSV, Vauxhall, Opel, Wuling, Holden, GMC, Buick, UzDaewoo, Baojun and Jie Fang. With respect to its automotive sales, GM operates in four markets i.e. North America, European, , Latin America and Asia Pacific. GM also uphold the stake of 77% and 20% in GM Korea and IMM respectively. The coloration is also an active partner in various joint ventures and alliances such as FAW-GM, SAIC-GM-Wuling and Shanghai GM in China, Ghandhara Industries-GM in Pakistan, GM Motors India, GM-AvtoVAZ Russian, Isuzu Truck in South Africa and GM Motors Egypt. GM has its business in more than 120 countries with its 396 production facilities in 6 continents. In 2015, the production output of GM reached up to 9,958,000 with its vehicles. By 2015, GM employs 216, 000 employees all across the world. General Motors is comprised of five business segment, which includes GMIO (General Motors International operations), GMNA (General Motors North America), GMSA (General Motors South America), Opel Group and GM (General Motors Financials). The new GM formed after the bankruptcy of ‘Old GM’, which later acquired the majority of the stakes of the former including the name ‘General Motors’ (Regassa & Ahmadian 7). This paper focuses on analyzing the internal and external business environment of the corporation as well its strategic business focus.
Strategic Issues of General Motors
In the recent years, GM has undergone a startling turn due to shifting and dynamic economic conditions that are affecting the entire business arena. Economists argue that the US has been intentionally pushed into a recession that begins from the housing crisis of 2008. This caused a major financial depression leading financial institutions to implement stringent lending policies for individual and business clients. The situation gravely affected GM, since the business heavily relied upon short-term financial returns with large brand portfolio and complicated value chain. Facing this financial turmoil of crashing financial returns and falling sales, FM faced bankruptcy. Due to the large product portfolio, the GM faced the issues to maintain its strategic focus. Consequential to this chaotic situation, GM is still struggling to come out of this mess. In such attempt, the organization went under somber restructuring yet its profitability and stabilized stature is still questionable. The five major strategic issues that the organization is going through involve strategic decision making, product development, gap of quality between the offerings of GM and its counterparts, thinly spread, large and extremely diverse portfolio and lack of strategic focus (More n.d.).
Vision, Mission, Objectives, and Values
The vision of GM is to be the global leader in automotive products and service. The vision of GM is, ‘To Design, build & sell world’s best vehicles’. It states that ‘We aim to earn enthusiasm of our customers through continuous development driven by teamwork, integrity, and innovation of GM people’ (General Motors n.d.). General Motors does not uphold an official vision and mission statement; however, it defines its business purpose as follows. ‘GM Motors is here to earn customers for life’. It also states that “Making the best vehicles of the world can only happen with the greatest employees of the world. We take great pride in our work, and take great care to deliver positive ownership experience and exceptional cars to our customers around the globe” (General Motors n.d.). However, by critically evaluating the vision and mission of GM, it can be analyzed that GM’s focus is on its customers, products/services, market, technology, survival concerns, philosophy, concept of self-development, and employees. However, it does not mention about developing better public image of the organization, citizenship, and product focus. Apparently, these factors are to a greater extent present in its values and objectives that are mentioned below;
The new GM values state that it wants to make sturdy and strong commitments to its employees, customers, business partners, and all other foremost stakeholders. GM proudly states the 5 major principles and values which guides all its business activates. It includes the following;
Quality & Safety First.
Developing lifelong customer relationship.
Delivering long-term investment value.
Make positive and constructive difference.
Innovate and revolutionize.
Business objectives of GM include the following;
External Analysis
PEST Analysis
Political Factors: Government now has even tougher regulations related to safety and environmental concern, which requires GM to change its ignorant attitude. It requires GM to operate within a more confined area of government regulations.
Economic Factors: After the somber recession setback, it’s quite difficult for GM to revive its leadership. Inflation, employment rate, and strict economic regulations have made it even difficult for GM make profit while keeping the cost low.
Social Factors: Social aspects have also become a significant contributor to firm performance. GM has to stringently follow the social factors since it is widely expanded all across the globe. GM is required to alter its business strategy with respect to its target market in order to meet the existing social trends.
Technological Factors: Technology has become one the dominant factors related to firm performance. GM is required to transform itself with the changing technology in order to meet the demands of market and customers. GM needs to optimally exploit the evolving technological options in order to consistently transform itself to meet the intense competition (Forbes n.d.).
Porter’s Five Forces
Rivalry Intensity: Rivalry in this industry is destructive, as well as, healthy at times. Major factors affecting the automobile industry include competitive pricing and erosion of market share. Intense rivalry within the industry has crafted a difficult pricing situation for the manufacturers.
Barriers to Entry: The industry has difficult entry barriers including high cost of capital, economies of scale, strict regulation of government, intense rivalry and strong brand loyalty of customers.
Threats to Substitutes: Since the gasoline prices are still quite high, the threats to the substitutes have also increased. People are now opting to travel through public transport and preferring fuel efficient vehicles.
Bargaining of Suppliers: Automobile manufacturers are losing their power as a result of higher number of supplier available in the market. Therefore, the bargaining power of suppliers is higher. However, on a positive note, this offer more options to the manufacturers.
Bargaining Power of Buyers: Nowadays, dealership are considered to distribute and sell automobile. Therefore, automobile dealer are now enjoying the ultimate power of distribution on their own terms (Forbes n.d.).
Internal Analysis
Internal Strengths
Continued Earnings of GMAC
The performance of GMAC (General Motor Acceptance Corporation) is extraordinary in spite of the difficult period of time that it has passed through. GMAC operates as the largest finance hub with more than $315 bn its assets. For the last few years, total earnings of the GM are heavily dependent over GMAC as it provides the organization a significant resource of cash flow. GMAC comprise of 79% earning of GM group. Most of the GMAC’s success is driven by lending, borrowing, and risk management. In particular, mortgage operations of GMAC are particularly vital for the business in driving finance for the company (Taylor n.d.).
Marketing Consolidation Strategy
The company has stringently embarked upon limiting its product portfolio while enhancing its product focus on two major brands to be its full line marquis i.e. Chevrolet and Cadillac. GM has decided to position Saab, Hummer, and Saturn as the brands for smaller niche while it has also decided to complementarily combine the distribution channels of GMC, Pontiac, and Buick. This consolidation initiative tends to save approximately 1.2 million annually for the business. The marketing consolidation strategy brings the business about a drastic shift that mainly enables GM to prevent product overlapping. GM has decided to focus on a particular product line instead of producing several brands and products (Forbes n.d.).
GM Research & Development
GM is focusing on finding out new procedures and approaches such as Cloud Computing and HMI to include better options for automotive clean-tech involving motors, batteries, emissions, and power electronics. Similarly, it is also incorporating innovative and eco-friendly materials for improved performance of business and vehicles. Major R&D areas include operational research, chemical materials, and sciences systems, manufacturing, vehicle development, control & electrical, electrochemical energy enhancement, and advanced technology operation (More n.d.).
Internal Weaknesses
Weak Product Mix
One of the major concerns for GM is to develop a product mix, which involves products that are demanded by the customers. GM’s major focus is on the product structure of sports vehicle and trucks. Therefore, when the price of gasoline increases, the demand for these vehicles decreases. Although GM is spending aggressively over new products but it is still far behind the current market giant - Toyota (Forbes n.d.).
Rising Costs of Operations
Since the situation is already tense for GM, the business is encountering rising cost of operations since it is offering new product, which requires installation of new assembly lines. This has brought in additional cost to the business resulting in rising debts and financial flaws for the organization (Taylor n.d.).
Lack of Flexibility
One of major concern for healthy operation of GM is that heavily relies upon its extent of flexibility to recoup in Europe, North America specifically through Opel. GM is also heavily dependent over its financial subsidiary i.e. 79% of its financial source comes from GMAC. With such heavy reliance, the financial portfolio reduces the diversification and flexibility. This tends to greatly affect the overall profitability and sales of GM (Regassa & Ahmadian 7).
Business Strategy
The core business strategy of GM is to be a differentiator since beginning. Therefore, until its recent restructuring in 2009, it extensively diversifies globally under the umbrella of 13 different brands. This strategy has offered GM a highly diversified product portfolio. This extensive and diversified portfolio is not accidental but the results of GM’s business strategy to produce a car of every purse and purpose. GM highly differentiates its product as it wants to offer the product for every type of market segment ranging from affordable elegant vehicle to profligate luxurious brands (More n.d.).
GM does not have a cost leadership position in the market as there are a lot of cars available in the market that uphold higher position than GM and also offering quality at the better price such as Toyota, Ford etc. Although the GM’s approach was quite efficient for market segmentation as it aims to produce car that suits the needs of different consumer segment, the portfolio becomes thinly spread and highly diversified, which causes GM to lose its product focus. This strategy proved to be successful for almost the whole 20th century and GM supremely ruled the globe with its remarkable sales in 140 countries. However, GM has been dethroned in 2007- 2008 superseded by Toyota entitled as the largest automaker now. Unfortunately, this differentiation strategy of GM, which has formerly brought plenty of success and revenues to the business and added substantial value to the U.S GDP, is no longer participating for the Detroit-based automaker. Also, the strategy is currently not leveraging the business drivers. Extensive differentiation and diversification have caused the product portfolio to thinly spread with low product focus, which is consequently resulting in failing brands. GM’s strategy fails to stay aligned with its business vision, which is not viable anymore as the business fails to respond intense rivalry and the changing preferences of customers. Even with the differentiation, GM is tactless in managing the cost drivers from the industry due to its overly widespread product lineup. GM keeps on adding new product line instead of upgrading existing products and fixing their problems. Therefore, the GM’s strategy for juggling up its brands clearly has proven out to be unsuccessful as far as its portfolio management is concerned (Regassa & Ahmadian 1).
In other words, instead of product diversification and differentiation, GM is required to increase product focus. GM needs to realize the factors that it’s not always the case that people want something new, sometimes they want better and something that delights them by fulfilling their expectations. As mentioned across the report, GM is going through numerous strategic issues that have significantly hurt the reputation and profitability of the business. The organization currently demands immediate expedient actions and complete attention. The strategy of proving car for every purpose and purses is no longer profitable and practical in the highly dynamic automotive industry and global marketplace. GM is resisting the change and lacking innovation that is leading to increasing debts and financial setback for the business. GM is stringently recommended to enhance product focus by putting precise attention to using modern technologies and latest knowledge to fulfill the consumer demand and producing what is expected and desired by the market. Furthermore, to turn around the existing situation, GM needs to adopt retrenchment strategy. It is required to make substantial changes in its existing product portfolio i.e. GM should discontinue the fading brands and should invest its resources on product innovation and product revival to steal back the market share. This is necessary for GM as different brands are stealing away business from each other causing the plus minus situation to GM’s balance sheet. Instead, GM needs to focus on stealing the share from competitors and not from its own brands. At present, the whole world is awaiting whether this Detroit-based automobile manufacturer will ever reign back as the largest manufacturer of automobiles. Though it is hard to predict yet if the corrective measures are deployed effectively, GM has prospects to rescue its business and reputation with brighter hopes to have a more successful and sustainable future (Regassa & Ahmadian 9).
Works Cited
General Motors. Official Website: General Motor Outline its Strategy, 2016, Web. April 2, 2016
General Motors. Official Website, 2016. Web. April 2, 2016
More. Roger, How General Motors Lost Its Focus – And Its Way. [Ivey Business Jounal], 2009. Print.
Regassa, Hailu, & Ahmadian, Ahmad. Comparative Study of American and Japanese Auto Industry: General Motors versus Toyota Motors Corporations. The Business Review, Cambridge, 2014. Web.
Taylor. Alex. 10 big problems for General Motors, 2013. Web. April 2, 2016
Forbes. The Rise and Fall of General Motors, 2013. Web. April 2, 2016
