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Nov 8, 2017 in Analysis
General Motors Business Strategy Report
- 1. Strategic Analysis
1.1 Company Profile and Industry
The General Motors Corporation (GM) is a renowned world producer of automobiles that ravishes on a total employment of 300,000 for both contractual and permanent employees. The company deals with the partial financing of the consumers through the GMAC system, where it has an advancement system of expansion from the South American General Motors to the Europe general motors. Currently, it has advanced its operations to include branches in countries like the North America, while its potential sources of market include countries like china. The automobile deals with the design and manufacture of motor products that range from cars, commercial vehicles and trucks. The company is a leading share leader that operates in both the commercial and industrial markets in the United States and globally. On the other hand, the General Motors America advances its sales activities to countries like Chile, Uruguay and Bolivia (GM Corporate Website, 2011).
The company sells automobile products, which range from cars to trucks. The auto industry is predominant in the sale of the Ford motors and the Chrysler that form the highest percentage in terms of brands of trucks and cars in the sales market. These brands form part of the big three considerations of the sales products of the company, where they account for over 41% of the worldwide sales of the light trucks as compared to productions from the other two sister companies. This shows that the company dominates the sister companies in terms of sales of cars and light Founded in September 1908, the company holds a market share of 21%, where it has a system of manufacturing operations in 32 countries and prospective markets within 192 countries. This explains its expanse, where the firm has expanded from the conventional small scale producer to a world renowned producer of automobiles. Its growth in the past years has shown a rise from a regional company to include expansion programs to other nations through outsourcing for external markets. For instance, the current automobile production and sale has increased with a margin of over 50% compared to the production and sales of 71.9 million automobiles sold during the year 2007. This trend is also perceived to be increasing over the next coming years, where the company is projected to increase its market share demands and production levels with the consequent number of automobiles sold.
1.2 Organizational Purpose
- Mission statement for the General Motors Corporation: “drive improvements in market share, revenue, brands, people, responsiveness, and cost effectiveness through the implementation of global common metrics and best practice sharing.”
- Vision of the company is: “to be a world leader in transportation products and related services.” Even though the mission statements and visions implicate a high platform of performance, the company sales are the decline from the analysis of the past five year business period. This is due the emergent of new entrants, lack of product differentiation and less power in terms of competition. This implies the company does not correlate with both the mission and its vision putting the requirement of research into new modes of production that is elemental in brand differentiation, while the training of employees should be vital in enhancing competencies in the human resource management (Anandaraian & Wen, 1999). The element of consumer satisfaction should also be reached through competent public relations management, which should be made up of professionals, who aid in consumer enthusiasm.
- Company relies on the structure of values that are evidently a force of drive for survival in the globally warmer markets. For instance, the core value of the company lies in the conversion of threats into opportunities, where product differentiation is fundamental in dealing with the changing environment. The production of vehicles with low fuel consumption capabilities is the factor underpinning this change of product differentiation, where the company is working on this mode of production to reduce the consumer cost of automobiles. This is fundamental in living with the values of being innovative and formation of greener products for globally warmer markets (Kemmerer, 2006).
- Company’s sales analysis for the past five years shows that there is an increasing trend in terms of the number of automobiles sold to consumers, where the year 2007, the company sold 71.9 million automobiles. This trend has been on an increasing trend, where the current sales rates have grown to over 50% the total sales made at the five year period down the business line. This implies that the current rate of sale of automobiles stands at 116 million automobiles per year. This is as a result of research into new mode of automobile that are not only suitable for the consumer needs but also adaptive to the changing global environment. The increase is also attributed to outsourcing of the market prospects, where countries like china form new entrants of prospective market sources.
1.2 Financial Analysis
- The current balance sheet of the company is defined by the term fortress because it is the force that creates value in all the constraints of the global economy. The company has consistently been working towards reducing the accumulated $0.3 billion debt as at the financial year 2011. The total liquidity that has been built for the past 5 year period stands at $7.5 billion, while the total profitability shows a fluctuating trend where the company posted $114 million profits that was a commendable performance. This is as a result of the $44 million loss recorded last year, where the upsurge is attributed to the diversification in the models (Dugdale, 1991)
1.3 External And Internal Environment
1.31 External Environmental Analyses
1.311 Legal Factors
- The federal legislative system geared towards the regulation of use of carbon fuels is affecting the sale and use of developed automobiles, which depend on the fossil fuels. This is affecting the performance of the company in terms of sale of the already manufactured products.
- The direct link with the Chinese market is hampered by the requirement of processing fees, with a consequent increase in the cost of the final products.
1.312 Economic Factors
- Fluctuation of the global commodity prices like oil affects stipulation of the market prices for the products that depends on the performance of the US dollar currencies in the global scene.
- The increase in the prices of raw materials like steel has resulted in an increased production cost, which affects the general profitability of the company.
1.313 Social Factors
- The world population of the high class is on the decline as a result of pressure on natural resources due to increase in the world population. Most of the emergent trends of the highly populated centres are made up of the low class with lower affordability power to purchase the GM products.
- The rise in the cost of living is shifting the focus of consideration of the products as basic needs.
1.32 Internal Environmental Analysis
- Cost leadership is high due to variation of production. GM Company is well endowed with research into new models that suit the market stipulations, where it has the ability of setting the market price for such products. For instance, the power train evolution system that helps in the generation of motor engines is the first evident project that gives the company the capability to stipulate costs of production. This is through providing an independent procurement for the products through capabilities of predetermining the cost price.
- Poor organizational structure, which is vertically integrated. This is fundamental in inhibiting communication between the higher and lower management thus giving rise to incongruence in times of decision making.
- Stagnating profitability forms a setback towards reinvestment of resources into the motor industry as a result of the market influences like the change to alternate sources of energy.
- The resurgence of alternate sources of energy is evidently hampering the efforts of development within the company, where the General Motors is not at par with the production of automobiles with the alternate power capabilities. This has consequently affected the purchasing power, which is influential in the resultant profitability of the organization.
- Dependence on the US markets, which is a monopoly of the market share index. This is to mean that the company does not have a differentiated marketing strategy, which has resulted in the reduced market prospects. This also explains why the sales within the company are on a decline, which calls for diversification of market prospects in order to live by the stated visions and mission statement. In consideration, diversification of the market could also
- Exploitation of tangible and non tangible resources such as research into production of automobiles with the capabilities to utilize the alternate energy sources. For instance, research into production of automobiles that are based on the use of electricity as alternative sources of fuel could result into gaining a competitive advantage over companies like the Toyota, whose advancement into manufacture of electric automobiles is evidently taking root (Surowieck, 2008).
- Stipulation of a form of communication between the higher management and the lower management as a form of restructuring the human resource management leading to a formulation for dealing with discretions.
- Aggressiveness in regaining the credit power systems, which are currently not defined.
- The company is at the verge of liquidation due to the vertical system of management that does not allow formal communication between the higher and the lower management.
1.4 Competitive environment
1.41 Buyer power
- The buyer power within the industry is evidently low, which correlates with the low product differentiation and low switching costs. In consideration, the presence of the conventional Chrysler has lost touch with the market resulting into a high buyer power.
1.42 Threat from new entrants
- The threats from new entrants are high due to the advancement in technology that ahs resulted into the sophistication of production to include the use of alternate sources of energy automobiles. Such entrants are already in the market with competitive companies like Toyota producing automobiles based on the use of electricity as a form of utilisation of energy.
1.43 Supplier power
- The fluctuations of commodity prices especially in the raw material industry for production of aluminium and steel affect the supply of raw materials. The current formation systems that propose manufacture of the raw materials could improve self reliance in terms of supply of the raw materials, although it is evidently an increased cost of production.
1.44 Substitute products
- The competition from substitute products is evidently high, where the use of alternate sources of power for driving automobiles likes the advancement in electric cars, which are most preferred forms a setback to the conventional fossil fuel automobiles produced in the General Motors Company (Angell & Smithson, 1991).
2.0 Strategic Development
- In terms of Porter’s generic strategies, General Motors competes in terms of cost leadership with companies like the Toyota by the virtue of brand differentiation and specification. The competitors are also articulating the essence of culture formation through the use of specific brands identifiable to the company, which puts the requirement of analysis, where the Bowman strategic Clock could help in synthesising the influence of brand specification within automobile companies and its consequent influence on cost leadership.
Source: Adapted from the work of Cliff Bowman (see P.M, Senge, the fifth discipline: the art and practice of the learning organization. Random House Business, 2006
- The formation of a business organization stipulates the concern for development of new strategies of survival in the globally competitive market especially if the structure is not in line with the regulations that give the company the perceived alignment of visions with performance. This is a reason for a challenging ideology especially with the consideration that the performance of General Motors Corporation does not lie within the stipulations of its visions of diversification of production, which is the reason for lowered sales in the past business periods. The current production of automobiles that do not meet the legal requirement of low carbon fuel automobiles ahs hampered the efforts of expansion of the market share of eh company, where the general formation should involve research into new forms of production. This is an explanation as per to why the company should apply the structure of the Ansoff’s five product marketing strategy of consolidation, market penetration, product development, market development and diversification (Harris, 1996).
- Consolidation is achievable through enacting sustainability within the consumer needs by reigniting the traits of cost leadership, which is fundamental in retaining consumers. The restriction of diversification is achievable through intensification in research to come up with new models that are compliant with the legal requirements, while product development is achievable through synthesizing identifiable brands that are unique to the company. On the other hand, the ideology of market development and market penetration is achievable within the company through advertisement by the use of social network systems that is fundamental in reaching out for new consumers (David, 2009).
- The contemporary reduction in sales does not correlate with the strategic development within the company, where the company is evidently facing a low rate of sales, which shows that the performance is not in linearity with the strategies. The existing SBUs within the company do not correlate with the each other due to the vertical system of management, which affects the performance of the human resource management. The general formation within the company is also a setback to the achievement of the basic goals, which explains the fluctuating performance in the yearly profitability of the company.
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