“The company’s main competitors in cars and trucks in the United States and Canada are the Ford Motor Company, DaimlerChrysler Corporation, Toyota Corporation, Nissan Motor Corporation, Ltd., Honda Motor Company, Ltd., Mazda Motor Corporation, Mitsubishi Motors Corporation, Volkswagen A.G., Hyundai Motor Company, Ltd., Bayerische Motoren Werke AG (BMW), Volvo AB, and Kia Motors Corporation.”(www.gm.com)
John Smith, Jr., has been the overseer of GM’s operations since he came to the company in January 1996. Smith deals with business relationships with GM’s associates. G Wagoner Jr. became president and CEO of GM in June of 2000. He is currently on the board of directors.
Wagoner so far has been a great leader for GM. He is chairman of the automotive strategy board. Harry J. Pearce is an African American who is also the director of the General Motors Corporation Board of Directors and vice chairman of the corporation since Jan. 1, 1996.
The fifty-four-day strike in 1998 in Flint Michigan by the United Auto Workers against GM is probably one of the most notable strikes in the history of the united states. Over this time period, much money was lost. In the end, there seemed to be no winners from the strike.
The worker union lost more than $150 million during the strike and GM lost about $75 million a day! That doesn’t include what GM lost in the minds of all its consumers. (Encarta, Unions) However, today, GM seems to have developed a trustworthy relationship with its consumers which is vital towards their success in the future.
General Motors has always made it a top priority to be environmentally sound in it production of automobiles. Each car has low emission standards and GM makes it a point to reduce the standards every year. There have been no major lawsuits filed against the company over their production methods making GM one of the most environmentally sound major corporations ever.
General Motors have proved themselves to be one of the leaders in automotive production throughout their existence. Today they are regarded as one of the most “sure investments” that the average Joe Schmoe could invest in. Short-term, they may not produce major gains for consumers but they are a sure bet to steadily produce in the long run.
GM globally has been doing very well as they try to spread worldwide increasing revenue in foreign nations. In the future, GM will become more global and capitalize on the worldwide consumers that can bring income into GM. GM has been noted to be very consumer-friendly as its cars always rate on the high safety as well as the comfort end of the scale. General Motors has always been one of the most stable companies in the NYSE and their success in the future seems certain.
I believe that General Motors Has one of the best technical development facilities. When an ambitious young inventor named Charles E Kettering set up a small laboratory in a Dayton, Ohio, barn in 1909, he laid the foundation for what was to become the automotive industry’s first research laboratory. Today that organization survives–and thrives–as the General Motors Research and Development Center.
Charles F. Kettering’s first laboratory, 1909-1911, was in E.A. Deeds’ barn in Dayton, Ohio. This was the birthplace of an improved automotive battery ignition system and the electric self-starter. Kettering and associate E.A. Deeds called their new business the Dayton Engineering Laboratories Company. The name Delco, formed by using the initials, has had a long history as a GM trademark.
Working at night, Kettering and a few assistants developed a high-output battery ignition system for cars. Soon after, he and his small team developed and demonstrated the first practical electric self-starter, which was introduced on the 1912 Cadillac. Within five years, all new vehicles were equipped with it, and the hand-crank became obsolete.
In 1916, Kettering and his associates sold their firm to United Motors Service Company–which would soon be acquired by General Motors–and formed a new organization called the Dayton Research Laboratories Company. Kettering hired his former college chemistry teacher, F.O. Clements, to organize the laboratory for him.
By 1917, before Dayton Research Laboratories got well underway, the United States entered World War I. Unable to obtain the materials needed to conduct research, Kettering and Deeds merged the organization with the Dayton Metal Products Company and devoted their efforts to manufacturing war materiel.
Charles F. Kettering, shown here circa 1920, founded what was to become the automotive industry’s first research laboratory–General Motors Research and Development Center. At the end of World War I, the company once again turned its attention to automotive research. At the same time, in the summer of 1919, the management of General Motors Corporation decided to establish a central research laboratory–a facility where new products and improvements to existing products could be developed.
Kettering initially turned down the job of running the laboratory, busy as he was with his own business and research activities. General Motors solved this problem by buying his company. The new organization was named the General Motors Research Corporation, incorporated on June 12, 1920. The laboratory was initially set up in a large building in Moraine City, six miles south of Dayton, but moved to Detroit by 1925.
At the end of World War I, the company once again turned its attention to automotive research. At the same time, in the summer of 1919, the management of General Motors Corporation decided to establish a central research laboratory–a facility where new products and improvements to existing products could be developed. Kettering initially turned down the job of running the laboratory, busy as he was with his own business and research activities. General Motors solved this problem by buying his company.
The new organization was named the General Motors Research Corporation, incorporated on June 12, 1920. The laboratory was initially set up in a large building in Moraine City, six miles south of Dayton, but moved to Detroit by 1925.
The Technical Center, designed by internationally acclaimed architect Eero Saarinen, remains one of the premier examples of the International style of architecture. It was constructed at a cost of approximately $100 million–equivalent to about a half-billion of today’s dollars.
In 1986, the American Institute of Architects honored the GM Technical Center as the most outstanding architectural project of its era. Designed by Eero Saarinen, the General Motors Technical Center netted the American Institute of Architects’ award for the most outstanding architectural project of its era.
The laboratory moved again, but by the end of World War II, it became evident that more space was still needed. General Motors purchased a site outside Detroit’s city limits in Warren to build a new Technical Center, designed to house Research, Engineering Staff, Styling, and Process Development activities. Between 1952 and 1955, the Research Laboratories moved into eight new buildings at the site. Since then, three additional buildings have been constructed immediately north of the original buildings.
With all that was said, General Motors Corporation has shot to first in the race of automotive technology from the Cadillac Northstar Engine, to the heated seat, even to the first electric car – the EV1.
General Motors Corporation has one of the most distinctive Development buildings in its class with state of the art technology and outstanding development staff. Sales for the General Motors corporation have soared following the distinctive design of the all-new late 90’s Cadillac.
Willam Durrant, the founder of the General Motors Corporation, has changed the way a lot of us look at today’s luxury vehicles. Back in the early 1900’s we all had to start our cars by turning a crank and now it is with the simple turn of an ignition switch. I might ad that General Motors was the first to develop the very first 100 mph car.
The new General Motors Technical Center was dedicated May 16, 1956. The laboratory moved again, but by the end of World War II, it became evident that more space was still needed. General Motors purchased a site outside Detroit’s city limits in Warren to build a new Technical Center, designed to house Research, Engineering Staff, Styling, and Process Development activities. Between 1952 and 1955, the Research Laboratories moved into eight new buildings at the site. Since then, three additional buildings have been constructed immediately north of the original buildings.
What kind of vehicle do you drive? Would it happen to be a Chevrolet? A Buick? How about a Cadillac? Or a GMC? All of these brands plus more are made by General Motors Company, or better known as GM. GM is the 2nd largest car manufacturer in the world (General Motors Company, 2011). They have provided millions, if not more, vehicles to the world.
Thanks to GM, many of the popular vehicle brands that are available, they have produced. You can understand how vital GM has been to the automotive world when you find out that “it was the world’s largest carmaker from 1931 to 2008 when it was surpassed by Toyota” (Costantini).
The history of GM dates back to 1908. At this time or to be more specific on September 16, GM was founded in Flint. In 2010, General Motors proved with their sales figure that they are financially back on track, globally, G.M.’s sales rose 12.2 percent in 2010, to 8.39 million, coming within about 30,000 vehicles of retaking the title of world’s largest automaker from Toyota.
For the first time, it sold more cars and trucks in China, where its sales rose 28.8 percent from 2009 than in the United States, where sales were up 6.3 percent (Costantini). Thought the years, GM has been a major asset to the automotive line, and because they are so successful they are going to continue to be a main contributor to the automotive line.
GM’s main product is automobiles “the Company develops, produces and markets cars, trucks, and parts worldwide” (Costantini). GM has several brands that they produce. These popular brands consist of Buick, Chevrolet, GMC, Pontiac, Saturn, Oldsmobile, Hummer, and Cadillac. However, because of financial situations and other dilemmas, a few of these brands had to be retired from GM.
These include Oldsmobile in 2004, Pontiac, Saturn, and Hummer in 2010 (Elliott, 2009). Some of the brands the GM retired were not done for good, some of them got sold to other companies who continue to produce them today. General Motors is worldwide and they have many workers “GM employs 209,00 people in every major region of the world and does business in more than 120 countries” (General Motors Company, 2011).
General Motors, also called GM, is an American-based company, which has an international reputation for the quality manufacture of cars and trucks. William C. Durant established the company in 1908 and currently, under the leadership of Edward Whitacre, it operates in sales and services of automotive in over one hundred and forty countries around the world. Employing about 244,500 people in its various manufacturing operations around the world, GM is playing a leading role in stimulating economic growth worldwide.
The automotive industry is exemplified by high profile trade disagreements as well as intense rivalry in this century. Since its establishment, GM has been undergoing important organizational changes from a traditional organizational model to a transformed organizational model in order to preserve its longevity in the market. This paper attempts to analyze the structure of the company and its organizational style.
GM sells most of its vehicles to the U.S. market. For example, in 2008, out of 8.35 million cars and trucks sold globally, the U.S. accounted for 22.1% of the market share. The top four regional markets for the company are North America, China, the European Union, and South America in that order.
The company has collaborations with different automakers around the world. Some of these are the Shanghai Automotive Industry Corporation of China, Fiat, and Ford Motor Company. In the global market, the company has recorded significant performance in the Chinese market. For example, in 2009, the company sold 1,830,000 cars and trucks in China, which represented 13.4 percent of its total global sales.
The company is structured into various groups, which represent various regions around the world. These groups are GMAP (GM Asia-Pacific), GME (GM Europe), GM LAAM (GM Latin America, Africa, and the Middle East), GMNA (GM North America), and other operations in different places around the world. Each region has its own president who is answerable to the company’s CEO (“GM profile,” description section).
The Board of Directors, who makes important decisions that affect the running of the activities of the automotive corporation, manages the company. For example, on December 4, 2009, the GM Board of Directors announced major leadership changes within the company that made Edward Whitacre, who had been previously serving in an interim capacity, to be appointed the company’s CEO on a permanent basis.
The company’s mission statement reads, “GM is dedicated to providing products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success…”
Its vision statement “is to be the world leader in transportation products and related services (“Company information,” para. 5). The company operates in the automotive industry under the following brands: “Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall, and Wuling”.
In a traditional organization model, a hierarchical structure is usually observed. In this case, a president or executive is usually regarded as the topmost official followed by vice presidents or the position of senior managers. After this, different levels of management follow.
Most of the employees are usually found at the bottom of the hierarchy and jobs are grouped by function into various departments. Before major transformations were done, this was the case at GM.
The company was categorized into various autonomous automakers, which functioned separately and competed with one another. The autonomous automakers consisted of Buick, Cadillac, Oldsmobile, Chevrolet, and Pontiac. However, the rivalry and absence of centralization within the company proved to be an expensive affair for the company.
Therefore, GM adopted the transformed organizational model, which is centralized and cohesive than the traditional model. Regardless of its size or complexity, the company has been able to arrange its diverse workforce coming from different parts of the world to ensure that its operations are run in a streamlined manner.
All the company’s employees are now working towards a common goal and running the company has been more cost-effective. In its transformed structure, GM lacks many different departments. Most of the company’s departments are performing the same tasks with related requirements. Thus, this centralized organizational structure makes more sense than the traditional one.
The adoption of the transformed organizational model has made GM have centralized staff functions. The change that was carried out radically changed its diverse workforce, including its management, since they had to learn a central set of skills.
For instance, before the adoption of the transformed model, every autonomous automaker was using different computer software for the manufacture of vehicles. This resulted in miscommunication between its different departments. The diverse workforce at GM was to be taught the basics of a central software program which resulted in easier inter-corporation communication.
The large undertaking also made the company’s production team to centralize their operations and learn from one another’s methods of design and engineering, which has resulted in a more productive and easier communication among them. Currently, the diverse workforce at GM communicates and embraces teamwork when working. They no longer work as individuals in completing a particular piece of the puzzle.
The transformed organizational model enabled General Motors to merge its different brand operations. The traditional model made various operations in the automotive company to be redundant. This led to the wastage of resources and time. This is because its employees were duplicating work that had been already performed by another of the company’s eight different brands. The traditional model plagued the operations at the company for years.
However, the merger of GM’s eight brands into four distinct channels drastically changed this. Different vice presidents who are appointed by the company’s Board of Directors head each of the four channels. The United States marketing and field operations are currently more strongly aligned to form four retail channels: “Chevrolet, Premium (Cadillac, Hummer, Saab); Buick-Pontiac-GMC; and Saturn”.
As a major strategy in the competitive automotive market, the company is involved in efforts to streamline further its organizational structure. This strategy is intended to lower unnecessary complexity and align resources towards increased growth.
Ultimately, the company hopes to regain the market share that it has lost to Toyota, which is a very efficient corporation in the industry. Another strategy that General Motors is using is transforming its portfolio so as to have very differentiated cars and trucks suited for every brand.
For a long time, critics observed that brands within the company were competing with one another in the market. However, the changes that the company has adopted have started to have positive impacts. For instance, Hall notes that “Buick has been geared up for luxury sedan models, while Pontiac will specialize in performance models and GMC is sticking with trucks and SUVs”.
The transformed organizational model has made the employees of GM work on the same page. All of them are working towards realizing the same objective of preserving the core competence of the company of innovation. Because of this initiative, the turnover of the company has dramatically increased in recent years.
Its dominant position in the manufacture of vehicles is largely attributed to the innovative culture that it has embraced in its transformed organizational model. Focus on innovation has also made the company to re-assess the market that it has been striving to approach.
For a long time, the company had embraced a traditional outlook for automobiles. However, with the changing tastes and preferences of its customers, GM has taken a step back to examine critically its position in the market. To maintain this innovative culture, all the heads of the regional operations hold frequent monthly meetings to assess the progress of the company. Global offices usually attend these meetings via phone; therefore, the CEO is able to monitor the progress of the company.
The structure of the company has been affected by various contingency factors such as the environment and the lifestyle of its customers in various places around the world.
Because of the nature of its worldwide customers who exhibit distinct tastes and needs, the company has found it to be advantageous to organize along geographic lines most of its activities that can be managed together. Every geographic unit has all the operations that are needed to effectively produce and market products in that region; therefore, this assists in giving the multinational company a more unified face to its local users.
The company’s global corporate headquarters located in Detroit, Michigan, provides brand recognition as well as handling some collective administrative roles. On the other hand, the semi-autonomous local units around the world serve the function of day-to-day running and decision making for the company; hence, the company is able to grow faster.
In order to sell its vehicles to a diverse customer group, the company has implemented a brand management structure that is aimed at selecting diverse potential market areas. As a result, GM has been able to develop strategies to supply these markets with specific brands that meet their tastes such as the “all-new” Pontiac Grand Prix, Chevrolet Malibu, and GMC Yukon. These have received an enthusiastic reception in the market.
The ever-changing consumer demographics have made the company to look for non-traditional methods of reaching different customer groups; therefore, its fresh image has started to emerge on different fronts. In efforts aimed at rebuilding its corporate brand image, the company is trying to reach clients in a variety of promotions and venues, for example, sponsorship of the WNBA and partnership with the fashion industry.
In this way, GM aims at reaching the users on their terms and gives them a reason for purchasing its brand of vehicles. In addition, with the evolution of the automobile industry, more consumers are currently using the World Wide Web to become better acquainted with different products before making the final purchase decision. Therefore, the giant automakers use E-commerce as a strategy for reaching diverse customer groups all over the world.
The company culture that is embraced within General Motors focuses on six core values, which gives it the road map on what it wants to accomplish. This is what defines the conduct of the business of the automaker and gives it it’s standing as a company.
All the workers of the company around that world are aware of the six core values since they are the drivers for the company’s key decisions and activities in all the nations. The first core value is customer enthusiasm. This calls on all the company’s employees to strive to fulfill the varied tastes and preferences of the customers.
The second is teamwork, which stresses the fact that the company is composed of a unique workforce; therefore, embracing teamwork is the only way to succeed. In this century, GM is faced with intense competition from market rivals such as Toyota and the Volkswagen Group.
That is why the next core value focuses on innovation, which is aimed at giving the company a competitive edge in the market. The core values of individual respect and responsibility focus on respecting the employees’ health, safety, and dignity.
Serving different customers around the world, General Motors has abandoned most of the traditional ways it employed in carrying out its operations. Although it is ranked at position two after Toyota in the automotive industry, it still has several competitive advantages.
These include a large market share that exists throughout the world, years of global experience in dealing with different customers, and a variety of brand names that appeal to all the target markets. However, in as much as the structure of the company makes sense, it must continually adapt changes in this dynamic world in order to maintain its market leadership.
At the turn of the 20th century, there were fewer than 8,000 automobiles in America, many of them powered by steam or electricity, others had gasoline engines. An unexpected turnout at the first New York Auto Show in 1900, showed the magnitude of the public’s fascination with the automobile. Over the next few years, hundreds of fledgling companies would try to meet the demands of a growing market. General Motors was founded by William “Billy” Durant on September 16, 1908.
Durant had become a leading manufacturer of horse-drawn vehicles in Flint, MI before making his foray into the automobile industry. At its inception, GM held only the Buick Motor Company, but in a matter of years would acquire more than 20 companies including Oldsmobile, Cadillac, and Oakland, today is known as Pontiac.
In Germany, a company named Opel began by manufacturing dependable sewing machines. Opel became a brand recognized worldwide after adding bicycles to its product arsenal. In 1899, Opel entered the growing automobile market with the Opel-Patent-Motorwagen System Lutzmann and became a part of General Motors thirty years later.
Earlier inventions such as the electric light bulb, the telephone, and the radio marked a new era of possibilities. In particular, the automobile sent the imagination racing and expanded the horizon upon which people could dream. As demand for automobiles grew to unexpected heights in the 1920s, General Motors set the pace of production, design, and marketing innovation for others to follow.
Adding Chevrolet, Vauxhall and Opel, diversified the selection and added to the reach of GM. With the philosophy and strategy of “a car for every purse and purpose,” and a series of landmark innovations that changed the automobile itself, GM’s vehicles went beyond transportation, becoming statements and aspirations in their own right. During these years GM also opened more than a dozen new plants outside the United States.
The milestone 1927 Cadillac LaSalle, with curves rather than sharp corners and a long, low stance, made people see cars as far more than just a mode of transport. Designed by Harley Earl, the LaSalle was a world apart from the high and boxy Ford Model T, marking the beginning of the true automotive design.
Earl would head GM’s design studio until his retirement in 1959. Hard times in America and political change in Europe throughout the 30s brought new uncertainty, but GM’s commitment to innovation continued unabated. The return of peace following World War II brought a new optimism with consumers eager for goods that had been out of reach for so long.
GM responded with an unprecedented string of milestone designs that continue to inspire to this day. In addition to innovations like independent front wheel suspension unibody construction, and the one-piece steel roof, General Motors pushed the envelope in design with a succession of vehicles including the 1949 Buick Roadmaster, the Chevrolet Corvette, and BelAir, and the 1959 Cadillac El Dorado. These machines were as much fun to drive as they were to see drive by. During the war, GM supplied the Allies with more goods than any other company.
In 1940, former GM President William Knudsen was chosen by President Roosevelt as Chairman of the new Wartime Office of Production Management. By 1942, one hundred percent of GM’s production was in support of the Allied war effort. GM delivered more than $12 billion worth of materials including airplanes, trucks, and tanks.
The 60s and 70s were a time of new challenges and great change. Environmental concerns increased as prices and foreign competition led to an unprecedented downsizing of vehicles across all GM vehicle lines. It was the largest reengineering program ever undertaken in the industry, ushering in an age of lighter, aerodynamic and more fuel-efficient vehicles. In 1971, GM pioneered the use of engines that could run on low-lead or unleaded gasoline.
Two years later, General Motors was the first to offer an airbag in a production car. In 1974, GM introduced the most important step in reducing emissions with the catalytic converter. This technology, shared by General Motors, is still used by the entire auto industry. Germany and Japan, now recovered from the devastation of World War II, began exporting cars to the U.S. in larger numbers, and fuel price shocks sparked consumer interest in these new, more fuel-efficient vehicles.
GM rushed to develop smaller vehicles as well, but the company had been too large and too successful for too long to change direction easily, and GM’s undisputed dominance of the U.S. market began to erode. Although General Motors was always active internationally, the 1980s and 1990s brought a new urgency for GM to operate as a single global company, to improve the efficiency of its operations and better compete with global competitors.
GM also began a series of reorganizations in North America that led to a single business unit there. In 1982, GM marked its largest single production expansion outside of North America with the opening of the new complex in Zaragoza, Spain. This facility immediately began building the fuel-efficient Opel Corsa. With joint ventures in China and India plus the additions of Saab and HUMMER to the GM family, the company expanded both the reach and variety of vehicles sold worldwide.
1995 was a big year for GM. Annual vehicle sales outside North America exceeded three million units for the first time. Five million vehicles were sold in the United States that year and GM entered into its first joint venture agreement in China. By the end of the 90s, the foundation for global growth in the new millennium had been set. During this period, GM also formed NUMMI, a joint-venture with Toyota, and Saturn, a wholly new company focused on creating a new small car and a new way of doing business. Lessons from these and other innovations were spread throughout GM.
By the start of the new millennium, GM had built a strong presence in emerging markets such as China and Brazil and had largely completed its transformation into a single global company. The creation of GM Daewoo in 2002 gave GM a new organization specializing and engineering and manufacturing smaller cars, proving an important boost to Chevrolet’s growth as a global brand.
The design and quality of GM’s new cars improved significantly, but GM found it difficult to regain share from its offshore competitors, and legacy cost from GM’s decades as a larger, less efficient company continued to weigh on financial results. It was also a period of tremendous innovation at GM. The company continued to push ahead with electric vehicle technology, developing a series of hydrogen-powered fuel-cell concept and demonstration vehicles.
Then, in January 2007, GM shook the industry with the Chevrolet Volt concept, a vehicle that could drive on battery power for daily commuting, then continue operating with a range extender when the battery charge was depleted.
The first production Volts were delivered to customers in December 2010. GM also became an industry leader in flex-fuel vehicles, which can run on either gasoline or E85, and developed a sophisticated two-mode hybrid system to significantly extend the economy of full-size trucks and SUVs. Notable new models included the Chevrolet Aveo small car, the Chevrolet Equinox crossover, and the Pontiac Solstice and Saturn Sky roadsters.
The new Saturn Aura and Chevrolet Malibu put GM back into the thick of the midsize car fight, and the Cadillac CTS began a renaissance at Cadillac that is gaining momentum to this day. However, in 2008, a major recession and global credit crisis drove car sales to near depression levels and dried up private sources of capital.
GM, critically short of operating cash, received a bridge loan from the U.S. Treasury, under the conditions that the company further accelerate a tough restructuring of its US operations that had been underway for several years.
General Motors Corporation filed for bankruptcy on June 1, 2009, and a new General Motors Company, which acquired many of the strongest assets of the old company, was created on July 10, 2009, with the U.S. Treasury, Canadian governments, and the UAW Retiree Medical Benefits Trust as its major shareholders. This new GM is a smaller, leaner company than its predecessor. It has four brands in the U.S.: Chevrolet, Buick, GMC, and Cadillac. It has a more focused network of 4,500 dealers and competitive labor agreements with its unions.
Globally, GM continues to grow rapidly, and more than 70 percent of its sales now come from outside the U.S. GM’s top five markets by sales are now China, the United States, Brazil, the United Kingdom, and Germany. Re-emerging at the new GM is the competitive spirit that, for decades, drove GM to leadership in styling, technology, engineering, marketing, and other key areas of the auto business. This spirit guides the new GM as it works to design, build, and sell the world’s best vehicles. Corporate Level Strategy.
GM is focused on a single global vision: To design, build, and sell the world’s best vehicles. This powers the development of world-class products that are winning in the marketplace and is helping to transform their business and fortify their balance sheet.
This business model also creates a self-sustaining cycle of reinvestment that drives continuous improvement in vehicle design, manufacturing discipline, brand strength, competitive pricing, and margins. Here’s how they bring the insight, drive, and vision of their business model to the market every day to yield positive results for our investors, employees, and customers worldwide:
Design. Focusing on core brands; leveraging global resources to create the most compelling vehicles and technologies, leading in the research and development of advanced technologies to reinvent the future of transportation.
Build. Optimizing their global footprint to cost-effectively develop best-in-segment vehicles. Maximizing the efficiencies of operating their facilities in an environmentally and socially-responsible manner.
Sell. Maximizing revenues with a focused brand strategy; delivering world-class vehicles to the marketplace that offer their customer’s higher residual value, with lower incentives and appropriate pricing.
Reinvest. Consistently reinvesting cash and profits into vehicle and technology development at strategic points in the business cycle. Putting their financial strength to work to ensure the economic viability of their company. Today, General Motors is one of the world’s largest automotive companies – with annual sales of over 9 million vehicles and operations in more than 120 countries worldwide.
Their business is diversified across products and geographic markets. They meet the local sales and service needs of their retail and fleet customers with a global network of independent dealers. Over 70% of total vehicle sales volume, is generated outside the U.S. Across the globe, they are a top global automotive manufacturer, led by a diverse portfolio of brands sharing core platform efficiencies and connected by GM’s global reach.
In North America, GM manufacturers and markets the following brands: Buick, Cadillac, Chevrolet, and GMC. Outside North America, GM manufactures and markets the following brands: Buick, Cadillac, Chevrolet, GMC, Holden, Opel, and Vauxhall.
The business-level strategies that GM uses are brand restructuring and cost-cutting. Over the next five years, GM will be focusing on restructuring of their brand while focusing on our core business. Chevrolet, Cadillac, and Buick will remain at the core of our business. Other brands such as Saab, Saturn, and Hummer will either be sold or closed.
This decision is based on sales statistics that are lagging in our domestic market. Saab and Saturn sales lag behind throughout the board and introducing new models and rebranding of these franchises, this late in the game will only push our breakeven point further rather than having a positive impact on the bottom line.
Hummer doesn’t fit with GM’s strategy of fuel efficiency and sustainability but accentuates a lifestyle of excess that doesn’t promote the green initiative. Although the brand is still profitable today its viability for the future is in question.
The youth demographic is increasing rapidly, over 3 Billion People will be Between 15 and 44 in 2020. This statistic emphasizes the need to recognize the needs of today’s youth and cater that need through vehicles with options and features that appeal to that market. Pontiac will fill this market niche and will cater to the increasing youth demographic offering entry to mid-level vehicles such as the G5, G6, Grand Prix, and Grand Am.
This will effectively reduce the number of SKU’s thereby reducing manufacturing and overhead costs. With this brand, restructuring will also come a significant number of GM dealer closings to further reflect cost-cutting initiatives. Through the reduction of GM brands and models, they can gain significant cost savings. With the sale of these brands will bring about many dealership closings that will be another cost reduction opportunity.
But this is not enough to offset the lack of liquidity and self-sufficiency that General Motors currently faces. There needs to be a reduction in salary expense at GM. Just as many consumers have had to tighten their wallets due to layoffs, pay cuts, and bankruptcies GM executives will be asked to do the same.
Upper-level executive pay in the tens of millions of dollars plus stock options and bonuses should be a thing of the past. A more modest compensation model needs to be adopted. A maximum salary cap of $500,000 plus incentives should be implemented with the opportunity for increases based on key performance indicators.
Structure and Control Systems. GM operates according to four values; quality, leadership, service, and value. Part of their organizational culture is the delivery of quality vehicles and service wherever the branch is located. Their mission/vision/aims/objectives of GM will affect the culture of GM to an extent. Initially, GM’S key objective of providing the customers quality vehicles links in with their culture (values) which is that GM places customer satisfaction at the core of what they do.
This will result in repeat business and hence improve the profitability of the business which is another value (culture) of GM. Another key objective of GM is to be a socially responsible company; this has again affected their culture to a great extent.
It is clear that GM’s investment is carefully considered. This again is reflected in their culture, which shows us that GM is committed towards its shareholders and stakeholders. Another aim of GM is to provide customers with outstanding quality vehicles and make every customer smile; this is again reflected in their culture (values) as the website informs us that GM strives to improve continually.
Therefore, as the company is innovating and continually making improvements, it would satisfy more customers who were maybe previously dissatisfied with a particular aspect.
The competitive structure of an industry is another important component of identifying factors that are a threat to diminish profitability. One of the most efficient ways to assess competitive issues is to consider Michael Porter’s five-force analysis. Porter (1980, 1985) has highlighted five such factors: (1) rivalry between existing competitors, (2) threat of entry by new competitors, (3) price pressure from substitute or complementary products, (4) bargaining power of buyers, and (5) bargaining power of suppliers.
1. The rivalry between existing competitors
With the rise of foreign competitors like Toyota, Honda, and Nissan in the 1970s and ’80s, rivalry in the American auto industry have become much more intense. Firms compete on both price and non-price dimensions. The price competition erodes profits by drawing down price-cost margins while non-price competition (e.g., new car rebates and interest-free loans) drives up fixed cost (new product development) and marginal cost (adding product features).
One of the other reasons there is such high rivalry is that there is a lack of differentiation opportunities. All the companies make cars, trucks, or SUVs. The competitors are compared to one another constantly. In recent years there has been significant market share variation, another indication of rivalry, and its very strong threat to profits.
2. The threat of entry by new competitors
The presence of new firms in an industry may force prices down and put pressure on profits. There are, however, barriers to entry that tend to protect established firms. One would expect the production of automobiles to require significant economies of scale, an important barrier to entry. The new entrant would have to achieve substantial market share to reach minimum efficient scale, and if it does not, it may be at a significant cost disadvantage.
While the evidence suggests that economies of scale in the auto industry are substantial, there are also indications that large size may not be as important as commonly assumed. Nevertheless, the entry would represent a large capital investment to any new firm and the body of research still indicates that economies of scalar present a substantial barrier to entry. Consequently, entry is currently a weak threat to profitability.
3. Price pressure from substitute or complementary products
While five-forces do not directly consider demand, it does consider two factors that influence demand substitutes and complement. Although new cars generally slightly price elastic, suggesting few real substitutes (e.g., bus and rapid transit), the demand for a particular model is highly sensitive to price because of the availability of close substitutes for a given model. A change in the price of a complementary product (e.g., gasoline, batteries, and tires) could have a significant impact on the demand for automobiles.
The rising price of gas, an important complementary product, is likely to affect some firms more than others depending upon the vehicle composition. Recent rising fuel prices are likely to have a greater impact on the big three (GM, Ford Motor, and Daimler-Chrysler) whose most profitable models are energy inefficient pick-up trucks and sports utility vehicles. On balance, the overall impact on the “industry” profitability from substitutes and complements is weak to moderate.
4. Bargaining Power of Buyers
Buyer power refers to the ability of individual customers to negotiate prices that extract profit from the seller. Individual consumers have some influence over price within a given dealership, but little power over manufacturers. Customers can easily, and with little cost, switch to other auto dealers.
Furthermore, customers now have access to market information (prices and costs) from the Internet that enhances their negotiating power. But when you have many individual customers, each representing a small proportion of total sales, they will have little bargaining power with manufacturers and therefore pose a weak threat to industry profit.
5. Bargaining Power of Suppliers
Auto manufacturers require inputs-labor, parts, raw materials, and services. The cost of these inputs can have a significant effect on profitability. Whether the strength of suppliers is weak, moderator strong depends on how much bargaining power they can exert. The auto manufacturers’ have large supplier networks that appear to exert little bargaining power.
Nevertheless, the United Auto Workers (UAW), the only supplier of labor, has historically exerted a great deal of leverage over the benefits and wages provided by the big three. Because of this historical dominance by the UAW and the uncertain results of their current negotiations with the big three, one has to characterize supplier power, at least in this segment of the American market, as a strong threat to profits.
Recommended strategies for General Motors would be product development, market development, liquidation, and restructuring. Reasons for product development being at the top of priorities is that GM has to create a type of Hybrid vehicle that will allow it to keep up with the pace of the competitive environment but must be a product that stands out from the crowd at the same time.
A prime example of their idea for a Hybrid SUV, fits the GM profile with maintaining the SUV portion but allows the firm to stay with trend patterns.GM must also re-evaluate the market they are trying to approach, because for so long they have continued with a traditional outlook for automobiles, but now that times are changing their original target market is not looking for what they once were.
General Motors needs to take a step back and take look at how they want to position themselves and towards what market since what they have been doing is no longer in favor of the company.
An example of what GM could possibly do is produce a futuristic vehicle, which has been heard in rumors from Toyota about their next plan of action. If General Motors could provide a “futuristic” vehicle before Toyota has the chance to hit the market with theirs GM would be a step ahead of the competition.
Liquidation is important to GM because their assets are a lot higher than revenues, and if GM could turn assets into cash then there would be more readily available funds and then GM would not have to depend some much on their U.S. sales, which only include 2/3 of that market and their financing tactic wouldn’t be as much of a risk. Liquidation would clearly help out the financial parts of the organization.
Last but not least is restructuring, which General Motors most desperately needs to review possibilities. The company has taken a large hit in recent years and needs to find a way back to the top. This is only going to be achieved if something drastic is changed.
Restructuring the product development pace would be a start as well as cutting back on employees because the company is growing in size but not in profit, which causes a red flag for GM. The company needs to be re-evaluated in many ways, but GM has been strong for many years that it is very possible for the company to overcome these issues.
Conclusion. In conclusion, GM has remained one of the largest automotive companies of today. Although they have experienced financial difficulties in the past, they have kept the promise of their vision and mission statements by providing quality vehicles and standing on customer satisfaction.
Reining among the cream of the crop current GM brands include: Chevrolet, GMC, Cadillac, Buick, Pontiac, Saturn, Hummer, Saab, Opel, and Holden. Their sales have increased from bankruptcy with annual sales of over 9 million vehicles and operations in more than 120 countries worldwide.
Since the financial difficulties that GM experienced they have been focused on one single global vision, and that is to design, build, and sell the world’s best vehicle. They have spent the majority of their time reinvesting what drives continuous improvement in vehicle design, manufacturing discipline, brand strength, competitive pricing, and margins.
Not only does GM meet the local sales and service needs of their retail and fleet customers they have expanded their corporation with a global network of independent dealers. GM has also become technology savvy with the addition of OnStar and satellite radio features to their vehicles as well.
Also in the newer models, they are equipped with Bluetooth capability which allows the driver to connect their phone by Bluetooth to use the car speakers as a hands-free device, or there’s another option that allows the driver to play music from their phone to the car speakers as well.
GM has changed their game plan and has become more environmentally and sociably responsible. They are consistently reinvesting cash and profits into vehicle and technology development at strategic points in the business cycle. Putting their financial strength to work to ensure the economic viability of their company. Overall if GM continues to use the method of providing quality vehicles and focusing on customer satisfaction, other automotive companies will become a thing of the past.
General Motors Company, known as GM, was founded in 1908 in Flint, Michigan by William C. Durant and Charles Stewart Mott. The present chairman and CEO is Daniel Akerson. Akerson joined GM’s board in 2009 as the company went through a bankruptcy reorganization.
He became CEO Sept. 1, 2010, and led GM’s 2010 return to the stock market — at the time the largest initial public offering in U.S. history (Detroit Free Press, 2013). The headquarters for GM is presently located in Detroit, Michigan. GM specializes in designing, manufacturing, marketing and distributing cars, trucks and vehicle parts.
The brands under GM include Chevrolet, Buick, GMC, Cadillac, Baojun, Holden, Isuzu, Jie Fang, Opel, Vauxhall and Wuling. GM employs over 200,000 people and has 396 facilities on six continents. GM is divided into five business segments: GM North America, GM Europe, GM International Operations, GM South America and GM Financial. The two biggest markets for GM are the U.S. and China. According to Dan Akerson they continually do well in both markets and are making further progress in their European business (General Motors, 2013).
In July, 2009, GM filed for bankruptcy. Later that year, GM emerged from a government backed Chapter 11 reorganization. Then in 2010 GM made an initial public offering (IPO) that was one of the world’s largest and helped them to return to making a profit later that year. An IPO is a type of public offering where shares of stock in a company are sold to the general public.
Through this process GM, a private company, became a public company. Because of the bankruptcy GM had to start from the beginning and figure out what caused them to go under previously and what they needed to do to become a top organization again. With the start of the “new” General Motors they were starting over so they created a new clearer vision and a new business model.