General Motors Case Analysis Essay Example

(42%), but after thirty years, Cadillacs market share and reputation has fallen 67.8% because of international competitors. In the mid-1970s, the U.S. auto market was affected by the high cost of fuel, so Cadillac downsized products. As fuel costs stabilized in the 1980s, consumer analysis not done, therefore did not know about consumer wants and desires in automobiles.

Cadillac tried to expend its auto market, so it began to focus on younger adults by producing new design cars. If Cadillac did not offer the right balance, it might lose traditional buyers.

Cadillac is one of the divisions of GM, so there are certain parts of the Cadillac such as chassis or platform became interchangeable with other models of GM such as Buick Electra and Oldsmobile 98. So, it may confuse consumers was this truly a Cadillac? Or is it a Buick Electra with a Cadillac body? Etc.

Nature of Competition

The U.S. automobile market begin to shrink from approximately 96.5% in 1957, to 85% in 1973, to77% in 1979, and to 68% in 1987 because the huge imports were from Japan that is the worlds largest producer of motor vehicles. (2)

Domestic competition

Fords Lincoln was not far behind Cadillac in 1979 Town Car/Coupe, Lincolns equivalent to the de Ville was downsized to dimensions similar to the Cadillac. For example, Cadillac de Ville/Fleetwood offered traditional large, 4-door, 6-passenger, rear wheel drive, V-8 engines. While Fords Lincoln Town Car are of the same configurations.

According to the domestic sales, Lincoln sold 165,138 units in 1985, 177,584 units in 1986, and 166,037 units in 1987. Chrysler competed in all other fuel efficient, economical market segments and was never really a threat to Cadillac as

the leader in the luxury car market. Foreign competition European luxury cars emerge as serious alternative types of luxury automobiles. Functional luxury cars 1980s Rolls Royce of England renowned as the producer of expensive, hand-built luxury cars (not a competitor of Cadillac).

Mercedes-Benz provided a silky smooth ride with firm, supportive seating and a controlled ride in an automobile engineered for traveling at high speeds on the German autobahn. Considered to be the ultimate car in the luxury market (however, recently being challenged by BMW) Owners rated their cars and dealer service higher than Cadillac owners did when asked the level of satisfaction of vehicle ownership and dealer service.

BMWs (Bavarian Motor Works) strategy differed from Mercedes in that BMW catered the sport-oriented functional luxury buyer. But, the product line is similar. Audi (Germany) reached an all time high U.S. sales volume of over 74,000 units in 1985 due largely to its sleekly styled 5000 series (48,057 units). Priced lower and could be purchased with one of the first applications of four-wheel drive in a passenger car.

However, in 1986, 5000s equipped with automatic transmissions were reportedly unintentionally accelerated, and sales began to slide. In 1987, sales were off by 44.2% from two years earlier. Introduced an all-new replacement in 1988 in its effort to restore Audis presence in the luxury car market. New interior redesigned in addition to its engineering developments that differentiate the 100/200 models from the 5000 series.

Foreign competition Asian luxury cars emerge as fuel costs stabilize in the 1980s, a strong Japanese yen created a situation in which the Japanese were no longer the low-cost producers and began expanding product line upward to include

a greater proportion of compact and midsize cars.

Honda provide European-style functional luxury cars, but at the price of traditional domestic luxury models. Acura, which is the Japanese luxury cars from Toyota and Nissan, establish itself in the U.S. luxury car market. Between year 1986 and 1987, Sales of Acura in U.S. was increasing about 50% because Acura focus on the vehicles handling and performance. So, sales will increase and more then other European brand in the auto market.

Toyota and Nissan are in the process of lunching their own luxury car division: Lexus and Infiniti. Lexus initial offered a new sedan with a modern multivalent V-8, and it appears to be an amalgam of BMW and Mercedes-Benz design cue. Nissans Infiniti brand was a new definition of luxury and establishes an international image beyond that of BMW and Mercedes.

Environmental Climate

Energy prices increased during the 1970s, so the product of temporary shortages in the supply of oil. Therefore, import manufacturers, many of which were building small, fuel-efficient automobiles, were in prime position to take advantage of the situation. Throughout the energy shortage and until the mid-1980s, the Japanese enjoyed favorable yen/dollar exchange rates were, so in large part able to offer vehicles that cost less than comparable U.S. or West European products. However, the U.S. government pressured by domestic auto companies imposed a voluntary restraint or quota. The government should protect domestic market by limit import.

Car sales are a function of the economy. Domestic automobile manufactures offered large cash rebates and attractive low-interest financing to spur sales during the high interest rate and slow economy. Also, customers can get the best models and sale incentive.

The Global Automobile Industry

is witnessing a shakeout with the emergence of a consortium of major giants like GM, Ford, Toyota, Volkswagen etc. consider the case of GM, the worlds largest car manufacturer. It has strategic tie-up with Fiat, Italy and Suzuki, Japan. To reduce the cost of developing a new car, companies are forced to develop a world car catering to all regions. So, companies will develop and manufacture cars at different parts of the world.

Stage of product life cycle

Cadillac is in a mature market (the automobile industry) of the life cycle. However, each car of Cadillac was going through the product life cycle until the next new car produced.Customers responses are the key to decide cars life cycle should be longer or shorter. If the sale of the car is low, the company may decide to create other new products to cover the loss. On the other hand, if a car is very popular, the company may decide to create the series of the car, so the product life cycle can be the type of extended fad.

Skills of the firm

Cadillac focused its business on the U.S. auto market, and propelled its status as the standard of the world, so Cadillac began to add new technology such as self-starter, V-8 engine and automatic transmission since 1912. Customers can get different image of the new products.

Financial resources of the firms

Cadillac had funds to support an effective marketing program that was TV advertising. For example, in 1987, Cadillac spent $ 35,334,300 to promote the spirit of Cadillac and compared with the pervious years that the budgets were increasing 32.5%. However, when Cadillac found out that its competitors spent more money

then its, Cadillac raised its budgets to $54,126,200. So, the promotion fee is flexible for Cadillac because the advertising is the major strategy of sales.

Distribution structure

Cadillac uses exclusive distribution because consumers only can purchase its products on the certain areas. Also, exclusive dealing often includes exclusive territorial agreements. So, Cadillac may not to sell to other dealers in a given area, or the buyer may agree to sell only in its own territory.

What will the competitors behavior be in this market? Competitors will probably focus more on promoting functional luxury cars that are smaller and therefore more fuel efficient. Oil is already priced at a premium for fear a U.S. attack on Iraq, the world's eighth largest oil exporter, could slash oil shipments from the Middle East, which supplies about 40 percent of the global crude trade. Crude for April delivery traded as high as $38 a barrel -- a level the futures market hasn't seen since the all-time high of $41.15 in October 1990. Smaller luxury cars are much more popular in Europe than in the United States.

Competitors try to provide form, supportive seating and a controlled ride in an automobile engineered for traveling at high speeds. Competitors also launch advertising campaign to promote certified used vehicles. Intended to boost consumer awareness of the benefits of certification, the new work promotes the ease and confidence associated with the purchase of Certified Used Vehicle and reassures consumers that it is the affordable and reliable alternative to buying a traditional used vehicle.

Most of competitors make a wide variety of financing plans available to consumers through their franchised dealers. They offer variety of services:

• Traditional Retail Financing

Competitors are serious about e-business. In 2000, Mercedes-Benz created an internal organization that intended to steer the company around costly e-mishaps and toward the best online business practices. The Internet has become a vital tool in a marketer's toolbox. With the E-Commerce Times it is important to define specific objectives for using the Web in marketing campaigns.

Mercedes and BMW have significant market shares in many countries worldwide whereas Cadillac is traditionally strong in America. This enables the European companies to generate considerably more revenue than Cadillac, which in turn can be used on aggressive marketing campaigns and product development. One weakness in GM business is customer relation services. Mercedes-Benz owners rated their cars and dealer services higher than Cadillac owners did when asked to rate level of satisfaction of vehicle ownership and dealer services.

GM is also trying to catch competitors in designing sport cars. BWM and Mercedes-Benz are investing a lot of money to design better and faster sport cars. Since society has changed significantly (people get married later in their life, have kids at their 35), customers characteristics has changed significantly too. More customers can afford to have only two-seats sport cars, they prefer smaller cars, and cars that are more fuel efficient.