Strategic Management Used At General Motors Business Essay Example

energy crisis, there was a shift from large fuel-consuming cars to smaller European models. A second crisis further intensified worries about pollution control, emissions, and safety issues. As a result of these trends, GM lost market share to more economical and compact vehicles.

The surge in Japan's vehicle imports during the 1980s and 1990s presented significant challenges for GM. To combat this competition, GM redesigned and reengineered their car models. However, high production costs continued to cause substantial losses in the market.

During these challenging times of adversity,G M implemented measures such as plant closures and worker layoffs in an effort to improve their financial situation. Additionally,G M pursued various strategies by acquiring Saab and Daewoo,purchasing shares in Subaru and Suzuki (later sold for profit),and merging with FIAT auto company.
By the late 1990s,G M appeared to be recovering with stable sales and increasing stock value.However, in September 2001, new challenges emerged, leading General Motors (GM) to once again change its system. In the subsequent years, GM faced difficulties in the highly competitive automotive industry, especially during the economic recession in 2008. To prevent bankruptcy after reporting a $6 billion loss and utilizing $10.2 billion in cash during the first quarter of 2009 due to a $20 billion decline in revenue (bbc.co.uk), the government provided financial assistance to GM. Despite these obstacles, GM sold more vehicles in China than in the US during the first half of 2010 (Constantini, 2010).

Regarding strategic analysis of GM, there are numerous models and frameworks available for assessing both internal and external environments. These include Tormenting's Eclectic Paradigm, Porter's Diamond and Five Forces framework, Directional Policy Matrix, Mintzberg's School of Thoughts approach Value

Chain Analysis SWOT analysis,and others. The choice of model depends on the specific needs and circumstances of the company (Johnson et al., 2008). According to Schlie and Yip (2000), companies at different levels require customized strategies.

GM operates across multiple states including Canada and the US, offering various services such as improvement, sales, manufacturing,economy,and insurance.Porter's five forces model aids in analyzing competitive pressures and industry attractiveness.It helps identify necessary strategic changes for obtaining a competitive advantage and achieving above-average returns on investments.The text discusses the use of Mintzberg's Design School and Michael Porter's five forces model to analyze General Motors Company's competitive advantage. It explains that strengths, weaknesses, opportunities, and threats are analyzed through Mintzberg's Design School, while Porter's five forces model is used to identify threats to profitability. The text highlights the importance of competition between existing rivals in gaining a competitive advantage and emphasizes that a company's success depends on its ability to outperform other companies.During the 1970s and 1980s in the US car industry, General Motors Corporation (GM) faced challenges from foreign competitors such as Honda, Toyota, and Nissan. These competitors entered the market and intensified competition by offering lower-priced cars with high quality (see Appendix 2). Despite being an industry leader at that time, GM struggled to compete with these well-established brands. The entry of new players into an industry, according to Porter, can lead to lower prices and decreased profitability by introducing additional capacity and resources. However, GM's strong brand reputation during both World Wars made it difficult for competitors to enter the market, resulting in significant profits and business expansion for GM. Smaller companies found it challenging to compete with

GM. In the early 20th century, GM differentiated itself from Ford by inventing self-starters. However, in the 1970s, European and Japanese firms introduced fuel-efficient models to the market. According to Porter (2004), all companies in this competitive car industry face pressure from producers of substitute and complementary products. Changes in prices for complementary items like gas and tires can greatly impact car demand. This effect will be more pronounced for GM due to their generally energy inefficient vehicles, significantly impacting their profitabilityAccording to Porter (2004), buyers can exert their bargaining power by demanding lower prices, higher quality, and better services. This can also be achieved by leveraging competition among rivals, even if it comes at the expense of industry profitability (Porter 24). The advancement in technology and globalization has made GM customers more aware of their purchases and costs. Additionally, access to competitor information through the internet has increased bargaining power for GM traders (Nytimes, 2011). Despite there being a large number of suppliers in the raw materials and machine parts sectors, there is still a low threat from them. However, GM faces potential risks from the UAW labor union which adds $1,400 to each vehicle compared to competitors due to pension and healthcare costs. To improve economically and grow as a company, GM needs to find ways to reduce these liabilities.

Figure 3 illustrates Michael Porter's Five Forces applied specifically to GM. Furthermore, Mintzberg's Design School analysis views strategy formation as achieving alignment between internal strengths/weaknesses and external opportunities/threats. Therefore, it is recommended that GENERAL MOTORS conduct a SWOT Analysis guided by Mintzberg's Design School (Mintzberg et al., 2003: p23).

GM possesses several strengths in the

automotive industry including its historical leadership throughout the twentieth century and its continued competitiveness. It also has a strong global presence with an increasing market share in China.GM has the potential to regain its leadership position with appropriate decisions. Additionally, GM operates in over 100 countries with around 250,000 employees and offers security features through OnStar Satellite Technology. To control costs, GM has formed alliances with companies like Shanhai Automobile Industry Corp., Toyota Motor Corp., and Daimler AG.

However, there are several issues that GM needs to address. These include heavy reliance on the US market and a need for global expansion. In 2010, an article by Associated Press revealed that GM had a low credit ratio resulting in a junk-credit rating (BB-). Downsizing has also been problematic with brand sell-offs and closures. Since the global economic recession in 2008, GM's profitability has remained stagnant which led to significant decreases in profit margins and sales.

A major failing for GM is its inability to keep up with the alternative energy movement. This puts them at risk of losing market share and decreasing profits as competitors like Honda and Toyota produce efficient and environmentally friendly vehicles. The vertically designed organizational structure of GM also contributes to communication issues between different levels within the company leading to operational and managerial problems.

On the other hand, there are opportunities for improvement for GM including expanding globally especially in the Chinese market where significant growth has already been observed.Catching up in hybrid technology is an area where General Motors (GM) has been lagging, but they still have time to make a comeback. GM has also started implementing Green-Manufacturing systems like water-borne technology

and waste reduction practices. Developing new vehicle models and designs is advantageous for GM in an ever-changing industry where innovation is crucial for success. However, there are threats that need to be considered.

Increasing supply costs pose a common threat in the car industry and other industries as well. This pushes companies like GM to minimize manufacturing and production costs while maintaining product quality. The fluctuation in steel prices between 2005 and 2010 had a negative impact on GM's production costs, particularly during the economic crisis in 2008 (See Appendix 5). Additionally, the rise in fuel prices (See Appendix 6) poses another threat to GM.

The economic recession in 2008 resulted in a significant decline in sales for General Motors, similar to the effect of steel prices. Consequently, the increasing cost of fuel has played a pivotal role in driving the development of hybrid and more fuel-efficient vehicles. Moreover, increased competition presents a major challenge for General Motors as multiple brands now compete for market share. To stay competitive, GM must prioritize innovation.

Figure 4 displays the SWOT analysis of General Motors (Source: Writer).The text discusses GM's value chain analysis, which involves adding value to products while minimizing resource waste and maximizing work done. The company utilizes suppliers and processes at each stage of production to gain a competitive advantage. Value Chain Management focuses on eliminating waste and ensuring customer satisfaction within the company. Understanding industry and business concerns is crucial for gaining a competitive advantage in the global market. One cost-reducing strategy is outsourcing activities to states with lower labor costs. This allows companies to take advantage of regional benefits and determine which activities should be outsourced.

Additionally, GM can make decisions about jobs with United Automobile Workers while reducing employment obligations. The company also emphasizes customer relationships by utilizing OnStar Technology for emergencies, helping maintain strong customer connections (Value Chain Analysis) (Figure 5: Value Chain Activities Table).The BCG Matrix Analysis helps prioritize products within a business unit's portfolio based on the product life cycle theory. It is recommended to prioritize high-growth products for long-term value and low-growth products for cash flow generation, using the BCG Matrix adapted for GM (Figure 6: BCG Matrix) (Lancaster & Reynolds, 2004).

Due to increasing oil prices and environmental concerns, the automotive sector has had to develop fuel-efficient vehicles. When applying the BCG Matrix to GM, it is advised to discontinue non-fuel-efficient brands like Pontiac and Hummer that consume significant amounts of oil. Additionally, GM should invest more in producing smaller fuel-efficient vehicles and Hybrid Electric Vehicles (HEVs).

In conclusion, strategic analysis methods such as Porter's FF, Value Chain, BCG Matrix, and SWOT Analysis have extensively been used to analyze General Motors Corporation. With over 100 years of history, GM has undergone thorough analysis considering factors impacting competitive advantage both internally and externally.

While every company can make mistakes throughout its lifecycle, minimizing these errors is crucial for success. Initially outperforming competitors in the industry, GM started losing global market share with the entry of new rivals. However, the text suggests that despite facing challenges and declining profits, General Motors (GM) made necessary changes to compete with rivalsThe recommendation for GM is to focus on a specific sector and implement collaboration and differentiation strategies. By adopting this strategy, GM can reduce costs as they transition from broad-line manufacturing to

offering different assortments. This will allow them to differentiate their products by targeting niche markets that may perform better. Conducting SWOT analyses will also help GM be prepared for unforeseen challenges such as financial crises, giving them a competitive advantage in the global industry.

Improving product development is crucial for staying competitive in the ever-changing global market. A suggestion is to prioritize merchandise development, such as producing Hybrid SUV vehicles, which aligns with the growing trend and effectively meets market demands. It is important for GM to reassess their strategy initially focused on traditional vehicles and now prioritize advanced vehicle production to gain an edge over competitors like Honda and Toyota.

Settlement is vital for GM due to their assets exceeding their incomes.By utilizing cash to acquire these assets, GM can improve its financial flexibility and reduce its dependence solely on the US market, thereby enabling it to succeed in the global industry. The following appendices provide additional information:
- Appendix 1: Imported Nipponese Cars Development [link] &[show=html]
- Appendix 2: Car Gross Sales Monthly Change [link]
- Appendix 3: China Car Market Soars [link]
- Appendix 4: Green Manufacturing Procedures [link] &show=abstract
- Appendix 5: Steel Monetary values Between 2005 and 2010 Source: http://www.ttiinc.com/object/ME_Materials_Steel
- Appendix 6: Rise in Fuel Monetary values Between 2009 and 2010 Source: http://www.bbc.co.uk/news/business-12098981

Reference:
1. The Associated Press (2010) reported that General Motors received a 'junk' credit rating from Fitch. The article can be found at [link] and was accessed on January 28, 2011.According to BBC News (2011), the price of fuel will increase due to the rise in petrol duty and VAT. The full article can be found at [link] and

was accessed on January 28, 2011.

Cavusgil, Knight, and Riesenberger (2008) discuss various aspects of international business, strategy, management, and the new realities in their book "International Business." This publication is available from Pearson Prentice Hall in New Jersey.

In his article "China Says No More Cars, Down Goes Auto Industry," Chu (2010) explains that China's decision has a negative impact on the automotive industry. The article can be accessed at [link] and was last accessed on January 31, 2011.

Constantini (2010) provides information about General Motors in an article published by The New York Times. The article can be accessed online at [link] and was last accessed on February 10, 2011.

Datamonitor (2009) offers a company profile of General Motors Corporation. Access to this profile can be found at www.datamonitor.com and was last accessed on January 28, 2011.David (2011) presents strategic management concepts in his book "Strategic Management Concepts." This is the 13th edition of the book published by Pearson Prentice Hall in New Jersey. Diez-Vial (2009) examines the effects of firm size on vertical boundaries in the Journal of Small Business Management. The article titled "Firm Size Effects on Vertical Boundaries" can be found in volume 47, issue 2, pages 137-153. General Motors (2010) references an unspecified publication or source related to the company. Company Profile [Online]. The following sources and their availability online, along with the dates they were accessed, are referenced in the text:
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2.Porter, M.E., 2004.Competitive Strategy: Techniques for Analyzing Industries and Competitors.New York: Free Press.
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(1991-1999) Between the Nipponese Car Manufacturers and the European Union." European Business Review. [Online] Available at: hypertext transfer protocol://www.emeraldinsight.com/journals.htm?articleid=1501956=html [Accessed 10 February 2011]
4. Available at: http://www.gm.com/corporate/about/company.isp [Accessed 10 February 2011]
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8.Mintzberg et al.,2003.The Strategy Process :Concepts Cases.New Jersey:Pearson Prentice Hall
9.Niederhut-Bollmann,C.Theuvsen,L.,2008.Silver, D., 2009."GM's Fire Sale Auto Sales Preview." Wall Street Strategies.[Online] Available at: hypertext transfer protocol://www.wstreet.com/investing/stocks/19359_gms_fire_sale_and_auto_sales_preview.html [Accessed 8 February 2011]
Schlie, E., Yip,G.,2000."Strategic Management in Turbulent Markets: The Case of the German and Croatia Brewing Industries." Journal for East European Management Studies, Vol.13, No.1, pp.63-88.Nunes B. and Bennett D. conducted a study analyzing environmental reports in the automobile industry, which can be accessed online at http://www.emeraldinsight.com/journals.htm?articleid=1863551=abstract [Accessed 13 February 2011]. According to an article from Nytimes, the United Automobile Workers organization is available at www.nytimes.com (accessed on January 31, 2011). Porter discusses competitive strategy in his book "Competitive Strategy: Techniques for Analyzing Industries and Competitors" (2004). Seidenfuss and Kathawala analyze the voluntary export restraint without market restraints in the Monitoring Agreement between Nipponese Car Manufacturers and the European Union from 1991-1999. Their article can be accessed online at http://www.emeraldinsight.com/journals.htm?articleid=1501956=html (accessed February 10, 2011). Silver provides insights into GM's fire sale auto sales preview on Wall Street Strategies' website (2009), available at http://www.wstreet.com/investing/stocks/19359_gms_fire_sale_and_auto_sales_preview.html (accessed February 8, 2011). In their article titled "Regional Follows Global," Schlie and Yip discuss strategy mixes in the world automotive industry, published in the European Management Journal (2000). The

Economist recently published an article titled "In Pieces" on the American car industry, which can be found at www.economist.com/node/13145718 (accessed February 8, 2011).