Strategic Management and General Motor Company - Case Study Example

Running Head: STRATEGIC MANAGEMENT AT GENERAL MOTORS (Your Name) (Institution) General Motor Company Introduction General motors is one of the leading car makers in the world. The company has 11 brands of vehicles in the market to date. The research below seeks to address the challenges the company faces in its pursuit to be ahead of its competitors,such as Ford motor company,Toyota,Fiat Hyundai to mention a few. It also seeks to address the world market the company has had its operations and those that it should exploit in its en devour to increase its sales volumes. The research seek to address some of the recommended marketing strategies it has to adopt especially in modernising its brands in order to succeed in its plans of increasing the sales volumes. Macro-environment Macro environment is the broad spectrum of business factors that surround the operations of General motors. This factors range from internal factors that the company has control over, to those that the company has got no control over ,for example, political environment. Example of macro-environments are,economic environment,political environment,social environment and technological environment. The above mentioned types of macro environment are discussed as follows, Economic environment The company has contributed a lot globally in terms of employment opportunities, contribution towards Gross Domestic Product (GDP) of different countries and as a major player in balance of payment of various countries. Tax payments from General motors have been a great boost to the budgets of different nations around the world. Competition is another economic-environment issue under which general motors operates. Strong emphasis is on product attributes linked to a total ownership package and financing method to buyer’s needs. General motors’ urge to open up new car manufacturing plants in Eastern Europe and Far East shows clear growth opportunities. Europe and China are the biggest grounds where General motors has been operating to enhance its growth capacity. India and Asian countries are also areas with great opportunity for the firm as long as government and structural reforms on entries are made. Investment strategies in 2007 have raised $17.1 billion which show that the company is on the right track. (Value base management, 2007) Economic life-cycle difference is on the concerns of General Motors company because it creates demand fluctuations. There is a great need to focus on flexibility and speed of response by the management. This should be based on accurate forecasting and market scanning. The product life-cycle can also be extended to emerging nations and therefore the company needs to invest heavily in emerging nations. Forward integration is the diversification strategy in use by the company. Added value is through financing, sale of spare parts and servicing. To overcome mobility barrier and gain presence in upper luxury segments, General motors has adopted growth by acquisition with Daewoo being its latest acquisition and it is more focused on US markets. To reduce manufacturing costs, the General motors has adopted measures of buying components or sharing development costs with other players in the industry. Collaborations on mutual need are used by the company as a market strategy or in spreading costs. A new strategy in the industry surrounding General motors is the interchange of resources towards combining. Social Environment General motors has for along time been involved in the welfare of the community. In 2004 it gave computers worth millions of dollars to the colleges through its PACE Award program. Its centre for human resource has also dedicated itself to providing salaried employees with education, Medicare, training and tuitions as well as programs of family concern .With newly drafted laws on emissions taking root the world over, General motors is rushing to make vehicles that can run on greener fuels like CNG and ethanol. Technology and components for curbing pollution are being researched on to ensure the company does not function against the Kyoto protocol. The target is to reduce Carbon dioxide, nitrogen sodium, sulfur dioxide, carbon monoxide and CFC methane and Nitrate. Statistics show that 5% of total sulfur dioxide and 70% of carbon dioxide emissions is from automobile and the company is working hard to adhere to the Euro 96 which means, tighter control over emissions which are mirrored in the US legislation. Technological Environment The company is developing engines with reduced friction, better ignition and efficient combustion. Engines capable of using renewable fuels like Soya oil and bio ethanol derived from sugar are also being researched on. Research on prototype development is underway with an aim of producing hydrogen powered vehicles by 2010.Emergence of car dealerships is another step forward in the industry, this is an important part of the value chain to the car makers. As cars become similar, dealers will influence replacement decisions in the ways they interact and manage customer relationship during the period of purchase and ownership. Dealers are also becoming selective and critical of markets especially their product development and marketing activities. The most sought after being BMW followed by Jaguars, Mercedes, Land Rover and Audi. The company has adopted the technology of using robots in assembling its vehicles. This has affected its propensity to relocate in areas of labor cost as the cost advantage has been reduced. Political Environment Political forces also affect the operations of the company. Politicians strongly influence legislative processes. Protectionist politicians compete to ensure tariffs and taxes are brought down to secure more employment and investment opportunities. Currently General motors has 284 000 employees worldwide and this number is projected to increase if favorable policies are set by politicians. In 2006 elections the General motors contributed $788,600 to the political cycle 34% to the democrats and 66% to the republicans. Forces Model of Competition General motors is the undisputed leader in automotive design. In 2004 General motors produced 8 million cars. By October of this year, the company had 11 brands in the market. The models were, Holden Saab, Opel, Saturn, Saab, Buick, Pontiac, Chevrolet, Cadillac Vauxhall, Daewoo and Hummer. Competition is very stiff and special emphasis is on product attributes which are matched to the buyers needs. General motors has continued to satisfy its consumer’s needs with all its eleven brands all over the world. The General motors hybrid models include 2006-2007 Saturn VUE Green line, 2008 Saturn Aura Green line, 2008 GMC Yuki, 2008 Chevrolet Malibu which are very competitive. (Barrabba, 2004) Strategic Groups Several strategic groups exist in the motor industry. General motors and Ford are the largest producers in one strategic group and they continue to compete in similar market segments. Chrysler and AMC are in the same strategic group and they also compete in the same market segments. The third group is dominated by Fiat, VW, Renault and PSA. Hyundai, Daewoo and KIA make the fourth strategic group; Volvo, Daimler- Benz, BMW and Saab make the fifth strategic group. Suzuki Fuji and Daihatsu make the sixth strategic group in the automobile industry just to mention a few. General motors has to compete closely with Ford to maintain its leadership and therefore has to adopt good marketing strategies. Competitor Profiles The top competitor is the Ford Company which is in the same strategic group. This is because they eye similar groups of consumers and operate in almost similar business segments. While general motors holds a $15.01B market cap the Ford motor company holds $14.54B which is a close range and it shows that competition between the two companies is very stiff. Revenue differences show that the two companies are in a hot race to dominate one another in their market segments. $186.70B for General motors and that of Ford stands at $168.70B. The sales figures dropped sharply with General motors having a change of -1.60% in its sales and Ford dropped by -1.43%. Ford motor company, develops, designs, manufactures and service trucks, cars and their parts all over the world. The brands that are sold are Lincoln, Volvo, Land Rover, Mercury, Jaguar and Aston Martin. It markets its products through dealers and distributors who are spread world over. Most of its market segment is in North America. The company also offers after-sale services to its customers, for example, extended service warranty, maintenance and light repair, heavy repair, collision and vehicle accessories. It offers whole-sale financing, retail financing such as giving working capital to dealers, helping improve dealership facilities in its effort to increase the sale of its brands. (Ford motors, 2007) Cognitive Maps General motors has 33 manufacturing plants in strategic places all over the world. It is divided into various regions, for example, GMA-Asia pacific, GME-Europe, GM LAAM-Latin America, Africa and Middle East, GMNA-North America and GMAC-Fina. Most of its market is in North America where it has dominated for several decades. Factors for Success For General motors to beat its competitors, several factors have to be considered. First, it has to adopt cost leadership strategies to enable it control the price of its brands. This will make Ford a close competitor fix its prices following General motors trends. This gives General motors a room to adjust its prices either upwards or downwards according to the forces of demand and supply in the industry. This is because the two have similar consumers and they are in the same market segments. Second, product differentiation should be on quality of service to its consumers. Products should satisfy consumers’ needs, for example, vehicles that do not emit so much of carbon dioxide and other harmful gases should be developed. Third, it has to reduce the number of varying components but increase consumer choice by offering more variants in terms of accessories and trim. Fourth, the invisible components must be standardized. This includes the steering, chassis, drive line and the braking system. Other components that are perceived important by the consumer must be common for example the airbags, controls and other instruments. Fifth, market segmentation should be used to identify where there is market catch and therefore concentrate on such regions. This will help reduce costs of marketing in regions where the market for its brands does not show signs of growth. (Ketler, 2000) Market Place Segmentation – Targeting Positioning (ATP) The General motors is more focused on the US market with its acquisition as the growth strategy. Eastern Europe and Far East are other market opportunities. Currently General motors is among the 33% whose supplies and manufacturing facilities are in Eastern Europe with Poland, Russia, Hungary and the Czech republic the best sales markets in that region. It has also important manufacturing locations in Slovenia and Slovakia. In China the Buick brand followed by the Buick excelle brand are very strong in the market. Shanghai auto is leading in the domestic market and has joint venture with General motors. This has been taken to explain the rationale behind purchase of Ma Rover. Africa is also a strategic region where General motors has set various brands in the market, for example, Kenya where Isuzu and Chevrolet brands dominate in the market as compared to Fords Mazda brand. Branding aspects General motors has 11 names under its control. The company has produced hybrid vehicles running on oil based fuel and electricity and anticipating that it will also produce fuel cell cars by 2020. Although General motors has dominated the market for several decades, Toyota has super ceded General motors as the world’s largest car producer by volume. Branding was the main factor behind Toyota emerging as the world’s top producer. A successful brand always stands for something and therefore the company has to come up with brands which satisfy their customers’ needs. The company is reducing the number of varying components in its brands to increase consumers’ choice. The `needlessly unique` components are reduced especially if they do not raise customer perceptions of value. To add value to its brands components suppliers have to develop in different regions to ensure they stay within cost targets set by customers of General motors. In 2002, 5 new models were launched by General motors with the number expected to be 64 in 2007. Branding is aimed at building a lifetime relationship with the customers. The company will either stretch its brands or build stable brands aimed at distinct product segments. Value chain and value systems Concentration has become a fundamental issue that centers on how cars will be sold in future and this is an important part of value chain to General motors. Customer interface takes place in this stage and most of the perceived value is added. The relationship that dealers establish with the customers is vital to enhance replacement decision. General motors has reconfigured its value chain with an aim of moving closer to its customers. Diversification into areas such as dealer services and finance will take a center stage. Competencies and Capabilities. General motors is including environmental criteria in the formulation strategies. Vehicles are being developed with reduced frictions, more efficient combustion and better ignition. Engines capable of using renewable fuels such as Soya oil have been designed. This is aimed at reducing pollution. General motors is among major players in green network to recycle batteries, catalytic emirates bumpers to produce new vehicles hence reduce environmental pollution from disposed materials The company is also turning its attention to lean distribution by reducing stocks and dealer’s margins. It is also developing a structure of a small number of multi-franchise dealers with servicing carried out by local satellite centers. Brand Anatomy and Brand Architecture General motors spend $225m in 2005 on Cadillac brand. It decided to move with smaller agencies in order to work with agencies seen as more nimble in the changing media landscape and advertising. Modernization was the key issue because of the stiff competition in the motor industry. Its marketing strategies were to be current and modern. The brands are architectured to eliminate production of harmful gases hence reducing environmental pollution. The brands have fobs that are programmed to raise or lower air suspension and automatically re-charge when in the ignition. Others that open windows adjust seats and tune the radio to various stations are also designed. General motors has spent 4.5% of its revenue to ensure its brands meet its consumer’s needs. Software has been used to alter power and torque profiles of diesel engines using inbuilt codes. This offers an opportunity to use one engine across a wide range of its model sizes. Speed limit is also adjusted using the GPS to a legal maximum. Telescopic observation matrix The telescopic observation matrix is a mirror through which the General motors has to use in order to attain robust performance and also maintain stability in the presence of other vehicle manufacturers. The company has to deal with dynamical systems behaviors such as market trends to achieve the desired reference(output). The management team of General motors has to manipulate its inputs such as raw materials to make the best models of vehicles in order to produce the best models of vehicles in the market. The work of manipulating this raw materials will be done by the production controllers and the output gauged with that of the competitors before before releasing it to the market. Desired reference Reference or output input actual references or results MC Kinsey 7's (shared values) General motors strategic intent has 3 attributes .First the sense of direction where the company expects to explore new markets in growing economies in order to be competitive. India and Africa are new regions where it anticipates entering in its expansion program. Second, sense of discovery: The Company has designed new strategies to differentiate its products from those of the competitors by exploring new territories and researching on consumer demands in those territories. Third, the sense of destiny: The Company still anticipates being the leader in automotive industry and therefore the whole staff in the company is involved in exploring new markets and getting information about consumer needs. Ketler MC Kinsey 7s has seven shared values that will be useful in General motors. (Ketler, 2000)They include, Strategies The company has plans to allocate resources to develop brands that are competitive and are consumer friendly in order to recapture its leadership in the market. The resources are to be directed to develop environmental friendly motor vehicles with reduced pollution. They are also designed to reduce competition. Structure. General motors is well organized in its management hierarchy with branches in various regions to ensure that it achieves its objectives. Systems Vehicles are manufactured in various regions and dealers all over the world market the models to the consumers. Staff. With its massive staff, the company has employees in all its departments to ensure that its objectives are achievable. The staffs are widespread to all regions where General motors has its centers. Style The management is well organized, with qualified people in key positions. The junior staffs are well motivated through managerial decisions in order to achieve the company’s goals. Skills. Qualified personnel are employed in all departments to ensure that the company meets its targets. Directional Policy Matrix General motors will have to use the matrix below to measure the health of the market and the need to pursue it. It will help the company get direction for its future investments. Where the market attractiveness is high it will have to invest and grow, and where the market attractiveness is low it will have to divest to reduce extra costs incurred without returns. Using this matrix for the first three years, the company will make a good decision on whether to continue with expansion programme or stop it. To invest, the company will ensure that the market is attractive and it has high business strength. In the second quadrant of growth, the company will have options of taking what it can while still holding possibilities of investing. In the third quadrant of the matrix (Harvest) the company will maintain its position for short term profits although the market might have lost its attractiveness. In the fourth quadrant the company will analyze the situation to know whether to divest and it will only keep in the market only if the market supports a more profitable part of its business. (Ketler, 2000)The matrix is as follows, Attractive Average Unattractive Double of quit Phased withdrawal Divest Weak Average Strong Try harder Custodial phased withdrawal Leader Growth Cash generator The above matrix can be analyzed as follows, Leader -Resources should be focused upon the strategic business units. Double or quit- Gamble in future on potential strategic business units. Custodial-No more resources should be committed in the market. Growth-More resources should be committed in that market. Cash generator-Expand elsewhere while still in the market. Phased withdrawal-Cash should be moved to the strategic business units. Divest- Move out your assets out of that market. General Electric Matrix The company will use this model to perform its business analysis on its strategic business units. The aim will be exploiting the most attractive market. The company looks at factors to achieve its overall strategies and assigns relative importance to these factors. (Ketler, 2000)The circles used in the model represent market share in different regions. The bigger the size of the circle the bigger the market share and therefore, the need to invest. The arrows in the model show the direction of movement in future and this is an indicator of growth of the market in future. The general electric matrix appears as follows, Business Unit Strength High Medium Low market attractiveness High medium low This matrix uses the 3*3 grid which makes it more sophisticated. Market share is replaced by competitive strength which helps to assess competitive position of each strategic businesses unit. The sizes of the circles represent the market share. Ansoff Matrix General motors has to use this model to find strategic choices in order to achieve its objectives .Main categories have to be designed for selection. First is market penetration: Existing brands will be marketed to existing customers and revenue will be increased through the promotion of its brands and repositioning them. In this category the brands will not be altered and new customers will not be sought. Second, the market development category: The Company will market its existing brands in new markets, for example, exporting to new regions. Third is product development where new brands will be developed and offered to existing customers. Forth is diversification where the company will explore new markets and offer new products to new customers. These strategies will have to be used by the company for growth purposes as shown below. (Leslie, 2000) product/market Present New Present market penetration product development New market development diversification The table shows that with the present market and present product it will be necessary to do market penetration while with a new product in the present market it will be necessary to do product development. With a new market and a new product it will be necessary to do diversification. Gantt chart This is a production tool that will be used by the general motors to help in planning, coordinating and tracking specific tasks in its projects. It will involve several steps, for instance, preliminary investigations, writing of reports, carrying out interviews, training, doing evaluation and writing of a final report. Horizontal axis represents the time scale .Beginning and ending of the individual tasks is shown by rows and bars. The ending of one task marks the beginning of the other as shown below, Task Duration Jan Feb March April May June 1 2 3 3 months 2 months 2 month Telescopic observation matrix The above matrix is also a production tool that will be used to determine the required output quality by first determining the inputs required in order to determine the output (reference).Different models of vehicles will need different inputs in order to reduce the level of competition in the market. The company has to ensure that it owns the latest models from its competitors in order to gauge them with its own models which will help determine the actual output that will be released into the market. This is a method in control theory that will be helpful in curbing completion from other car manufacturers. Desired reference Reference or output input actual references or results Relevant Numerical Analysis. North America’s contribution to global growth is steady showing that there is a large market for its brands as shown below. These were the highest contribution figures as compared to any other country. Year contribution to global growth 2003 1.04% 2004 1.54% 2005 1.27% 2006 1.27% The emerging pacific also shows that the economies are not doing badly and therefore there is a great need to invest in those regions as shown below, Year rate of growth 2003 0.69% 2004 0.77% 2005 0.69% 2006 0.64% The company will need to move into these regions to source for new markets. (Farber, 2000) References Barrabba, V. (2004), Servicing transformation, (Columbia: Columbia press). Chandler, A. (1994), Giant Enterprise, (Chicago: Chicago press). Cray, E. (1990), General Motors and its times, (Columbia: Columbia university press). Farber, D. (2000), Triumph of General Motors, (Chicago: Chicago press.) Ford profile. Available from, www.Fordmotor.com (Retrieved on 18 December) General motors corporate strategy. Available from, www.valuebasedmanagement.net (Retrieved on 18 December 2007) General motors brand anatomy. Available from, www.thetruthaboutcars.com (Retrieved on18 December 2007). General motors value chains. Available from, www.msnbe.com. (Retrieved on 18th December 2007) Ketler, M. (2000), The Rise, fall and Struggle for recovery of General Motors, (Chicago: Chicago press.) Leslie, S. (2000), Wizard of General Motors, (Columbia: Columbia university press). Sloan, A. (2002), General Motors High performance machine, (Chicago: Chicago press). Read More