General Motors Case Analysis

.

Company Company OverviewOverview

Significant actions undertaken by GM (since the completion of the case after 2005)

- Reducing legacy cost with the United Auto Workers agreement

- Increasing vehicles resale value by reducing sales to fleet operations

- Sold off stakes as well as the General Motors Acceptance Corporation To decrease exposure to failing international operations and to increase liquidity

Internal & Internal & External External AnalysisAnalysis

Business Business Level Level StrategyStrategy

Corporate Corporate Level Level StrategyStrategy

AlternativeAlternative11

AlternativeAlternative22 RecommendationRecommendation

ImplementationImplementation

GM’ s current Strategic Plan Four Point Turnaround Plan 1. Reduce labour expenses2. Cut legacy costs3. Decrease production capacity4. New designs and marketing strategies

Costs reduction do not guaranty successful competition

GM must differentiate its products for customers to get a sense of value-added

Must appeal to needs and trends of local markets instead of using a global

Company Company OverviewOverview







Problem Statement

What organizational changes must GM implement in the North American market to earn above average returns and improve its ability to compete in future, developing markets?

Case analysis focus on North American market

Must first develop a successful domestic strategy to be able to compete internationally


CompanyCompanyOverviewOverview







Strengths

-Extensive cash reserves

-Global network of suppliers and distributors

-Economies of scale and scope

-Quality improvements

-Low cost suppliers through competitive bidding process

-Technological know-how for SUVs

-Only company to have invested in all 5 alternative fuel technologies

-Developed internet distribution channels

Weaknesses

-Legacy costs/unionized labour force

-Brands require large investments to maintain equity and are a barrier to innovative thinking

-Poor corporate reputation for green technology

-Customer perception of low quality

-Bureaucratic processes create delays

-Fixed investment in SUV production

-Inadequate experience in smaller vehicle production

Opportunities

-Increasing demand for smaller cars and CUVs

-Emerging world markets

-Reduce costs through JIT

-Demand for environmentally friendly cars

-Government subsidies

-Increasing public awareness of green technology

Threats

-Economy fluctuations affect sales

-Devaluation of the American dollar

-Increasing regulations on CO2 emissions and recyclable parts

-Decreasing demand for SUVs

-Increasing oil prices

-Rise in commodity prices





ImplementationImplementationCompanyCompanyOverviewOverview


Exploiting Opportunities

- Market for green automobiles

- Shift in consumer preferences, government subsidies and regulation

-Barriers to accessing market

-Corporate reputation

-Fixed investments

-Bureaucratic decision making






Defending from Threats

-Global supply chain system

-Dollar devaluation

-Increasing commodity prices

-Solutions

-Implementation of JIT

-Provide value to customers through other means







Business Level Strategy

- Integrated BLS

-Failed application

-Trade-off between cost and differentiation

-Implications of unionized labour force and legacy costs

BusinessBusinessLevelLevel

StrategyStrategy






Corporate Level Strategy & Organizational Structure

Related Linked

- Multi Divisional Structure

-Centralization of key processes

- Regions represent autonomous Strategic Business units - Brands are a subdivision of the SBU’s with minimum control over processes

- Minimal links to identical brands in different regions

CorporateCorporateLevelLevel

StrategyStrategy






Problems with Current Structure

-Structure focuses on cost reductions Direct conflict with the intended integrated differentiation/cost leadership strategy

- Brand level management is almost inexistent at the SBU level which results in lack of differentiation

- Regional SBUs do not have enough control over their regions.**


StrategyStrategy







StrategyStrategy






Alternative One

Keep all brands but differentiate effectively

- Decrease model portfolios of each brand

-Engineer an organization change to make the company more flexible and able to select the right brand for the right market

- Increases product differentiation amongst brands and reduces inter- brand competition

- Marketing for each brand will be more efficient and customer loyalty can be captured

- Each brand will have a more specific market trend to address thus will be more competent in predicting demand Lower inventory costs

AlternativAlternativee11






Organization Changes to Support the Initiative

-Start with decentralization but aim for an overall more coherent organization through the pursue of a related constrained strategy Key processes such as R&D, Marketing, Human Resources will need to be better centralized to achieve consistency

- Brand Management needs additional power

- Regional SBUs more control and better coordination with the others

- Follow a related constrained strategy with increased coordination amongst divisions

- Increased brand autonomy on marketing/product development will ensure differentiation













Pros

- Uses 8 brands to capture customer loyalty- Enables brands to focus on specific market niches- Allows for reaching economies of scale and scope throughout the whole organization- No extensive organizational restructuring is needed

Cons

- Slow process, would take long before we see if the differentiation efforts have succeeded- As the market demand changes and market niches are exploited or eliminated, brands might start competing with each other once again- Very difficult for GM to control all these brands consistently- Organization structure is could result to be less flexible*






RecommendationRecommendation


Alternative 2Divest some brands but keep rich model portfolios for remaining brands and reform the company’s structure to provide each brand division with more autonomy

-Divest 4 brands: Buick – Saab – Hummer – Pontiac

-Restructuring in to a decentralized organization in order to put more emphasis on individual brands rather than regional divisions

- Market research, internal and external analysis required in order to make this alternative successful - Unit sold by brand in 2006 Hummer: 56 789 Saab: 133 167 Pontiac: 145 183 Cadillac: 220 000 - growth of 290% compared to 2005 Saturn: 226 375 Buick: 403 690 - bright spot in China (280 000 units) but overall lost 13 billion in the past 7quarters GMC: 542 000 Chevrolet: 1 180 000













Pros - Focused resources on less brands- Distinct target markets which define brand equity- More capital to invest in R&D for each specific brand - More autonomy to brands which decrease decision making time

Cons

- Shut down plants and lay off workers - Loss of brand loyal customers- Large amount of resources required to settle distribution contracts- Initial decrease in sales and profits will affect shareholder value in the short term












ImplementationImplementationCompanyCompanyOverviewOverview RecommendationRecommendation

Implementation - Year 1

- Analysis of potential synergies within brands and corporate organization and market research to determine market segments for each remaining brand to target

- Begin to phase out brands

- Begin organizational change

- Formulation of tactical and strategic decisions to be implemented

- Develop yearly goals, new corporate vision and mission

- Invest heavily in to R&D for new designs






CompanyCompanyOverviewOverview RecommendationRecommendation



- Introduce new brand images and marketing campaigns

- Begin to clear inventories

- Distribution system alterations

- Develop new concepts for vehicles within each brand and begin marketing

- Develop long term supply chain arrangements

- Monitor transitional period from old to new organizational structure






CompanyCompanyOverviewOverview RecommendationRecommendation



- Begin fixed investments in specialized assets required for future vehicles

- Realize potential synergies

- Continuous quality control and customer feedback






CompanyCompanyOverviewOverview


RecommendationRecommendation

Alex SideAndrea BergaminiAmanda EluidgeLaurence Vezina-MontplaisirStelios CharalambousVanessa Leung