Faculty of Business, Economics and Law

Corporate Venturing

(IBU5COV)

GROUP ASSIGNMENT

Semester 2, 2015, Bundoora

Lecturer Students

Ms Gemegin Kis 1. Thi Thuy Linh Nguyen 17797534

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Words count: 2000 words

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TABLE OF CONTENTS

I. Introduction...................................................................................................................................3

II. Background of General Motors Company (GM)............................................................................4

II.1. Mission statement.................................................................................................................4

II.2. Vision statement....................................................................................................................4

III. Core competence.......................................................................................................................4

IV. Financial results.........................................................................................................................4

V. The Holden subsidiary...................................................................................................................5

VI. External environment analysis...................................................................................................6

VI.1. Political..............................................................................................................................6

VI.2. Economic...........................................................................................................................6

VI.3. Sociocultural......................................................................................................................6

VI.4. Technology.........................................................................................................................6

VI.5. Demographics....................................................................................................................6

VI.6. Global.................................................................................................................................7

VII. Competitors...............................................................................................................................7

VIII. Analysis SWOT...........................................................................................................................7

VIII.1. Strength.............................................................................................................................7

VIII.2. Weakness...........................................................................................................................8

VIII.3. Opportunities.....................................................................................................................9

VIII.4. Threats.............................................................................................................................10

IX. Conclusion...............................................................................................................................11

X. References...................................................................................................................................12

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I. Introduction

This paper purposes to propose a new venture which will generate significant development in case

study of General Motors. Firstly, some background information about the company as well as the

mission and vision will be given. The next part will analyse the core competency and financial results.

Thirdly, Holden subsidiary will be introduced. Then, this report will evaluate several external

environment factors including political, economic, sociocultural, technology, demographics and

global. In the final part, the report will cover and analyse strength, weakness, opportunity and

threat. Lastly, some recommendations will be listed in the conclusion.

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II. Background of General Motors Company (GM)

General Motors Company (GM) is famous for its forms, designs, and trades cars, trucks and

automobile parts globally. GM also provides automotive financing services via General Motors

Financial Company, Inc. (GM Financial). It functions in four automotive parts: GM South America

(GMSA), GM Europe (GME), GM North America (GMNA), and GM International Operations (GMIO).

In 2011, GM’s overall global vehicle sales were nine million. The Company’s GMNA sector grows,

manufactures and markets vehicles under the famous brands including Buick, Chevrolet and Cadillac.

Furthermore, GM for its consumers outside North America grows, manufactures and markets

vehicles under the other well-known brands such as Vauxhall, Buick Chevrolet, Holden, Opel,

Cadillac, GMC and Daewoo.

II.1. Mission statement

GM is developed to become a leader in terms of manufacturing transportation products as well as

services with excellent quality and satisfy every customer.

II.2. Vision statement

Their vision is to design, develop and introduce the best vehicles to the world.

III. Core competence

Innovation is the fundamental core competence of General Motors. This is the strong and powerful

force behind its $190 above revenue. To be specific, since 1908, in order to achieve a leading

position in the automobile industry field, General Motors has been applying innovation with regard

to service and technology. For the first time in 1911, GM formed an idea of engineered and

commercialized the self-starter engine. In 1926, one of its products namely Cadillac was the

trailblazer in inventing a nationally service strategy. In 1996, OnStar satellite technology was

introduced as an equipment to allow vehicles to be followed in case of theft or an emergency and let

the passengers connect to OnStar personnel. However, with regard to hybrid vehicles, it is difficult

for GM to make progress to the step of the market demand (Dibben 2000).

IV. Financial results

As can be seen from the GM’s consolidate net sales and turnover, it shows that from 2004 to 2007,

General Motor Corporation income has been decreasing from $193.5 billion to $192.6 billion.

Particularly, in 2007, GM experienced a consolidated net loss of $10.6 billion, when comparing to net

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revenue of $2.8 billion in 2004. In the last 1990s, GM had recovered market share up to $80 per

share. And then in 2000, the interest rose by the Federal Reserve in order to control the stock

market and an extremely serious stock market decline.

V. The Holden subsidiary

In the 1850s, the Holden name first established in Australia with J A Holden's leather and saddlery

corporate in Adelaide, South Australia. From 1885, the Holden and Frost Company renovated and

created horse drawn carriages and in 1914, manufactured its first custom made car body. In 1924,

the company renamed to Holden's Motor Body Builders and developed to become the special

supplier of American car manufacturer General Motors in Australia.

In 1931, Holden's Motor Body Builders collaborated with General Motors to generate General

Motors Holden's Limited (GM-H). This union shaped Australia's first large scale automotive

manufacturing feature. This was also a hard time for the company because of the Great depression's

economic downturn. In 1936, after director Laurence Hartnett helped navigate the setup and its

innovative plan at Fisherman's Bend in Melbourne, the company began to give a go again.

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VI. External environment analysis

VI.1. Political

Since the 1960s, laws and government principles play an important role in this industry. It is due to

the fact that people show their concerns for safer automobiles as well as the environment (Elfring

2005).

VI.2. Economic

It is unrefusable that the automobile industry has an enormous influence on every nation’s

economy. According to numerous studies, this industry is the main user of computer, copper, lead,

chips, textiles, iron, vinyl, aluminium, steel, plastics, and rubber. The research also presented that

there are seven other occupations shaped for every autoworker in other industries (DuBrin 2011).

VI.3. Sociocultural

It is partly true that today, people judge each other based on the driven car even though they never

admit that. Based on this fact, manufactures can take advantages to target their markets first.

Anyone with a wonderful vehicle is supposed to be affluent. Nobody wants to drive an unattractive

vehicle to lead to misjudge from other people. Customers always feel confident and better when

they drive a fantastic car as it makes them feel better about themselves as well (Greiner 1972).

VI.4. Technology

Nowadays, it is irrefutable that technology plays an important role in order to impact the whole

automobile industry. Evidentially, a research was accompanied by J.D. Power in collaboration with

Associates in 2002 including more than 27,000 new vehicle purchasers showed that 60% of the

consumers use the internet as the mentioned tool before making their decisions and surprisingly,

before going and having a test drive, 88% out of the above 60% took a look at the auto websites.

Many opportunities are created for business market places generally and for the whole industry

because of the internet (Gevurtz 1995).

VI.5. Demographics

From the past until now, the baby boomers generation has been the key target market for every

product (Forsyth 2002). Since their group is getting prepared to leave and invest less money, the

automakers are expecting from the younger groups. At the moment, the attention is beginning to

turn to the baby boomers children who are at the age from 20 to 30. Consistent with analysts, these

generations will contribute to approximately 30% of vehicle sales in the next 5 years.

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VI.6. Global

BMW, Ford Motor Company, Volvo, Mazda, General Motors, Daimler Chrysler, Volkswagen, Toyota,

and Nissan Motor Company come together in order to generate a new trade friendship shaped the

Alliance of Automobile Manufacturers. The company was to substitute the American Automobile

Manufacturers Association that merely entailed of American manufacturers; the objectives of the

collaboration are working together to deliver reliable industry information and data; and pursuing

stable global monitoring standards (Wheelen, Hunger, Hoffman & Bamford 2015).

VII. Competitors

For GM, Honda Motor Company is one of the strongest competitors. From a company which famous

for motorcycles, nowadays, Honda has developed to become a dominant in Japan manufactures.

There are much strength including reputation for producing excellent quality products and gaining a

variety of awards for quality and customer satisfaction (Zahra 2005). Another competitor in the

same field is Toyota Motor Corporation, which has been a leader in the automobile industry. With

three main distinct brands including Lexus, Scion, and Toyota, Toyota has the ability to reach a

number of different sectors for customers to have many different choices (Keil 2002).

VIII. Analysis SWOT

VIII.1. Strength

Large market share

Despite of the fact that GM market share in the United State has decreased, it is still significantly

competitive at 26 precent. In the Chinese market, the company also have a growing share. It is the

responsibility of leaderships to make the right decision to lead GM to become the automotive leader

all over the world (Wheelen & Hunger 2015).

Global experience

As mentioned above, even though GM market share in the United State has decreased, they still

have big market share as well as the experience to move forward. In addition, GM has been an

international company for a century, well known for its global leaders, so one potential opportunity

for GM is expanding internationally as they did before. There are two fundamental factors which are

the appropriate plans and suitable implementation of these plans that will contribute mainly in the

way GM accomplishes their objectives and decide whether GM success or not (Pech 2009).

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Diversity of brand names

Initially, GM has been the automotive leader for the mainstream of the last century. This could be a

consequence from the wide range of excellence brand names that have strong appeal to all target

markets. Currently, GM brands including GMC, Saab, Saturn, Chevrolet, Holden, Buick, Opel, Cadillac,

Pontiac, Hummer, and Daewoo are famous brand names (Robbins, Campbell & Judge 2010).

GMAC customer financing program

GM has been awarded for providing the most reliable source of income since its establishment.

OnStar satellite technology

One of the most outstanding technology features is OnStar satellite technology. OnStar was

generated in 1996 and at present, it has over 3 million subscribers and is equipped on all GM

vehicles. OnStar satellite technology is not only allowing the vehicles to be followed in case of

emergencies or unexpected accidents, but also allowing the drivers and commuters to be able to

communicate with OnStar personnel to seek for assistance by clicking a button (Wheelen & Hunger

2012).

VIII.2. Weakness

Behind alternative energy movement

This is GM major weakness. In terms of alternative energy vehicles, hybrid trend has started to enter

in the automotive industry; therefore, GM has a number of different competitors and GM has always

been one step behind the competition. As a consequence, many problems occur including losing

market share as well as a profit decline. One possible solution for the company is making Hybrid

friendly and efficient and effective fuel (Walker 2011).

Inefficient organizational structure

It is clear that GM organizational structure is vertically combined. This led to a lack of

communication among workforces from high position to low position and it is also a potential

explanation for GM to fall behind with regard to the alternative energy movement (Tollington

2010,).

Static profitability

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It is difficult for the company to deal with the size. Observing GM profit over the past five years, their

profit margin was approximately 1.5% and the Return on Equity (ROE) has significantly declined. In

this case, the shareholders will not satisfy (Tushman & Anderson 2004).

Overly dependent on the United State market

GM has become too reliant upon the United State market and must make use of the opportunity to

develop internationally since the competition is evolving too fats to concentrate on just one nation

(Pinchot & Pellman 1999).

Overly reliant on General Motors Acceptance Corporation (GMAC) Financing

GM has also become too reliant upon its financing strategy. It is undeniable that it is a massive

strength for GM; nevertheless, with respect to increase profit, they should not depend only on

financing, specifically in case they wish to compete with Toyota and Honda who are speedily

developing (Sanchez & Heene 2005).

Poor credit rank

GM financial position has been slowly falling. Their present percentage is just barely above 1 and

their valuable test is even lower. On the other hand, the company is not getting refused based upon

their credit at this fact so the serious problem is definitely apparent (Oden 1997).

VIII.3. Opportunities

Alternative energy movement

It is noticeable that GM was one step behind their competitors in terms of hybrid vehicles’ research

and development. However, hybrid technology is still a new feature for GM to take the opportunity

to develop as the automotive industry’s leader in technology and innovation (Saloner, Shepard &

Podolny 2001).

Continuing to develop internationally

Currently, the Chinese automotive market increase the demand, thus, GM can show their needs to

be more importance for the overseas markets. Furthermore, in case GM can penetrate these

markets and positively develop with their continuing concentrate on the United State market, they

will be in an optimistic track.

Low interest rates

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It is obvious that the low interest rates have the possibilities to create a direct growth in sales when

appreciate marketing strategies are made (Raimbault & Barr 2012).

Focus on new vehicle styles and models

In the globalizing world with uncountable competitors, GM should always try to generate the

automotive world’s most widespread vehicles because this opportunity will never be satisfied (Crane

& Meyer 2011).

VIII.4. Threats

Rising fuel costs

These days, as the result of not having enough fuel efficiency, while GM is a huge manufacturer in

both trucks and SUVs, sales have radically reduced. The increase in fuel costs contributed an

important role in making the potential opportunity for expanding both hybrid and more fuel

effective vehicles (Clark 1939). Generally, an equivalent opportunity will typically appear among

threats as in the case of GM’s opportunity.

Variety of competitors

Nowadays, many competitors emerge which is a serious threat for GM. In particular, one potential

competitor is Toyota. Since Toyota entered hybrid technology field, the company has been

dramatically developed and became the doubtful automotive leader to surprise the 21st century,

hence, GM will face a serious problem and no longer has the fame of being the leader in this field

(Burrow & Kleindl 2012).

Pension payouts

This threat is unavoidable. GM is currently in charge of supplying substantial pension welfares to its

staffs, which at present, it can be seen as a brilliant impression; however, they are still facing

difficulties since large amount of people start to gather.

Increased health care budgets

As time continues, it happens for many big companies with excellence employee health care

benefits including GM that a large financial hit always gets worse.

Rising supply costs

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Each company was forced to cut manufacturing and production budgets as much as possible,

without decreasing the quality of the product since this serious risk affects the whole automotive

industry (Burns 2005).

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IX. Conclusion

In conclusion, the fundamental thing for GM is to advance a Hybrid vehicle that will maintain the

place in the competition for the company and to be different. Creating a Hybrid SUV is a wonderful

idea; hence, the future of the company can be very bright if GM can make it by the end of 2012.

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