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Class 2 – Group 9
Company: General Motors
Case Problem: Legacy
STRATEGIC ANALYSIS
Number Content Pages
I. Company overview
1 Executive summary
1.1 o History 3
1.2 o Mission 4
1.3 o Vision 4
1.4 o Strategy objective 6
1.5 o General Motors Products 7
II. Financial Analysis 12
1.1 o Financial ratio 12
1.2 o Income statement 13
1.3 o Balance sheet 15
1.4 o Cash flow 18
III. Strategy Analysis 23
1.1 o SWOT Matrix 23
1.2 o External Factors Evaluation Matrix 27
1.3 o Internal Factors Evaluation Matrix 37
1.4 o Competitive Profile Matrix 38
1.5 o BCG 42
1.6 o Strategic Position & Action Evaluation 45
1.7 o Grand Strategic Matrix 49
1.8 o Quantiative Strategic Planing Matrix 53
IV. Business Alternatives, Recommmendations,
and Implementations
1 o Buiness alternatives 57
2 o Recommendations 59
3 o Implementations 63
V. Conclusion 65
I. Company Overview
1. Executive Summary
1.1 History of General Motors (GM)
General Motors (GM) is one of the world's largest car and truck manufacturers, reaches back more than a century and involves a vast
scope of industrial activity around the world, mostly focused on motorized transportation and the engineering and manufacturing that
make it possible. Founded in 1908 as a Holding Company for McLaughlin and Buick Stocks and allied in 1919, in Flint, Michigan, as
of 2012 it employs approximately 202,000 people around the world. With global headquarters at the Renaissance Center in Detroit,
Michigan, United States, GM manufactures its cars and trucks in 35 countries. In 2008, 8.35 million GM cars and trucks were sold
globally under various brands. The GM automotive brands today are Vauxhall, Buick, Cadillac, Chevrolet (including the Corvette—
nominally a Chevrolet Division product), GMC, Holden, Opel, and Wuling. Former GM automotive brands include McLaughlin,
Oakland, Oldsmobile, Pontiac, Hummer, Saab, and Saturn.
In addition to these brands selling assembled vehicles, GM also has had various automotive-component and non-automotive brands,
many of which it divested in the 1980s through 2000s. These have included Euclid and Terex (earthmoving/construction/mining
equipment & vehicles); Electro-Motive Diesel (locomotive, marine, and industrial diesel engines); Detroit Diesel (automotive and
industrial diesel engines); Allison (transmissions, gas turbine engines); Frigidaire (refrigeration and air conditioning); New Departure
(bearings); Delco Electronics and ACDelco (electrical and electronic components); GMAC (finance); General Aviation and North
American Aviation (airplanes); GM Defense (military vehicles) and Electronic Data Systems (information technology). In short, there
are few, if any, industrial sectors or categories in which GM did not play a major role in the twentieth century, worldwide.
General Motors Company, commonly known as GM, is an American multinational corporation headquartered in Detroit, Michigan,
that designs, manufactures, markets and distributes vehicles and vehicle parts and sells financial services. General Motors produces
vehicles in 37 countries under ten brands: Chevrolet, Buick, GMC, Cadillac, Holden, Opel, Vauxhall, Wuling, Baojun, Jie Fang,
UzDaewoo. General Motors holds a 20% stake in IMM, and a 96% stake in GM Korea. It also has a number of joint-ventures,
including Shanghai GM, SAIC-GM-Wuling and FAW-GM in China, GM-AvtoVAZ in Russia, Ghandhara Industries in Pakistan, GM
Uzbekistan, General Motors India, General Motors Egypt, and Isuzu Truck South Africa. General Motors employs 212,000 people and
does business in 157 countries. General Motors is divided into five business segments: GM North America (GMNA), Opel Group,
GM International Operations (GMIO), GM South America (GMSA), and GM Financial.
General Motors led global vehicle sales for 77 consecutive years from 1931 through 2007, longer than any other automaker, and is
currently among the world's largest automakers by vehicle unit sales.
In 2009, General Motors shed several brands, closing Saturn, Pontiac and Hummer, and emerged from a government-backed Chapter
11 reorganization. In 2010, GM made an initial public offering that was one of the world's top 5 largest IPOs to date and returned to
profitability later that year.
1.2 Mission Statement:
"G.M. is a multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to provide products and
services of such quality that our customers will receive superior value while our employees and business partners will share in our
success and our stock-holders will receive a sustained superior return on their investment."i
Source: http://www.makingafortune.biz/list-of-companies-g/general-motors.htm
1.3 Vision Statement
"Over the past 100 years, GM has been a leader in the global automotive industry. And the next 100 years will be no different. GM is
committed to leading the industry in alternative fuel propulsion."
"GM’s vision is to be the world leader in transportation products and related services. We will earn our customers’ enthusiasm
through continuous improvement driven by the integrity, teamwork, and innovation
of GM people."ii
Source: http://www.makingafortune.biz/list-of-companies-g/general-motors.htm
1.4 Strategic Objectives
Product analyses
The planning strategy is looking on how the GM products are fairing in the world auto market. The existence of the company in the
market is based on an extensive research that was carried out in the European market which shows that there is still large untapped
market potential in the auto industry in Europe and other parts of the world.
The GM Company specializes in Designing and making of automobiles, trucks, locomotives, and related parts such as chassis,
interiors, drivetrains, and electronics.
Leadership
Leading the way is our seasoned leadership team who set high standards for our company so that we can give you the best cars and
trucks. This means that we are committed to delivering vehicles with compelling designs, flawless quality and reliability, and leading
safety, fuel economy and infotainment features. All are intended to create that special bond that can only happen between a driver and
their vehicle.
Making the world’s best vehicles can only happen with the world’s greatest employees. We take great pride in our work, and take
great care to deliver exceptional cars and a positive ownership experience to our customers around the world.
Innovation
We challenge ourselves to be creative and lead in everything we do. From implementing the smallest improvements to executing big
ideas, we are constantly increasing our competitive advantage to delight and excite our customers
General Motors continues to develop innovative technologies to shape the future of the automotive industry.
Action plan
We are expanding our leadership in vehicle electrification with advancements in batteries, electric motors and power controls. The
GM team is also working on a range of high-volume, fuel-saving technologies including direct injection, variable valve timing, turbo-
charging, six-speed transmissions, diesel engines, and improved aerodynamic designs
We believe in acting responsibly across the globe and focus our efforts in important areas, including the environment and education.
The General Motors Foundation helps us achieve this goal by strengthening communities across the United States through investments
in education, health and human services, environment and energy, community development and worldwide disaster relief efforts. Over
the past ten years, the foundation, fully funded by a GM endowment in 2000, has donated more than $315 million to send students to
college, keep teen drivers safe, educate parents on child passenger safety, promote diversity and support vital non-profit organizations.
1.5 GM products – Global brands
Chevrolet
General Motors owns Chevrolet, a great American car manufacturer. W.C. Durant in Detroit, Michigan started the company. The cars
produced were first brought out by racecar driver, Louis Chevrolet. He established an automobile for $2150, which were six cylinders
and 4.9 litres. The first big car produced on the market was the Baby Grand, which was sold for $875. Electrics were optional on
Chevrolets until 1917. With the first real boost in production and innovation cars were sold at a standard price increasing sales to
70,701 from 13,600.
In 1917 General Motors acquired Chevrolet. In 1920 Ford and Dodge were the only leaders above Chevrolet's marque. As competition
rose Chevrolet began preparation for new models as well as styles. They came up with a few standard automobiles, which were no
different than competitors until their 1925 Superior. This coach had disc wheels and "Duco cellulose finish (refer to source 6)" selling
for only $650. This allowed for Chevrolet to outsell Ford for the first time, even though Ford was switching over from the Model T to
A. One big development came in 1929 with the "Cast Iron Wonder" which sold more than a million cars in its first year at $595.
(Exhibit 1.1)
Buick
Before becoming a trademark of automobile luxury and innovative engineering, Buick was rather fond of plumbing inventions. Born
in Arbroath, Scotland, David Dunbar Buick experienced a second-coming to life in his mid 30's when he became particularly
interested in gasoline engines. He soon discarded his plumbing-related activities and, by the 1900's, he had already built an impressive
number of engines for farming and boating usage. Buick's passion for motors led him to establishing his own company, called Auto-
Vim and Power Co. (Exhibit 1.2)
(Exhibit 1.2)
GMC
More than a century ago, a man by the name of Max Grabowsky started the Rapid Motor Vehicle Company. After developing some of
the first trucks ever created, General Motors, an emerging mogul in the automobile industry, acquired Rapid Motor in 1909. Together,
the two formed General Motors Truck Company, known today as GMC.
In 1910, due to the large amount of acquisitions the company had made, loans were not repaid and bankers ousted founder William
Durant from GM. He went on to found a brand called Chevrolet. “Chevy” was developed to produce a wide variety of vehicles to
compete with Ford. When he bought back into GM in 1917, he brought along Chevrolet, which today remains the number one selling
brand of GM.
In 1912, the first mass produced truck was released and over 22,000 examples were produced and sold. As the brand developed, so did
sales, and when WWII came to be, GMC Truck was a major provider for the U.S. Military, producing over 600,000 trucks. It wasn’t
until 1996 that GMC Truck decided to drop the word Truck to create GMC. (Exhibit 1.3)
(Exhibit 1.3)
Cadillac
Cadillac became the first American automobile manufacturer to win the coveted Dewar Trophy for the standardization of automobile
parts. The Dewar trophy was instituted in 1904 to encourage technical progress. It was sponsored by a wealthy member of the British
Parliament, Sir Thomas Dewar. It was awarded annually to the company making the most important advancement in the automotive
field. From the beginning, Leland stressed the concept of parts interchangeability. “No special fitting of and kind is permitted,” he
wrote in a factory manual. “Craftsmanship a Creed, Accuracy a Law.” In 1908, Leland became the first industrialist to employ the
Johannson Gauges for checking the accuracy of his tooling. They were the creation of a Swedish-American toolmaker named Carl
Johannson. These devices were extremely accurate blocks which measured tolerances down to two-millionths of an inch. (Exhibit 1.4)
(Exhibit 1.4)
II. Financial Analysis
1.1 FINANCIAL RATIOS
Annual Income Statement (values in 000's)
Period Ending: Trend 12/31/2013 12/31/2012 12/31/2011 12/31/2010
Liquidity Ratios
Current Ratio
131% 130% 122% 113%
Quick Ratio
108% 102% 95% 87%
Cash Ratio
48% 52% 62% 59%
Profitability Ratios
Gross Margin
12% 7% 13% 12%
Operating Margin
3% 20% 4% 4%
Pre-Tax Margin
5% 19% 6% 4%
Profit Margin
3% 4% 6% 5%
Pre-Tax ROE
18% 79% 24% 15%
After Tax ROE
13% 17% 24% 17%
1.2 INCOME STATEMENT
Annual Income Statement (values in 000's)
Period Ending: Trend 12/31/2013 12/31/2012 12/31/2011 12/31/2010
Total Revenue
$155,427,000 $152,256,000 $150,276,000 $135,592,000
Cost of Revenue
$137,373,000 $141,443,000 $131,171,000 $119,038,000
Gross Profit
$18,054,000 $10,813,000 $19,105,000 $16,554,000
Operating Expenses
Research and Development
$0 $0 $0 $0
Sales, General and Admin.
$12,382,000 $14,031,000 $12,163,000 $11,446,000
Non-Recurring Items
$541,000 $27,145,000 $1,286,000 $0
Other Operating Items
$0 $0 $0 $0
Operating Income
$5,131,000 ($30,363,000) $5,656,000 $5,108,000
Add'l income/expense items
$851,000 $595,000 $869,000 $1,727,000
Earnings Before Interest and Tax
$7,792,000 ($28,206,000) $9,717,000 $6,639,000
Interest Expense
$334,000 $489,000 $540,000 $1,098,000
Earnings Before Tax
$7,458,000 ($28,695,000) $9,177,000 $5,541,000
Income Tax
$2,127,000 ($34,831,000) ($110,000) $672,000
Minority Interest
$15,000 $52,000 ($97,000) ($331,000)
Equity Earnings/Loss Unconsolidated
Subsidiary
$1,810,000 $1,562,000 $3,192,000 $1,438,000
Net Income-Cont. Operations
$6,944,000 $7,500,000 $12,400,000 $6,172,000
Net Income
$5,346,000 $6,188,000 $9,190,000 $6,172,000
Net Income Applicable to Common
Shareholders
$3,770,000 $4,859,000 $7,585,000 $4,668,000
1.3BALANCE SHEET
Annual Income Statement (values in 000's)
Period Ending: Trend 12/31/2013 12/31/2012 12/31/2011 12/31/2010
Current Assets
Cash and Cash Equivalents
$21,268,000 $19,108,000 $17,076,000 $22,301,000
Short-Term Investments
$8,972,000 $8,988,000 $16,148,000 $5,555,000
Net Receivables
$33,162,000 $23,868,000 $13,742,000 $8,699,000
Inventory
$14,039,000 $14,714,000 $14,324,000 $12,125,000
Other Current Assets
$4,060,000 $3,318,000 $3,633,000 $4,373,000
Total Current Assets
$81,501,000 $69,996,000 $64,923,000 $53,053,000
Long-Term Assets
Long-Term Investments
$22,448,000 $13,837,000 $12,701,000 $16,726,000
Fixed Assets
$29,250,000 $25,845,000 $23,790,000 $19,235,000
Goodwill
$1,560,000 $1,973,000 $29,019,000 $31,778,000
Intangible Assets
$5,668,000 $6,809,000 $10,014,000 $11,882,000
Other Assets
$3,181,000 $3,040,000 $3,644,000 $6,224,000
Deferred Asset Charges
$22,736,000 $27,922,000 $512,000 $0
Total Assets
$166,344,000 $149,422,000 $144,603,000 $138,898,000
Current Liabilities
Accounts Payable
$48,254,000 $48,474,000 $47,426,000 $45,541,000
Short-Term Debt / Current Portion of Long-Term Debt
$564,000 $1,748,000 $1,682,000 $1,616,000
Other Current Liabilities
$13,594,000 $3,770,000 $4,118,000 $0
Total Current Liabilities
$62,412,000 $53,992,000 $53,226,000 $47,157,000
Long-Term Debt
$6,573,000 $3,424,000 $3,613,000 $9,142,000
Other Liabilities
$54,185,000 $55,006,000 $48,773,000 $44,608,000
Deferred Liability Charges
$0 $0 $0 $0
Misc. Stocks
$0 $0 $0 $0
Minority Interest
$567,000 $756,000 $871,000 $979,000
Total Liabilities
$123,737,000 $113,178,000 $106,483,000 $102,718,000
Stock Holders Equity
Common Stocks
$15,000 $14,000 $16,000 $15,000
Capital Surplus
$28,780,000 $23,834,000 $26,391,000 $24,257,000
Retained Earnings
$13,816,000 $10,057,000 $7,183,000 $266,000
Treasury Stock
$0 $0 $0 $0
Other Equity
($3,113,000) ($8,052,000) ($5,861,000) $1,251,000
Total Equity
$42,607,000 $36,244,000 $38,120,000 $36,180,000
Total Liabilities & Equity
$166,344,000 $149,422,000 $144,603,000 $138,898,000
1.4 CASH FLOW
Anual Income Statement (values in 000's)
Period Ending: Trend 12/31/2013 12/31/2012 12/31/2011 12/31/2010
Net Income
$5,346,000 $6,188,000 $9,190,000 $6,172,000
Cash Flows-Operating Activities
Depreciation
$8,155,000 $38,950,000 $7,587,000 $7,065,000
Net Income Adjustments
$1,211,000 ($35,900,000) ($5,252,000) ($5,796,000)
Changes in Operating Activities
Accounts Receivable
$0 $0 $0 $0
Changes in Inventories
$0 $0 $0 $0
Other Operating Activities
($2,067,000) $1,419,000 ($3,456,000) ($992,000)
Liabilities
$0 $0 $0 $0
Net Cash Flow-Operating
$12,630,000 $10,605,000 $8,166,000 $6,780,000
Cash Flows-Investing Activities
Capital Expenditures
($7,565,000) ($8,068,000) ($6,249,000) ($4,202,000)
Investments
($5,184,000) $3,796,000 ($12,704,000) ($5,157,000)
Other Investing Activities
($1,613,000) $767,000 $6,213,000 $10,592,000
Net Cash Flows-Investing
($14,362,000) ($3,505,000) ($12,740,000) $1,233,000
Cash Flows-Financing Activities
Sale and Purchase of Stock
($2,438,000) ($5,098,000) $0 $3,389,000
Net Borrowings
$8,006,000 $1,412,000 $697,000 ($11,422,000)
Other Financing Activities
($150,000) ($116,000) ($139,000) $0
Net Cash Flows-Financing
$3,731,000 ($4,741,000) ($358,000) ($9,770,000)
Effect of Exchange Rate
($400,000) ($8,000) ($253,000) ($57,000)
Net Cash Flow
$1,599,000 $2,351,000 ($5,185,000) ($1,814,000)
III. Strategic Analysis
1.1 SWOT Analysis
STRENGTHS 1. Large Market Share
2. Global Experience 3. Variety of Brand Names 4. GMAC Customer Financing Program
5. OnStar Satellite Technology
WEAKNESSES 1. Behind on Alternative Energy Movement
2. Poor Organizational Structure 3. Stagnant Profitability 4. Overly Dependent on US Market
5. Overly Dependent on General Motors Acceptance Corporation (GMAC) Financing
6. Poor Credit Status
OPPORTUNITIES 1. Alternative Energy Movement
2. Continuing to Expand Globally 3. Low Interest Rates 4. Develop New Vehicles Styles and Models
THREATS 1. Rising Fuel Prices
2. Growth of Competitors 3. Pension Payouts 4. Increased Health Care Costs
5. Rising Supply Costs, i.e Steel
STRENGHTS
Large Market Share
In the last few years, even though GM’s market share has went down in the US but it is still very competitive to another brand
at 26%. GM have a share expansion in the Chinese area. With this situation, GM could become the leader in automobile market.
Global Experience
As explained above even with GM's recent decline they still have the market share and the experience to bounce back. They
have been a worldwide company for nearly a century now and have established themselves as the global leader for most of
them. It is just a matter of the correct planning and proper implementation of those plans that will decided whether or not
GM's goals are achieved.
Variety of Brand Names
In the last century, GM has been the leader in automobile market. The reason for that is because they own a lots of big quali ty
brand names which occur in many target markets. The current GM brands include: Chevrolet, GMC, Cadillac, Buick, Pontiac,
Saturn, Hummer, Saab, Daewoo, Opel, and Holden.
GMAC Customer Financing Program
Since its establishment in 1919 it has proven to be GM's most reliable source of revenue.
5OnStar Satellite Technology
Developed in 1996 OnStar currently has over 3 million subscribers and is standard on all GM vehicles. This technology allows
the vehicles to be tracked in the event of an emergency or theft. It also allows the driver and or passengers the ability to
communicate with OnStar personnel at the click of a button.
WEAKNESSES
Behind on Alternative Energy Movement
This is GM's biggest weakness. The alternative energy/hybrid trend has begun to take place in the automotive industry and
GM has been one step behind the competition in terms of alternative energy vehicles. This has led to many problems including
loss of market share and a decrease in company profit. In order for any automotive company to be successful from this point
forward they must be Hybrid friendly and fuel efficient.
Poor Organizational Structure
As we can see in exhibit 1 of the case GM's organizational structure seems to be too vertically integrated. This causes a lac k of
communication between employees from top to bottom and may have played a part in GM falling behind on the alternative
energy movement.
Stagnant Profitability
Looking at GM's profit we see that they are certainly struggling with respect to the size of their company. Their profit marg in
was about 1.5% and the ROE has dramatically decreased over the recent years dropping to 10% in 2004. This is a situation
that shareholders will not be pleased with.
Overly Dependent on US market
GM has become too dependent on the US market and must take advantage of the opportunity to ex pand globally. The
competition is becoming too strong to focus on just one country.
Overly Dependent on General Motors Acceptance Corporation (GMAC) Financing
GM has become too dependent on its financing program. Granted it is a great strength for GM, howe ver they once again cannot
rely solely on financing in order to turn profit, especially if they want to compete with Honda and Toyota who are rapidly
growing.
Poor Credit Status
GM's credit status has like everything else has been steadily declining. Their current ratio is just barely above 1 and their acid
test is even lower. Although, I don't see them getting denied based on their credit at this point, the seriousness of the mat ter is
certainly apparent.
OPPORTUNITIES
Alternative Energy Movement
It is obvious that GM was behind its competition with regards to the research and development of hybrid vehicles. However
hybrid technology is still very much new giving GM the opportunity to once again become the automotive industry's leader in
innovation and technology.
Continuing to Expand Globally
Recently GM saw an increase in the Chinese automotive market, which proves their needs to be more emphasis put on foreign
markets. If GM can infiltrate these markets and successfully grow along with their continuing focus on the US market they will
be headed in a positive direction.
Low Interest Rates
With the right marketing strategy the low interest rates have the potential to generate an immediate increase in sales.
Develop New Vehicle Styles and Models
This is an opportunity that will never be satisfied, meaning that GM should always be attempting to develop the automotive
world's most popular vehicles, and as we know, what is in today will be out tomorrow.
THREATS
Rising Fuel Prices
With GM being a large producer in both trucks and SUV's, sales have drastically decreased due to the lack of fuel efficiency. The
rise in fuel prices has played a significant role in creating the opportunity for development of both hybrid and more fuel
efficient vehicles. As you will find with most threats, an equal opportunity will usually emerge as is the case here with GM's
opportunity mentioned above.
Growth of Competitors
GM no longer has the luxury of being the known leader in the automotive industry and faces the reality that they are in serious
trouble. As I mentioned earlier Toyota took the first step in the direction of hybrid technology and has since drastically gr own
and become the questionable automotive frontrunner to start the 21st century.
Pension Payouts.
Part of this threat is their own doing and the other is simply unavoidable. GM is responsible for providing generous pension
benefits to its employees, which at the time seemed like a great idea, however they are now experiencing problems as more
and more people begin to collect.
Increased Health Care Costs
GM, like many large companies with quality employee health care benefits, is experiencing a large financial hit that only get s
worse as time continues.
Rising Supply Costs, i.e. Steel
Once again this threat affects the entire automotive industry and forces each company to cut manufacturing and production
costs as much as possible, without taking away from the quality of the product.
1.2 External Factors Evaluation Matrix (EFE)
Opportunities Key External Factors Weight Rating Weighted Score Increasing demand for hybrid electric vehicles 0.09 3 0.27 Opportunities in emerging markets 0.07 3 0.21 Growing economy of car market 0.07 2 0.14 Alternative Energy Movement 0.08 4 0.32 Continuing to Expand Globally 0.07 3 0.21 Low Interest Rates 0.06 2 0.12 Develop New Vehicles Styles and Models 0.09 3 0.27
Threats Declining demand for light vehicles in US 0.08 3 0.24 Rising raw material price 0.05 3 0.15
Stringent emission standards 0.04 2 0.08 Competitive offerings from foreign manufacturers 0.06 3 0.18 Rising Fuel Prices 0.05 3 0.15 Growth of Competitors 0.07 4 0.28 Increased Health Care Costs 0.05 2 0.10 Rising Supply Costs, i.e Steel 0.07 3 0.21 Total 1.00 2.93
Source: General Motor Strategic Management Analysis. (n.d.).General Motor Strategic Management Analysis. Retrieved August 4,
2014, from http://www.slideshare.net/rashidjaved925059/gmworkfinalreport-140129104656phpapp02
Analysis
Opportunities
Increasing demand for hybrid electric vehicles
Increasing fuel prices open up large markets for GM’s hybrid and electric cars as consumers shift towards cheaper fuel types.
Hybrid electric vehicles have been on the market for several years and are now fairly sophisticated and reliable, and are consequently
in high demand. However, plain hybrids still depend entirely on liquid fuels, while using regenerative braking to increase efficiency.
London has a fleet of 56 experimental hybrid buses, and from 2012 all new buses there were to be hybrids.
Hybrids have a battery which is charged by an internal combustion (IC) motor (as well as regenerative braking), and in full, or
parallel, hybrids the drive may be from both or either. They claim much enhanced fuel economy, though figures suggest that there is
little advantage over efficient diesel motors in highway use. Their advantage is in urban driving, and their significance is mostly as an
important step towards plug-in hybrid vehicles. iii
Opportunities in emerging markets
General Motors' strategy is to position itself in emerging markets so that the company will grow simultaneously with these economies.
The automaker is still trying hard to restructure its finances in North America and therefore needs to invest in emerging markets in
order to keep up with the rest of the other automakers, explained Kempston Darkes. She also said that the automaker is in need of
products that would particularly cater to buyers in different markets.
General Motors' division in Latin America, Africa and Middle East has launched 17 new products last year and for this year, the
company is again expecting to launch the same number.
And in connection with the growth strategy that GM is implementing it is launching a redesigned Chevrolet Malibu equipped with
quality Chevrolet catalytic converter to compete with Toyota's Camry.
However some industry observers are doubtful that GM will be able to convince Americans that a redesigned aging nameplate like the
Malibu can topple down the rock-image of the Camry.
Aside from that, Honda -- another strong rival of GM, has also released its own entry in the family sedan market---the Honda Accord.
GM's redesigned Chevrolet Malibu would also have to compete with the Accord.
It can be remembered that last year that Honda was able to sell more than 354,000 Accord sedans and coupes. But despite such
volume Toyota has remained to be at the top rank with 448,000 units of Camry sold. Last year General Motors sold 163,800 Malibus
and 289,000 Impalas.
General Motors will also spend $100 million for the promotion of the new Malibu but still industry observers are doubtful that an
expensive ad blitz can turn things for the Malibu.iv
Growing economy of car market
General Motors (GM.NYSE) intends to grow China sales 10% in 2014, Reuters reported, citing the automaker’s new chief of China
operations. Matt Tsien said his mandate is one of continuity in order to sustain GM's "profitable growth" in the world's biggest auto
market. Tsien plans to achieve the objectives in part by focusing on China's increasing appetite for SUVs and luxury cars. GM expects
China's overall vehicle market to grow 7-10% this year compared with 2013, roughly in line with industry forecasts.v
Alternative Energy Movement
US Government will be GM’s major stakeholder as it has entered into bankruptcy after 101 years of existence and it failed in
convincing its debtors to forgive 90 % debts. The government are willing to takeover GM bankruptcy but want as much as possible be
in active as responsible as it can. Its alternative energy movement are the another stakeholder of GM. No matter GM is behind but its
competition is with regards to the research and development of hybrid vehicles. However, hybrid technology is still very much new
that gives GM the opportunity to become once again automotive industry’s leader in innovation and technology.
Continuing to expand globally
Investments in GM’s quality growth will include the opening of five new manufacturing facilities by the end of 2015: four vehicle
assembly plants and one powertrain plant. With additional facility expansion between 2014 and 2020, GM China’s manufacturing
capacity will increase by 65 percent.
GM is also continuing to expand its presence in the central and western regions of the country. These areas already represent about 45
percent of GM’s domestic sales. GM will add dealerships and manufacturing facilities in these regions, including plants in Wuhan and
Chongqing by the end of 2015.vi
Low interest rates
The main benefit to taking a dealer loan for your vehicle as opposed to a bank loan is the lower interest rate. The dealer has an
incentive to reduce the cost of your loan so you will purchase a car from them. Additionally, this means they will earn two sources of
income from one single contract with you. As such, the dealer will often drop interest rates in order to lure you away from other car
dealers and other lenders. While you may see less flexible terms on the loan, you will almost always see a lower financing cost or
discounts if you are taking out a GMAC car loan instead of approaching an independent lender.vii
Develop New Vehicle Styles and Models
It was also a period of tremendous innovation at GM. The company continued to push ahead with electric vehicle technology,
developing a series of hydrogen powered fuel-cell concept and demonstration vehicles. Then, in January 2007, GM shook the industry
with the Chevrolet Volt concept, a vehicle that could drive on battery power for daily commuting, then continue operating with a
range extender when the battery charge was depleted. The first production Volts were delivered to customers in December 2010. GM
also became an industry leader in flex-fuel vehicles, which can run on either gasoline or E85, and developed a sophisticated two-mode
hybrid system to significantly extend the economy of full-size trucks and SUVs.
Threats
Declining demand for light vehicles in US
Based on an estimate from WardsAuto, light vehicle sales were at a 15.17 million SAAR in October. That is up 5.9% from October
2012, and down slightly from the sales rate last month. Some of the weakness in October was related to the government shutdown.
This was below the consensus forecast of 15.4 million SAAR (seasonally adjusted annual rate).
This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for October (red, light vehicle sales of 15.17
million SAAR from WardsAuto).
U.S. Light Vehicle Sales decline to 15.17 million annual rate in October.
Rising raw material price
Rising prices for raw metals will lift the costs for auto manufacturers and result in squeezed profits for the companies.
Stringent emission standards
The U.S. federal government imposes stringent emission control requirements on vehicles sold in the United States, and additional
requirements are imposed by various state governments, most notably California. These requirements include pre-production testing
of vehicles, testing of vehicles after assembly, the imposition of emission defect and performance warranties and the obligation to
recall and repair customer owned vehicles that do not comply with emissions requirements. We must obtain certification that the
vehicles will meet emission requirements from the EPA before we can sell vehicles in the United States and Canada and from the
CARB before we can sell vehicles in California and other states that have adopted the California emissions requirements.viii
Competitive offerings from foreign manufacturers
General Motors has planned to invest around $12 billion in China from 2014 to 2017 and bolster its production facilities in the
country.
Volkswagen has plans to invest $25.16 billion in China to accelerate its sales to a record level of 3.5 million vehicles this year. ix
Rising Fuel Prices
Due to increasing extraction of shale gas, future fuel prices should drop and make electric and hybrid cars less attractive. GM would
treat the projects of hybrid and electric cars as losses, rather than perspective future cars. On the other hand, steeping fuel prices would
make current GM models less attractive to cost conscious consumers, as they demand smaller cars that consume lower amounts of
fuel.
Growth of Competitors
Direct Competitor Comparison
GM PVT1 F TM Industry
Market Cap: 55.92B N/A 66.67B 182.39B 26.40B
Employees: 219,000 65,5351 181,000 342,872 112.50K
Qtrly Rev Growth
(yoy): 0.02 N/A -0.01 0.02 0.13
Revenue (ttm): 156.52B 65.78B1 146.63B 248.64B 41.26B
Gross Margin
(ttm): 0.10 N/A 0.13 0.19 0.20
EBITDA (ttm): 9.41B N/A 11.58B 34.66B 2.74B
Operating Margin
(ttm): 0.02 N/A 0.04 0.09 0.05
Net Income (ttm): 1.92B 1.67B1 6.61B 17.80B N/A
EPS (ttm): 1.87 N/A 1.61 11.22 1.63
P/E (ttm): 18.62 N/A 10.70 10.25 10.78
PEG (5 yr
expected): 0.79 N/A 1.06 N/A 1.14
P/S (ttm): 0.36 N/A 0.46 0.73 0.65
Pvt1 = Chrysler Group LLC (privately held)
F = Ford Motor Co.
TM = Toyota Motor Corporation
Industry = Auto Manufacturers - Major
1 = As of 2012
Source: https://finance.yahoo.com/q/co?s=GM+Competitors
Increased Health Care Costs
In a recent SEC filing, General Motors said it remains burdened by a high fixed cost structure due to its large retiree base. Currently,
for every GM employee there are 2.6 retirees. Along with this, GM spent 5.2 billion dollars on health care in 2004 for 1.1 million
employees, retirees, and dependents throughout the U.S. (GM Annual Report 2004). For each benefit provided to employees in health
care it adds about $1,400- 1,500 to the sticker price of each car and truck built in the U.S. Accordingly, GM is paying more per vehicle
in health care costs than in steel. One major concern is the amount of financing that is leveraged on their balance sheet due to high
fixed costs associated with health care. This concern could affect the condition of the company in the future.
Rising Supply Costs, i.e. Steel
Steel typically accounts for about 5% of the manufacturers total vehicle production costs. The future trend is for steel prices to lower
by the end of 2005. According to several analysts, AK steel, a large supplier to the automotive industry, said that it obtained double
digit price hikes on two-thirds of its contracts. The primary result of high steel prices are due to shortages of raw materials due to
heavy global demand in China. China is still the number one consumer of steel and with many manufacturing companies and GDP
growth of about 7.0% it will continue to keep the steel prices at high levels. Another major factor are freight costs, import levels
decreasing, and consolidation within the industry.
1.3 INTERNAL FACTOR EVALUATION (IFE) MATRIX
Strengths
Key external factors Weight Rating Weighted score
Global presence 0.09 4 0.36
New vision and strategy 0.05 3 0.15 Largest manufacture in the
market
0.06 3 0.18 Strong management team 0.07 4 0.28 Strong brand portfolio 0.05 4 0.2 Strong presence in China 0.04 4 0.16 Knowledge of home market 0.05 3 0.15
Well performing brands 0.05 4 0.2
Large employee base
with highly educated
engineers and good R&D
department
0.06 4 0.24
Huge increase in total
equity
0.05 3 0.15
Minimal service complains 0.04 3 0.12
Weaknesses
High cost structure 0.05 1 0.05
Brand dilution 0.03 2 0.06 Sensitive to oil prices 0.04 1 0.04
Saturated market 0.05 2 0.10 Little diversification 0.04 2 0.08 Bureaucratic culture 0.03 1 0.03 Car recalls 0.04 2 0.08 Economic inventions 0.05 2 0.10 Green car development 0.06 1 0.06 Total 1.99 7.79
Analysis
There are several challenges that General Motors company has had dealed with as the result of using old technologies for car
producing. Therefor, the firm has had low competitive advantage level compare to other competitors. In order to be success in
automoblie industry, General Motors company must have objecttive strategies that regarding to produce hybrid vehicles that using
hybrid technologies. When the firm can take the advantages of such new technology for their own car producing, there would be the
opportunity for General Motors to become a global leader as well as the significant increasing in the market development in the
automobile industry because of its innovative products that are expected form customers.
On the other hand, as a result of financial crisis of the global economy, there are huge negative impacts to automoblies industry that all
of car producers must have to concern about and figure out the appropreate strategies in order to adapt with such crisis. It can be
recognize that the consumers are showing no interest in less fuel efficiency vehicles such as big trucks which takes more fuel and
sports vehicles which were the General Motor’s key profitable business. Furthermore, fuel prices are increasing in these days that
make considerable considerations for buyers while General Motors is widely producing the large trucks and cars which have got less
fuel efficiency. Because of an increase in fuel prices, these vehicles have lost its demand hugely and every consumer is interested in
hybrid technology vehicles and more fuel efficiency vehicles. This has got a negative impact on General Motors and the company has
to spend on researches for these technologies.
1.4 COMPETITIVE PROFILE MATRIX (CPM)
Critical success factor Weights Rating Weighted score Rating Weighted score Rating Weighted score Rating Weighted score
Global expansion 0.11 3 0.33 2 0.22 2 0.22 3 0.33
Financial position 0.09 4 0.36 3 0.27 3 0.27 3 0.27
Growth 0.13 3 0.39 2 0.26 1 0.13 4 0.52
US market share 0.15 4 0.6 3 0.45 2 0.3 2 0.30
Product quality 0.11 3 0.33 4 0.44 3 0.33 3 0.33
Customer loyalty 0.12 3 0.36 4 0.48 4 0.48 3 0.36
Model/Styles 0.09 4 0.36 3 0.27 3 0.27 3 0.27
Hybrid/fuel efficient vehicles 0.14 2 0.28 3 0.42 2 0.28 2 0.28
Management experience 0.06 4 0.24 3 0.18 3 0.18 3 0.18
Total 1 3.25 2.99 2.46 2.84
General Motors has a strong brand name globally. There is also a customer desire for hybrid cars. Therefore, the company should use
new and future technologies to provide the hybrid cars. As a result, this will increase the company’s market share.
In addition, the company should utilize its strong research and development department to determine what the customers in the market
want, so that the company must increases the company’s knowledge on the preferences and tastes of consumers in the changing
market environment. After having facts on the customer preferences, it should then use its skilled and experienced engineer to design
what the customers demand.
Competitor’s analysis
1. Ford:
Strength:
- The brand image :
Thanks to over 100 years of experience, this brand is well known in all over the world. What is more, the organisation of the work
created by Ford is also famous. That allows underlining that Ford gets the leadership in the world with the sales of the Ford-Focus.
- The offer :
The range of Ford is very large. This firm is present in all the segments, that is why it is able to compete with other brands.
- Activity of credit :
This activity represents a part increased in the activity of the firm.
Weakness:
- The brand image :
Like Chrysler, Ford has got difficulties to make the ends meet because of its image. Indeed, this brand has got a high American image,
so it can not export its brands in all over the world. Also, like GM, they are dependent of the US market.
- The costs :
Compare to GM, Ford has got high costs. Actually, its R&D department is not as good as the Daimler one.
- Lack of anticipation :
Compare to its competitors, Ford is not able to be reactive. Indeed, this firm is late in Asia and adapts to slowly its range.
2. Toyota :
Strength:
- Innovation :
The R&D department is very successful. Toyota is the brand top of the pile for the technology. This firm gets indeed all the
knowledge of the Japanese companies in this way. What is more, Toyota innovates for the organisation of the production (JIT) in
order to reduce the costs.
- The offer :
The range of Toyota is very large. This firms is present in all the segments, that is why it is able to compete all the others brands. In
USA, Toyota earns market shares thanks to its pick up. The offer is valued by the capacity of the brand to adapt the product to the
market and by the brand image (reliable).
Weakness:
- The range :
Even if Toyota is present in all segments, this firm is not able to develop the top of the range product.
- The position :
The firm is based in Japan. This market is too narrow. That is why, Toyota is obliged to compete is foreign countries were national
brands are praised.
1.5 BCG Matrix
Division Revenue Revenue in % Profit Profit in % Market Share Industry Growth Rate
Hummer (H) 9406 7 4061 0.9 0.2 -4
Opel 16207 12 19304 4.5 0.4 +5
Buick (B) 25194 18 137198 32 0.7 +8
Cadilac (C) 12909 9 55218 13 0.6 6
Chervolet ( CH) 76229 54 209919 49.6 0.9
+9
Total 139945 100 425700 100
Star
Question Mark
Cash Cow Dog
1.00 0.05 0
CH
B O
C
H
Mar
ket
Gro
wth
Market Share
Low
H
igh
High Low
-10
0
10
Analysis
The company manufacturers the cars and the trucks in 55 different countries (exluding US and Canada). General Motors has sub-brands under its management. Buick, Cadillac, Chevrolet, Hummer, Pontiac, Saab, Vauxhall, Holden, Saturn and Wuling are some
one the names of General Motors’ brands.GM should focus on producing the brands such as Pontiac, Hummer which are fuel-efficiency and oil-guzzling cars.
Furthermore, more investment should put into producing smaller fuel-efficient vehicles, and also HEVs ( Hybrid Electric Vehicles).General Motors company must strive to lead in delivering new fuel-saving technologies in cars and trucks as well as
focusing on mass reduction, aerodynamics, lightweight materials, tire construction, and other technologies to make our vehicles more efficient.
1.6 Strategic Position and Action Evaluation (SPACE) Matrix
Internal Strategic Position External Strategic Position Financial Strength (FS) : 1 to 6 + Return on investment (3) In 2012, its revenue was 150.3 bill ion then increased to 152.484 bill ion in 2014.
+ Working capital (1) 18.6 bill ion working capital overall 174.5 billion capture by auto manufacture
+ Cash flow (3) Last year cash flow was 3.1$ bill ion and now it is 3.2 bill ion + Earnings per share (5) In 2013, EPS was 2.79 and now it increases to 3.9$ EPS
Total: 11
Industry strength (IS) : 1 to 6 + Growth potential (5) Automobile industry growing globally and GM operate in 157 countries + Profit potential (3)
Profit increase day by day in GM and automatic company is also growing now + Financial Stability (4)
Automobile industry is financially stable and financially growing industry globally. + Resource Utilization (3) Strong management in GM has strong resources and it also uses resources
effectively. + Ease of entry into market (4) Having strong capital structure entry to market globally is not easily
possible Total: 19
Competitive Advantage (CA) : -1 to -6 + Market share (-5)
48.5% market share in automobile industry + Product quality (-3) Standard quality because using high technology + Technological knowhow (-4)
Have good engineers from market + Customer loyalty (-2) Having mission to retain customer by providing efficient services
Total: -13
Environmental Stability (ES) : -1 to -6 + Technological changes (-4)
Technological changes day by day fuel efficiency improving + Rate of inflation (-2) Highly rate of inflation increase globally + Price range of competing products (-4)
Price range increase by ford and Toyota motors products + Competitive pressure (-3) Competition increase due to globalization of Toyota and Honda
+ Barriers to new entry (-3) Having strong capital structure entry into market is easily not possible Total: -16
FS / number of variables= 11/4 = 2.75
IS/ number of variables= 19/5 = 3.8
CA / number of variables= -13/4 = -2.6
ES / number of variables= -16/5 = -4.2
Y axis: FS+ES = 2.75 + (-4.2) = -1.25
X axis: IS+CA = 3.8 + (-2.6) = 1.2
Graph
ANALYSIS
Financial strength
In 2012, the total revenue that the GM got was $150.3 billion, then it incremented to $152.484 billion in 2014. This designates GM
has returned the investment in only two years. Besides, the earning per share in 2013 was $3.1 billion and it went up to $3.2 billion in
2014. That betokens the value of the GM’s share has incremented between 2013 and 2014.
Industry strength
GM was the leading auto manufacturer in terms of sales for 77 years until 2007. The business has grown its presence in the world and
is now operating in 157 countries, while its Chevrolet brand reached world record sales (4.95 million units). The profit that General
Motors earning increase day by day its company is more growing now.With the famous brand and having vigorous capital structure,
GM facilely ingression to the global automobile market.
Competitive advantage
GM occupied 48.5% market share in GM sales go up 48.5% in China in the first half and top U.S. sales for the first time. General
Motors fixated on investing in incipient technologies such as fuel efficiency, auto-driving, electronic displacement to compete with
products from other automobile companies. Besides, the engineers in GM work under good conditions that avail them engender more
efficacious products. Additionally, GM has mission to retain customer by providing efficient accommodations.
Environmental stability
New technology has a consequential role in automobile market. GM has applied the innovation and fuel efficiency that brings more
benefits customer. It preserves fuel and avails users in driving way. Besides, the low price is withal the factor that avail GM to
magnetize more customers who want to buy standard car. It is withal lower comparing to the average price of Ford or Toyota.
1.7 Grand Strategy Matrix
Rapid maket growth
Weak Competitive
Position
Slow Market
Growth
Strong
Competitive
Position
Turnaround or
retrenchment
Diversiture
Liquidation
Vertical intergration
Conglomerate diversification
Concentrated growth
Market development
Product development
Innovation
Horizontal intergration
Concentric diversification
Joint venture
Analysis
General Motors Corporation competing in quadrant four has slow growth industry but has a strong competitive position. There is can
diversify into different untapped businesses by utilizing their existing resource. These firm face restricted internal growth and has high
cash flow intensity which allows them to practice related and unrelated diversifications effectively. Finally this firm can go for joint
ventures to fulfill their internal growth needs.
Porters Five Forces
Rivalry
The rivalry within the automotive industry can be described as both healthy and destructive at times. Factors that affect the industry
include: a competitive pricing environment and market share erosion. Intense competition has forced a dangerous pricing environment
for all automakers. “When one manufacturer offers incentives (such as rebated or discounted financing), the others generally follow
suit or risk losing market share.”
One major factor in understanding the rivalry in the automobile industry is the competitive environment that lies within it. This
rivalry can be seen in the declining market share of numerous companies throughout the world, but mainly in North America. Market
share losses across the world, most recently in the US, suggest that the competitive environment is not getting easier. In fact, from
2004-2005 General Motors has lost almost 2 percentage points of market share in the automobile industry. This is occurring, while
companies such as Toyota and Nissan are increasing their market share by 1-2 points. See Appendix (F).
One main factor to consider when evaluating the threat of rivalry is the exit barriers, which exists in the automobile industry. All of
the companies have invested heavily in the production of their respective products, which make it difficult to close down their
manufacturing plants. Also, many regulations and contracts with unionized labor forces make it extremely difficult to lay off sizeable
amounts of the labor workforce. Therefore, due to the increasing competitive nature of the automobile industry and decreasing threat
of market share, along with the high exit barriers we have labeled the threat of rivalry as high.
Barriers to Entry
Within the automotive industry lie many barriers to entry, which can be difficult to overcome for smaller, less established companies.
Some of these barriers to entry include: high capital costs, economies of scale, government regulation, and brand recognition. The
largest entry barrier within the automotive sector is economies of scale. Also, high capital costs act as another considerable barrier to
entry due to the sizeable amount of capital needed to run the day to day operations of the company.
One of the overwhelming statistics a company must consider when entering this market is the amount of capital needed to start the
company and also the enormous costs needed to run the operation. In fact, General Motors over the previous ten years has had R&D
costs annually over $400 million. However, even though this one factor is a distinct barrier to entry we still feel that overall the
barriers to entry can be characterized as a low threat.
Threat of Substitutes
In the past couple of years the threat of substitution of automobiles has increased significantly due to the increasing price of gasoline.
Customers are beginning to consider fuel efficiency when selecting a vehicle. This can cause problems for the less fuel effic ient
automobiles such as Hummer. Many of these automobiles will soon be substituted by fuel efficient cars. This is exemplified by the
decline in sales of SUVs by Ford and General Motors, and the increase in interest for hybrid vehicles such as the Toyota Prius. Other
substitutes to the automobile include bus, metro, motorcycle, and train. In Europe and the US, the increase in gasoline prices has
increased the use of these other forms of transportation. In Appendix (I) there is a breakdown of the problems occurring with oil and
the rising gasoline prices.
The threat of alternative automobiles is mostly being seen in the development of hybrid-electric vehicles. Since their entrance into the
market, this type of vehicle has given way to new innovation and alternative forms of driving transportation. The need for this type of
automobile was due to the overwhelming outcry over pollution from natural gas/diesel emissions. As a result, hybrid technology helps
automakers meet stricter environmental standards in Europe and in North America. Currently, this threat can be characterized as
moderate due to the in adequate choices that are available and small amount of demand for alternative automotive vehicles.
Power of Suppliers
The relationship between the suppliers and the automobile manufacturing industry has changed dramatically in the recent past.
Manufacturers have begun to outsource the majority of parts used in the production process. In addition, they have also decreased the
number of suppliers significantly. They have accomplished this by requiring the suppliers to produce major components of the
automobile. For example, Lear and Johnson Controls have expanded to produce complete interiors. By reducing the number of
suppliers, the automobile manufacturers have not only reduced costs, but have also created closer relationships with their suppliers.
This change has also had a significant affect on the suppliers. They are now expected to manage units requiring greater production
expertise, manufacture more, and coordinate with the automobile manufacturers.
It may seem that with a reduced number of suppliers the automobile manufacturers would lose all power, but they have not. In order
to meet the demand of the manufacturers, the suppliers also reduced the number of automobile manufacturers they supply. Delphi
Corp, the nation’s largest supplier to automobiles manufacturers, generates half of its sales from General Motors. This exemplifies the
fact that automobile manufacturers still have power over the suppliers.
Also although it may seem that the manufacturers are dependent on the suppliers, this is not especially true with the ever-growing
global market. The choices of suppliers are endless. Considering the reduction in the number of suppliers, one would imagine that the
power of the suppliers has increased, but unfortunately they are still at the mercy of the manufacturers, making the power of suppliers
low.
Power of Buyers
The majority of automobiles are sold directly to franchised dealerships. And recently there has been an increasing trend of industry
consolidation. This trend gives more power to the dealerships, because of their overall hold on the cars. However, in the end the
manufacturers have the upper hand, because of their ability to set the prices for each automobile the dealership has. Other buyers of
automobiles include the government and large companies. These companies usually order automobiles in large quantities. They
commonly have more say over the price and production of the vehicle. Overall, after weighing all the aspects that are incorporated
into the power of buyers we have rated it as low.
Source:
1 Ward’s Dealer Business. “What Could Happen If Fuel Hits $3 a Gallon.” http://search.epnet.com/login.aspx?direct=true&db=buh&an=16958878 1 Mergent Online 1Levy, Efraim. “Industry Surveys: Autos & Auto Parts.” Standard & Poor’s, 12.
1Levy, Efraim. “Industry Surveys: Autos & Auto Parts.” Standard & Poor’s, 12
1.8 Quantiative Strategic Planning Matrix (QSPM)
QSPM – External Factors
Key Factors 1.Product Redevelopment2.Expanding GM into emerging countries 3.Revising current health care and pension plans
External Opportunities Weight AS TAS AS TAS AS TAS
Increasing demand for hybrid electric vehicles 0.09 3 0.27 2 0.30 1 0.15
Opportunities in emerging markets 0.07 3 0.21 3 0.45 2 0.30
Growing economy of car market 0.07 2 0.14 3 0.30 2 0.20
Alternative Energy Movement 0.08 4 0.32 3 0.30 2 0.20
Continuing to Expand Globally 0.07 3 0.21 3 0.15 2 0.10
Low Interest Rates 0.06 2 0.12 1 0.15 2 0.15
Develop New Vehicles Styles and Models 0.09 3 0.27 4 0.30 3 0.10
External Threats
Declining demand for light vehicles in US 0.08 3 0.24 2 0.15 2 0.20
Rising raw material price 0.05 3 0.15 3 0.08 3 0.15
Stringent emission standards 0.04 2 0.08 4 0.15 3 0.20
Competitive offerings from foreign manufacturers 0.06 3 0.18 4 0.15 2 0.30
Rising fuel prices 0.05 3 0.15 3 0.28 2 0.07
Growth competitors 0.07 4 0.28 3 0.25 3 0.10
Increased Health Care Costs 0.05 2 0.10 2 0.30 3 030
Rising supply costs i.e Steel 0.07 3 0.21 4 0.30 2 0.30
QSPM – Internal Factors
Internal Strengths Weight AS TAS AS TAS AS TAS
Global Presence 0.09 4 0.36 2 0.20 4 0.40
New vision and strategy 0.05 3 0.15 4 0.40 1 0.10
Largest manufacture 0.06 3 0.18 4 0.40 1 0.10
Strong management team 0.07 4 0.28 2 0.60 2 0.10
Strong brand portfolio 0.05 4 0.2 4 0.30 3 0.15
Strong presence in China 0.04 4 0.24 2 0.14 2 0.10
Knowledge of home market 0.05 3 0.15 2 0.10 2 0.20
Well performing brands 0.05 4 0.2 2 0.10 1 0.30
Large employee base with highly educated engineers and good R&D department 0.06 4 0.24 2 0.20 3 0.20
Hugh increase in total 0.05 3 0.15 2 0.10 3 0.08
Minimal services complains 0.04 3 0.12 2 0.05 3 0.10
Internal Weaknesses
High cost structure 0.05 1 0.05 2 0.20 3 0.20
Brand dilution 0.03 2 0.06 1 0.06 2 0.06
Sensitive to oil prices 0.04 1 0.04 1 0.03 3 0.10
Saturated market 0.05 2 0.10 2 0.14 3 0.10
Little diversification 0.04 2 0.08 1 0.30 3 0.21
Bureaucratic Culture 0.03 1 0.03 3 0.06 3 0.06
Car recalls 0.04 2 0.08 2 0.20 2 0.10
Economic inventions 0.05 2 0.10 1 0.15 3 0.08
Green car development 0.06 1 0.06 3 0.20 3 0.10
Total 1.99 7.79 3.93 3.5
Analysis
One of the most immensely colossal issues for GM is that sales are either decrementing or stagnated. To cope with this, GM should
find incipient markets in order to increment its sales and ascertain future magnification. Today, emerging countries represent a
paramount opportunity for magnification because of the population increases and their ability to purchase more. That is why GM
should transmute their direction of strategy: in lieu of investing in Europe, GM must specialize in a different market, that of the
emerging countries.
It is essential to point out that the authoritative ordinance is still quite poor, and the ability to purchase products is still less than in
developed countries. So, GM must engender inexpensive cars for these countries in order to be prosperous. For example, Renault
engendered a categorical car, the Logane, in Eastern Europe. This car is very frugal, 5,000€, and did not have any options making it
have the lowest price possible. This strategy should be followed by GM. These cars have targeted an astronomically immense part of
the authoritative ordinance and sanction a standardized engenderment which reduces costs. Moreover, the cost of the engenderment,
facilities, and workforce is lower than in the developed countries. As a consequence, GM is bound to increment its sales.
To manage this strategy, GM should be concentrated in the countries which have the most immensely colossal potential. They
commence at first in Asia, (China, Taiwan, India), which is 53 % of the total of emerging countries; then Latin America (Brazil,
Argentina) which make up 28%; and conclusively Eastern Europe which makes the majority of the rest of these emerging countries.
IV. Business Alternative Strategies and Recommendations
1. Alternative strategies
Alternative 1
At last months Incipient York auto show Bob Lutz, GM’s vice chairman for global product development, suggested cumulation-
represented hourly employees should apportion identically tantamount, less munificent, health care benefits as salaried employees.
Last year GM’s 119,000 hourly workers paid 7% of their health care costs, while its 38,000 U.S. salaried workers footed about 27% of
their costs (Garsten). When you compare this to the average employee in the U.S., you find that they pay 37%. Sean McAlinden, an
economist and labor expert with the Center for Automotive Research, estimates GM would preserve as much as $1.4 billion annually
if this occurred (Garsten).
Alternative 2
The second restructuring tactic is for UAW members to pay a portion of their Health Care costs. This can be done by having a single,
salaried worker pay $100 a month toward health costs, while hourly coalescence workers pay no premium and only $5 co-pay on
medical expenses. This particular tactic will preserve an estimated $1.2 billion a year. However, the concessions that need to be made
can only be approved by the UAW through a renegotiation of its current contract. Otherwise, GM will have to wait for the next round
of contract negotiations to resolve the elevating health care crisis and pension quandaries.
A positive sign though is that the negotiation verbalizes that occurred with Chrysler Corp and their contract with the UAW recently.
They negotiated an incipient Health Care accedence that requires around 35,000 Chrysler employees and retirees to commence paying
deductibles of between $100 and $1,000 for Health Care. Our best recommendation is for General Motors to follow the orchestration
utilized by Chrysler in eliminating their Health Care cost structure already in affect.
Alternative 3
The final option calls for General Motors to disunite their Automotive and Financing segments, or even sell the entire financ ial
subsidiary. However, we believe that selling GMAC in its entirety will be too challenging a task predicated on the involution of GM
and GMAC’s relationship. In integration, GMAC engenders much needed earnings and cash flow for GM.
Therefore, the only alternative left for General Motors would be to engage in further negotiations with the UAW members and ask for
concessions. Unless something is done GM’s healthcare bill is expected to climb from $5.3 billion to $5.6 billion this year, making it
the US’s most sizably voluminous single healthcare provider (Simensen). GM’s Chief Financial Officer, John Devine, verbally
expressed: “Health care is an authentic drain on our profitability, and mazuma, and a sizably voluminous dent on the balance sheet.
The issue is making us increasingly non-competitive.” (Simensen)
One way General Motors can coerce the UAW members back to the table is by threatening their workers with a refusal to pay for
retiree healthcare and the elimination of its pension plan. This possibility, along with the rumors of filing for bankruptcy, has many of
GM’s 160,000 US workers and 440,000 pensioners worried about their future. Fred Spearing, a GM worker, verbalized: “Everybody
is ambulating on eggshells right now out of trepidation they will be laid off or even lose their retirement benefits.” (O’Dewell) If the
company did decide to seek out bankruptcy bulwark, contracts with unionized members and their subsisting healthcare acquiescents
could be renegotiated (O’Dewell). GM could then pass on their pension obligations to the federal regime, which would reduce an
immensely colossal portion of GM’s fine-tuned costs.
This major strategy involving the restructuring of GM’s pension plan calls on General Motors to follow the same path the U.S. Steel
Industry took in their latest bankruptcy filings. The current pension plan standards in that industry are:
1. Elimination of pension plans for current workers.
2. Elimination of pension liabilities for retired workers.
3. Scale back Health Care plans for retired workers.
Currently, the Steel Industry is visually perceiving perpetuated denotements of profitability as a result of their recent bankruptcy
filings, renegotiation of coalescence contracts, and funding from the federal regime. We feel that if this tactic can be duplicated in the
event that the other two fail, then there will be a great opportunity for re-emergence in the automotive sector for General Motors.
2. Business Strategy Recommendations
The automotive sector of General Motors is currently experiencing an elongated period of decremented profitability and sales. In
order to turn around the company as well as ascertain future magnification, we have proposed three strategies. The first strategy, a
retrenchment strategy, fixates on product redevelopment, more categorically brand reinvention. The second approach to GM’s
redevelopment is a magnification strategy, which overviews the option of expanding GM into emerging countries. Finally, the last
strategy, a restructuring strategy, explicates a way to increment profits in the long term by revising the current health care and pension
plans. The main strategy we will fixate on is the Retrenchment strategy, because it provides the greatest amount of near term and
sustainable profitability.
Retrenchment Strategy: Product Redevelopment
In order to turn around their current situation, General Motors must make paramount changes to their current product commix. First,
they must commence by reducing the number of overlapping conveyances across brands. Different brands should not take away
customers from one another; rather they should take business away from the competition. Because this transpires often in GM’s case,
it is time to cut and consolidate.
Overlapping models
Currently, General Motors has over 89 models. We suggest that they abstract a number of these models. By doing this, GM will not
only reduce the number of overlapping models, but will withal concentrate their product commix to sanction for future redevelopment.
First, GM should abstract its GMC Cargo Van and Passenger Van because the Chevrolet brand has the same two vans with only minor
differences in the model. Secondly, due to the decrementation in SUV sales, GMC should reduce the number of Envoy models from 5
to 3 and Yukon models from 4 to 2. Finally, Pontiac should abstract their Montana Vans from their product line. Both of these vans
have a pass design and are not as remuneratively lucrative as the other vans in GMs product commix.
In the past, GM’s strategy included offering an assortment of conveyances for every brand. Recently, General Motors has decided to
transmute their strategy by constraining its product portfolio by fixating on Chevrolet and Cadillac as its marquis brands, repositioning
Saturn, Hummer, and Saab to niche brands, and coalescing Pontiac, Buick, and GMC into a complementary distribution channel
(Howes). By making these vicissitudes, it seems that GM has taken a step in the right direction.
Reinvention
After reducing the number of overlapping automobiles, General Motors must focus their attention on their brands. Each brand should
hold an identifiable position in the market; if it does not, there are two options: eliminate or reinvent it. Although many reprehenders
believe General Motors should eliminate a division, namely Pontiac or Buick, this does not seem to be the best option. Eliminating a
brand is costly, for example, the cost for closing Oldsmobile totaled at $1 billion (Welch). Instead, General Motors should fixate on
reinventing its struggling brand denominations.
Reinventing a brand is arduous and can be very jeopardous. Fortuitously, General Motors has already prosperously reinvented its
Cadillac division, giving them experience with this arduous procedure. To commence the process, GM must first ask itself the
question, “What does each brand stand for?” By answering this question, GM can utilize the information they have amassed to
associate an overall feeling to each brand. Then GM must conduct research to engender a design that fits each brand. Cadillac
invested $4 billion in research to develop a “stark incipient design that reveled in its edges and sharp angles.” (Greenberg) Once the
product line is consummated, GM must focus its attention on marketing the incipiently revamped product to its consumers. GM spent
$220 million in 2002 and $100 million in 2001 on advertising the incipient Cadillac design (Greenberg).
Chevrolet
We suggest that GM commence its brand reinvention with Chevrolet and Buick. We culled Chevrolet because it is their number one
brand and has an archaic design. They must commence by engendering a good ingression level conveyance that is commensurable to
Toyota’s Corolla or Honda’s Civic. Although GM has recently introduced the Cobalt, it is not doing the job. The Cobalt was
supposed to supersede the Cavalier and “even with GMs projections, the Cobalt won’t come proximate to matching the Cavalier’s
sales of 195,275 in 2004.” (Welsh) For this reason, GM must head back to the drawing board and reinvent the Cobalt. In order to do
this, GM must increase their costs in the Research and Development department.
It is additionally consequential to fixate on Chevrolet’s SUV line. GM must first reduce the number models. We suggest that
Chevrolet halt engenderment of the Trailblazer and Blazer. We culled these two models because they were the least remuneratively
lucrative. Additionally GM should fixate on the emerging interest in sport wagons. They recently introduced the Equinox, a sport
wagon, with a sleek incipient design. Utilizing this design, we suggest that GM reinvent their SUV line to resemble the Equinox.
Buick
In the past, GM has endeavored to decrement the median age of its Buick customers from its current 70 years of age. In the recent
past, they felt as though they may have achieved this when they introduced their incipient LaCrosse in 2005. Unfortunately, the public
did not concur. Even dealers were repining, “We needed a halo car to relaunch Buick, LaCrosse does not have breakthrough styling.”
(Halliday) Auspiciously, they have engendered a car that may appeal to the younger audience that is due to emerge in 2006, the
Lucerne.
Many reprehenders refer to GMs automobiles as, “outdated, poorly constructed, and wrapped in dull cookie-cutter styling.” (Yates)
As General Motors reinvented Cadillac, it is now time to reinvent their other brands. As verbalized above, this can be very jeopardous
as well as costly. Although GM was prosperous in reinventing Cadillac, there is a chance that they may not be as prosperous with
other brands. Unfortunately, this is a jeopardy GM must take in order to turn around its struggling company and commence future
magnification.
Restructuring Strategy: Health Care and Pension Plan(Long-run)
In September of 2003, General Motors embarked on labor negotiations with the UAW involving their latest contract. What resulted
were concessions which have to this date, single handedly assured General Motors of annual profit losses, at least until the next round
of negotiations commence. According to Business News Bank, General Motors spends more on Health care and pension plans per
conveyance than on steel. Analysts’ estimate that coalesced these two non value integrated costs accumulate to $2,200/conveyance.
Comparatively, Honda and Toyota spend approximately $100/conveyance.
Recently, GM and the coalescence have met to discuss their antecedent contract. Although the amalgamation was noncommittal in
reopening its contract with the IMMENSELY COLOSSAL Three, their disposition to discuss the industry’s deepening financial
distress was emboldening. In order for GM to ameliorate for the future, the UAW must come back to the negotiation table and
reevaluate their antecedent contract.
General Motors has three major alternatives it can pursue in the restructuring of its Health Care and Pension plans:
1. Have UAW members covered under same H/C plan as non-cumulation salaried workers.
2. Have Employees pay for a portion of their Health Care costs.
3. Separate the 2 units, which will coerce the UAW to renegotiate their contracts.
3. Implememtations
Implementation Timetable (Gantt Chart )
Product Redevelopment Period Highlight: 1 Plan Actual % Complete Actual (beyond plan) % Complete (beyond plan)
Phrase 1: Overlapping modelPhrase 2: Reinvention
PLAN PLAN ACTUAL ACTUAL PERCENT
ACTIVITY START DURATION START DURATION COMPLETE PERIODS
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
1. Reducing the number of overlapping vehicles 1 5 1 7 0%
2. Remove its GMC Cargo Van and Passenger Van 5 6 7 6 0%
3. Reduce the number of Envoy models from 5 to 3 10 8 10 8 0%
4. Reduce the number of Yukon models from 4 to 2 17 6 17 6 0%
5. Remove Montana vans from product line 22 3 22 4 0%
6. Making survey 1 3 1 3 0%
7. Focus on marketing the newly revamped product 22 8 22 7 0%
8. Advertising the new Cadillac on Magazine, E-commerce 3 5 3 5 0%
9. Innovate and cooperate with community 3 4 3 4 0%
From the table above we can see that:
1. Reducing the number of overlapping vehicles
2. Remove its GMC Cargo Van and Passenger Van
3. Reduce the number of Envoy models from 5 to 3
4. Reduce the number of Yukon models from 4 to 2
5. Remove Montana vans from product line
6. Making survey
7. Focus on marketing the newly revamped product
8. Advertising the new Cadillac design on TV
9. Innovate and cooperate with community
PESTEL Analysis
Economic Factors
To commence with the economic factors, the whole continent was going through recession in the year 2008 and everybody, right from
customers to the raw material suppliers were curtailing there expenses which just made the condition more suffering. This also left a
deep impact on the macro-environment which resulted in unemployment. As an automobile industry, besides being a merchandiser,
GM group is also a major consumer of various metals, textile, rubber, plastic, vinyl and computer chips.
Political Factors
Political environment can be inferred as all the aspects of the government which affect the sales and the purchase directly or indirectly,
i.e. any one of the aspect affects the functioning of a company positively as well as negatively. The rules of the government have
always been against the ignorance of the company towards environmental as well as safety regulations since 1960. The company has
been always ignorant towards safety equipments such as seatbelts, airbags, ABS (antilock braking system) and environmental friendly
products such as large engines and catalytic converters, with an idea to keep its vehicle notoriously strong, unconventional and
pleasurable. But the change in the norms worldwide took a heavy toll on the firm. The world now had new demands and new set of
trends which had no place for unsafe and oil gulping engines.
Technological Factors
s time has progressed, so has technology, which is a dominating factor in the performance of a firm. As a matter of fact, companies
should be ready to mould themselves according to the demands of the customers which rapidly changes due to advancements in
technology and subsequent transformations in the market. The company not only makes full use of the evolving technology to
constantly innovate itself for the cut throat competition by the rivals but also uses it for reaching out to the customers and
understanding their needs and comfort better. Technology is also used by the company to reach out to the customers more efficiently
through more effective distribution channels.
Social Factors
Social aspect is also one of the vital contributions for analysis of any firm. The condition is simpler when dealing with a national
entity but gets complex when a multinational firm is under consideration, reason being each county has a different perception towards
its buying habits depending upon education, requirement and various other features such as urbanization.x
V. Conclusion
In conclusion, if we apply those strategies above, GM will increase the profits as we expected. Because using different brands can take
the business away from competition. We removed the out of date vans because the old designs are not as profitable as the other vans
in GMs product mix. Furthermore, we decided to change the strategy by limiting its product portfolio by focusing on Chevrolet and
Cadillac as its marquis brands, and combining Pontiac, Buick, and GMC into a complementary distribution channel. By making these
changes, we expected that GM could have a right direction. Beside that, in long term we also eliminate the pensions plan for the
current workers, and we invest more on Steel industry. The Steel industry is seeing continued signs of profitability as a result of
General Motors recent bankruptcy filings, renegotiation of union contracts, and funding from the federal government. There will be a
great opportunity for re-emergence in the automative sector for the General Motors.
Bibliography
“Area Dealers See Brighter Future for GM Newspaper.” Knight Ridder/Tribune Business News.May 8, 2000. Associated Press.Sintinel, Fort Wayne, Indiana.Knight Ridder/ Tribune News. Eavis, Peter. “GM’s Pumped-up Lending Arm Surprises Many.” http://TheStreet.com. (May 23, 2005). Economist Intelligence Unit. Eb.eiu.com. (May 25, 2005). General Motors Annual Report 2004. “General Motors Corporation SWOT Analysis.”Company Report. April 2005.
http://search.epnet.com/login.aspx?direct=true&db=buh&an=16895193. (May 25, 2005). “Global Operations: Asia-Pacific Operations.” General Motors. 2005.
http://www.gm.com/company/corp_info/global_operations/asia_pacific/. (May 24, 2005). “GM Factory Workers in Baltimore are concerned about Future. Newspaper.Knight Ridder/Tribune Business News.May 9, 2005. “GM Pulls out all the stops to sell its vehicles.” Knight Ridder Business News.April 6, 2005. “GM to Invest $3 Billion in China.”World IT Report. June 24, 2004.
http://search.epnet.com/login.aspx?direct=true&db=bug&an=13747080. (May 24, 2005).
Halliday, Jean. “Buick seeks baby boomers with new models.” Automotive News. Vol. 79, Issue 6126, p 22. December 20, 2004.
http://search.epnet.com/login.aspx?direct=true&db=buh&an=15509816. (June 6, 2005). Hawkins, Lee. “Struggling GM Rolls Out a New Marketing Strategy.” Wall Street Journal.May 23, 2005.
http://proquest.umi.com/pqdweb?did=843300381&sid=1&Fmt=3&clientid=3920&RQT=309&VName=PQD. (May 24, 2005).
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