General Motors 2005: Crisis and Way Out

1

General Motors – 2005

GENERAL

MOTORS

2005

2

GENERAL

MOTORS

2005

Outline

Company Background

Current Situation and Basic Facts

External Environment: Opportunities and Threats

Internal Environment: Strengths and Weaknesses

Analysis of Strategic Factors

Strategic Formulation, Evaluation, and Recommendation

Strategic Implementation, Evaluation, and Control

Limitation and Conclusion

Question and Answer

3

GENERAL

MOTORS

2005

Company Background

Creation 1897-1909

General Motors was found by William “Billy” Durant on September 16, 1908 in MI.

Started with Buick, then acquired Oldsmobile, Cadillac, and Oakland (Pontiac)

Acceleration 1910-1929

GM set the pace of production, design, and marketing innovation for other to follow.

Added Chevrolet, Vauxhall, and Opel

Philosophy of “a car for every purse and purpose”

Emotion 1930-1959

During World War II, GM still committed on innovation

100% of GM production was in supported the war including airplane, truck and tank

4

GENERAL

MOTORS

2005

Company Background

Revolution 1960-1979

Due to environmental concern, increase in gas price, GM did the largest reengineering

program ever, with an age of lighter, aerodynamic, and more fuel-efficient vehicles.

Acted as a pioneer, an air bag, and reducing emission with catalytic converter for instance

Also played a lead role, in developing guidance and navigation system in Apollo 11

Globalization 1980-1999 GM re-invented itself as an integrated global team and focus on innovation growth.

Opened the big plant in Spain, Joint venture with China and India

Added Saab and HUMMER to strengthen both the reach and variety of vehicle sold worldwide

Innovation 2000-Present

Environmental concern about the energy, GM has created innovation vehicles.

More fuel-efficient engines to biofuels and hybrid, and Hydrogen fuel cell.

5

GENERAL

MOTORS

2005


Operation Performance

Two main businesses: Automotive and other operations, and Financing and

insurance

Automotive business with four main sectors: GMNA, GME, GMLAAM, and GMAP

Plus one type of business that GM acts as an investor.

General Motor North AmericaGeneral Motor EuropeGeneral Motor Latin America/Africa/Middle EastGeneral Motor Asia Pacific

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GENERAL

MOTORS

2005


Operation Performance (cont)

GM’s automotive business has eight divisions, which are Chevrolet, Saturn,

Cadillac, Hummer, GMC, Pontiac, Buick and Saab

Regardless of decline in demand or non-profitability, GM had to run its plants at

80% capacity, minimum due to its union agreements.

It seems like GM’s operation is in trouble, especially in non-profitable product lines

and over capacity production

7

GENERAL

MOTORS

2005


Financial Performance

Total Net Sales of Automotive

$193,517 million $(89) million

Automotive business

Stock Price, Market Capitalization and Liquidation

Stock Price: 73% Market Cap: $15 B Liquidation: $19.8 B

Net Sales

$2,805 million

Net Income

8

GENERAL

MOTORS

2005


Financial Performance (cont)

GMAC’s Net Income

2003: $2.8 billion

2004: $2.9 billion

2002: $1.9 billion General Motor Account Commercial

The financial performance mirrors that GM is in trouble with its core business –

Automotive.

9

GENERAL

MOTORS

2005


Marketing Performance

Offering a car to feed every market segment and every geographic area.

An increase in sales – an increase in GM’s total net sales in 2004.

Unit sales versus Net sales and Revenues

2004 2003

Auto & Other: (dollars in millions)

Total net sales and revenues ▲$161,545 $155,831

GMA net income (loss) by region:

GMNorth Amr ▲$1,583 $811

GMEurope ▼$-976 -504

GMLatinAmr/Africa/MidEast ▲$85 -331

GMAsiaPacific ▲$729 $577

GM Vehicle unit sales by region: (in thousands)

GM North America

Industry -- North America ▲20,275 19,841

Industry -- US. ▲17,302 16,970

GM Europe ▲20,606 19,537

GM Latin America/Africa/Mid-East ▲4,240 3,585

GM Asia Pacific ▲17,070 15,925

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GENERAL

MOTORS

2005


Marketing Performance

Offering a car to feed every market segment and every geographic area.

An increase in sales – an increase in GM’s total net sales in 2004.

Despite 52,000 sold unit per model, GM is about to lose 8% in overall sale in April.

By the end of 2005, GM would lose its US. sales about 5.2%.

GM is going down to the marketing problem very soon according to critics.

Market Share of Automotive

GMNA 2004: 26.7%

GMNA 2003: 27.4%

U.S. 2004: 27.2%

U.S. 2003: 28.0%

Global 2004: 14.5%

Global 2003: 14.6%

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GENERAL

MOTORS

2005


Human Resource Performance

By the end of 2004, GM employed about 340,000 employees worldwide (110,000

salaried workers)

GM paid $21.5 billions for the worldwide payrolls; $8.7 billions for US. Hourly

payrolls.

Average labor cost per active hour worked U.S. hourly decreases 6%.

2004: $73.73

2003: $78.39

6% Health Care Trend Rate Operating Expenses

GM is now carrying on the “legacy cost” ($1,600 per vehicle sold). This puts GM in

a cost disadvantage situation compared to competitors.

GM has spent $5.6 billion on health care, retirement and pension plan.

12

GENERAL

MOTORS

2005


Research and Development Performance

R&D budget spending on 89 models in eight divisions

$13.7 billion

Chevrolet Saturn Cadillac Hummer GMC Pontiac Buick Saab

Due to too fragmented in R&D budget distribution, each model has to be stayed

longer in the market (nearly four years).

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GENERAL

MOTORS

2005


Strategic Posture

Conglomerate strategy – Automotive and Financial

Pursuing growth

Globalization strategy: Global industry

Functional Level

Business Level

Corporate Level

Broad differentiation

Product leadership

Not low-cost Strategy

Capacity over real demand and engineering

Design and engineering compromise

Being differentiated requires building creative talent and flair, strong capabilities in

basic research and corporate reputation for quality/technical leadership – Not GM

14

GENERAL

MOTORS

2005


Remote Environment

Economic Factors

An increase in gas prices

An increase in a health care trend rate

Social Factor A change in lifestyle to concern more about environment

Technological Factors

Alternative vehicles for alternative energies (Hybrid and Hydrogen car)

Ecological Factors

Global warming concern

Eco-efficient

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GENERAL

MOTORS

2005


Remote Environment (cont)

Remote Environment Factors

Factors Opportunity Threat

Economic An increase in gas prices An increase in health care trend rate

-

-

√√

Social People’s attitude toward environmental impact √ -

Political N/A - -

Technological Hybrid car and hydrogen car technologies √ -

Ecological Global warming concern Eco-efficient

√√

-

-

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GENERAL

MOTORS

2005


Industry Environment

Threat of New Entrants

Mature industry

Reached economies of scale

Very high start-up cost

Hard to access distribution channel

Power of Suppliers

Requires many parts in production

Many suppliers in the industry

Low switching cost

Industry Competitors

Intensity of Rivalry

Very High

New Entrants

Very Low

Suppliers

Very Low

Buyers

Moderately high

Substitutes

Moderate

Threat of New EntrantsBargaining P

ower

Bar

gain

ing

Pow

er

Threat of Substitutes

of Suppliers

of B

uyer

s

Forces Driving Industry CompetitionAdopted for GM case

17

GENERAL

MOTORS

2005


Industry Environment (cont)

Power of Buyers

Be a significant portion of revenues

Low switching cost

Not being large


Walking, riding bike, train, etc.

Cannot compare in usability

Not a new potential trend

Industry Competitors


Very High

New Entrants

Very Low

Suppliers

Very Low

Buyers

Moderately high

Substitutes

Moderate


ower

Bar

gain

ing

Pow

er


of Suppliers

of B

uyer

s


18

GENERAL

MOTORS

2005




Mature and low growth

High number of competitors

High competition in market share

A lack of differentiation opportunityIndustry Competitors


Very High

New Entrants

Very Low

Suppliers

Very Low

Buyers

Moderately high

Substitutes

Moderate


ower

Bar

gain

ing

Pow

er


of Suppliers

of B

uyer

s


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GENERAL

MOTORS

2005



Industry Environment Factors


Threat of New Entrants - -

Bargaining Power of Suppliers - -

Bargaining Power of Buyers - √

Threat of Substitute Products - -

Intensity of Rivalry among Competitors - √

20

GENERAL

MOTORS

2005


Operating Environment

Competitive Position

Cannot compete with the Koreans and Chinese on price

Also cannot compete the Japanese on quality and the Europeans on performance.

Less effective in R&D spending

Bad in tracking and collecting customer profiles

Creditor

Private equity firms and hedge funds are ready to acquire potential companies.

21

MT6280 Strategic and Competitive Policy Management Piyorot Piyachan 4829524

GENERAL

MOTORS

2005


Operating Environment (cont)

Customer Profiles

A continued expansion in GM market share – China from 2002 to 2004

2003: 8.60%

2004: 9.30%

2002: 4.20% 121.42 % Increase in two years

Time for “technology generates values” to replace “technology creates demand”

• Air-condition system• Heated rearview mirrors• Four-cylinder engine• ABS• 5-gear automatic transmission

• Comfort, ease of use• Overall vehicle design• Environmental friendliness• Safety• Driving dynamics/handling

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GENERAL

MOTORS

2005


Operating Environment (cont)

Operating Environment Factors


Competitive Position R&D advantage position Product quality Customer profile Price competitiveness Breadth of product line

-

-

-

-

-

√√√√√

Customer Profile Expansion in China market The presence of “technology generates value” approach

√√

-

-

Suppliers N/A - -

Creditors Private equities ready to take over √ -

Labor Market N/A - -

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GENERAL

MOTORS

2005


Summary of External Environment

External Factor Analysis Summary (EFAS): GM case

External Factors Weight Score WeightedScore

Opportunities People’s attitude toward environmental impact Hybrid car and hydrogen car technologies Expansion in China market The presence of “technology generates value” approach Private equities ready to take over

0.050.150.100.050.08

32423

0.150.300.400.100.24

Threats An increase in gas prices An increase in health care trend rate Bargaining power of buyer Intensity of rivalry among Competitors Competitor’s R&D advantage position Competitor’s product quality Competitor’s customer profile

0.050.150.030.120.050.070.10

2132322

0.100.150.090.240.150.140.20

Total 1.00 2.26

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GENERAL

MOTORS

2005


SWOT Analysis

Core Competencies

Tangible Global market share (14.5% as of 2004) Global market coverage Net sales of $193 billion in 2004 340,000 employees worldwide Number of plants Diversity of products Financing and insurance businesses

Intangible World’s largest auto manufacturer Global brand and image Power to set industry standard

Research and Development potential Technology potential Production and capacity potential

Resources Capabilities

Core Competencies

25

GENERAL

MOTORS

2005


SWOT Analysis (cont)

Corporate Culture

DNA of being number one makes inflexibilities and overlooks future problems.

Result in over capacity, offering too much incentives to attract new employees

Marketing

Sale volume per model and U.S. sales

Causes: wrong marketing strategy. Try to “push” rather than “pull”, too many

product lines with 89 models

52,000 unit

GM 80,000 unit

Toyota

2005: 5.2%

U.S. sales

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GENERAL

MOTORS

2005



Finance

2003: 0.81

2002: 0.92

2004: 0.74

Current

2003: 0.65

2002: 0.77

2004: 0.54

QuickLiquidity Ratio

Ability to pay short term obligation

GM is losing itsability to cover liabilities comparedto prior years.

Result

2003: 0.94

2002: 0.98

2004: 0.94

Debt to Asset

2003: 1.17

2002: 2.09

2004: 1.09

Debt to Equity Leverage Ratio

Percentage of fundprovided by debtand equity

GM can reduce riskfrom creditors andStockholders.

Result

27

GENERAL

MOTORS

2005



Finance (cont)

2003: 0.41

2002: 0.48

2004: 0.40

Asset TurnoverActivity Ratio

How much revenue is being generated for every $1 of

capital employed

Currentlynon-evaluable

Result

2003: 0.015

2004: 0.015

2002: 0.010

ROS

2003: 0.006

2004: 0.006

2002: 0.005

ROI Profitability Ratio

a company's operational efficiency and utilization

GM can betterutilize its assets togenerate revenue.

Result

2003: $482,029 m

2002: $379,142 m

Asset

28

GENERAL

MOTORS

2005



Research and Development

Not too bad performance as the revival of Cadillac

But with too many product lines, the budget is too fragmented and not enough

Operations and Logistics

Compromises car design and engineering to boost up productivity and keep plants

happy

Human Resource Management

Carry on a large expense in health care and pension – so called “legacy cost”

340,000 employees

No of Employees

$5.6 billion

Health care and Pension

$1,600 per unit

Legacy cost

29

GENERAL

MOTORS

2005


Summary of Internal EnvironmentInternal Factor Analysis Summary (IFAS): GM case

Internal Factors Weight Score Weighted Score

Strengths Global market share (14.5% as of 2004) Global market coverage (six regional areas) Net sales of $193,517 billion in 2004 340,000 employees worldwide Number of plants Diversity of products Lucrative financing and insurance businesses Global brand and image Research and Development and technology potential Production and capacity potential

0.020.110.030.080.070.050.020.010.070.08

4444435435

0.080.440.120.320.280.150.100.040.210.40

Weaknesses Decline in global market share and U.S. sales DNA of being number one Inflexibility in managerial style Inappropriate marketing strategy (push strategy) Bad operational practice (capacity over engineering) Too much health cost and retirement expenses Decline in employee and union relation

0.120.010.010.070.080.140.03

3222212

0.360.020.020.140.160.140.06

Total 1.00 3.04

30

GENERAL

MOTORS

2005


Problems and Challenges

Problem1: High Health Care and Retirement Expenses By the end of 2005, $5.6 billion to be paid out for the expenses

Holding the “Legacy Cost”

Problem2: Decline in Global and U.S. Market Share

Continued decline in global and U.S. market share

Cash drain out will then affect to GM’s liquidity status within five years.

Current US. market share is 25.6% but the threshold is 25%.

2003: 14.6%

2002: 15.0%

2004: 14.5%

Global Market Share US. Market Share

24% 20%

Cash Flow

$19.8 $17.4 $12.9 $(0.6)

In five years

31

GENERAL

MOTORS

2005


Problems and Challenges (cont)

Challenge1: Chinese Market Expansion

Due to a significant increase in market share in China

To capture and dominate the market, GM has to move and move quickly.

Challenge2: Alternative Vehicle Development

Due to an increase in gas price, and environmental and pollution concerns

Hybrid car and Hydrogen car

Source: autospies.com

Sat

urn

Aur

a

Hy-

Wire

Source: evlender.org

32

GENERAL

MOTORS

2005


Problems and Challenges (cont)

Challenge3: Competitive Advantage Revival Due to intensity of competitive rivalry and threats from potential competitors

To regain competitive advantages

Challenge4: Environmental Friendliness

Due to a trend of customer environmental concerns

A long term challenge to create another source of competitive advantages

33

GENERAL

MOTORS

2005


Review of Vision and Mission

VISION:"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."

MISSION:"GM 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 stockholders will receive a sustained superior return on their investment."

The current vision and mission statement are still proper to GM in order to drive

the company forward with the current company and industry situation.

34

GENERAL

MOTORS

2005


SAFER Framework

The main framework to formulate, evaluate and recommend an appropriate set of

strategies that the organization can use to pursue its staked out position in the

industry [Shawyun, T, 2006]

Situational Analysis

The Input Stage

TOWS Matrix

The Matching Stage

QSPM

The Decision Stage

35

GENERAL

MOTORS

2005

SAFER Framework: Situational Analysis

Strategic Factors Analysis Summary: GM case

Strategic Factors Source

Global market coverage (six regional areas) 340,000 employees worldwide Number of plants Research and Development and technology potential Production and capacity potential Decline in global and U.S. market shares Inappropriate marketing strategy (push strategy) Bad operational practice (capacity over engineering) Too much health cost and retirement expenses

StrengthStrengthStrengthStrengthStrength

WeaknessWeaknessWeaknessWeakness

Hybrid car and hydrogen car technologies Expansion in China market Private equities ready to take over An increase in health care trend rate Intensity of Rivalry among Competitors Competitor’s R&D advantage position Competitor’s product quality Competitor’s customer profile

OpportunityOpportunityOpportunity

ThreatThreatThreatThreatThreat


36

GENERAL

MOTORS

2005

SAFER Framework: TOWS Matrix

Strengths (S) Global market coverage (six regional areas) 340,000 employees worldwide Number of plants Net sales of $193,517 billion in 2004 Research and Development and technology potential Production and capacity potential

Weaknesses (W) Decline in global and U.S. market shares Inappropriate marketing strategy (push strategy) Bad operational practice (capacity over engineering) Too much health cost and retirement expenses

Opportunities (O) Hybrid car and hydrogen car technologies Expansion in China market Investors swoop in GM businesses

SO Strategies Innovation for hybrid and hydrogen car to serve global market.

Concentrated Growth in China.

WO Strategies Product Development for U.S. market.

Market Development for global market.

Divestiture the Financial sectors to cope with health care and retirement expenses.

Bankruptcy declaration to eliminate health care and retirement payment.

Renegotiation with union about health care and retirement contracts in the next two years.

Threats (T) An increase in health care trend rate Intensity of Rivalry among Competitors Competitor’s R&D advantage position Competitor’s product quality Competitor’s customer profile

ST Strategies

Turnaround GM’s assets (plants) to make GM smaller and more manageable.

Turnaround GM’s product lines to make GM more compact.

Innovation for continue being differentiation as competitive advantage.

Marketing Improvement to pursue changes in customer profiles.

WT Strategies More reasonable incentive payment to reduce health care and retirement expense, and reflect with the current situation.

Outsource unimportant product items to reduce cost.

1Legacy cost

2

Competitive Advantage


37

GENERAL

MOTORS

2005

SAFER Framework: Quantitative Strategic Planning Matrix

(QSPM) Alternatives for a reduction in health care and retirement expenses Quantitative Strategic Planning Matrix (QSPM): GM case

Weight Divestiture Bankruptcy Renegotiation

Rating Score Rating Score Rating Score

Key External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/Environmental Technological Competitive

0.200.100.10

-0.15

332-2

0.600.300.20

-0.30

211-1

0.400.100.10

-0.15

333-3

0.600.300.30

-0.45

Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Computer Information Systems

--

0.250.20

--

--32--

--

0.750.40

--

--21--

--

0.500.20

--

--23--

--

0.500.60

--

Attractiveness Score 1.00 2.55 1.45 2.75

Get loss from such expenses before the rebound.


38

GENERAL

MOTORS

2005


(QSPM) Alternatives for a reduction in health care and retirement expenses (cont)

Why not “Divestiture”

The financial sectors still in profit. Selling them is not a right thing to do.

2003: $2.8 billion

2004: $2.9 billion

2002: $1.9 billion

Why not “Bankruptcy”

A ton of liquidity makes it unlikely Risky with employee strike

$19.8 billion $2 billion in 54 days


39

GENERAL

MOTORS

2005


(QSPM) Alternatives for competitive advantage revival

Innovation for differentiation and Turnaround (plant) for better operations.

Quantitative Strategic Planning Matrix (QSPM): GM case

Weight Innovation Turnaround (plants)

Turnaround (product lines)

Rating Score Rating Score Rating Score

Key External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/Environmental Technological Competitive

0.05-

0.050.100.15

3-344

0.15-

0.150.400.60

2-322

0.10-

0.150.200.30

3-322

0.15-

0.150.200.30

Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Computer Information Systems

0.050.100.150.200.15

-

33244-

0.150.300.300.800.60

-

43333-

0.200.300.450.600.45

-

43223-

0.200.300.300.400.45

-

Attractiveness Score 1.00 3.45 2.75 2,45


40

GENERAL

MOTORS

2005


(QSPM) Alternatives for competitive advantage revival (cont)

Why not “Turnaround” (product line)

High rate of compensation prices. To lose market penetration capability.

$3,000 / vehicle


41

GENERAL

MOTORS

2005

Recommended Strategies

Cost reduction at plants- Reduce overhead cost of over production- Better utilize R&D budget- More focus on core points

Turnaround

Maximize R&D, technologies and experience- Seek differentiation- Head to new technology emergences- Stay in product leader

Innovation

Pursue growth in China- Capture profit from the fastest growth market- Reduce risk in U.S. market dependency

Concentrated Growth

Apply to the mature U.S. market- Add on differentiation to existing products- Generate more demand from the market

Product Development


42

GENERAL

MOTORS

2005

Recommended Strategies (cont)

Apply to global markets (EU, ME, and AP)- Continue capturing profits- Identify new target markets

Market Development

Focus one core competencies of the brand- Reduce cost- Gain advantage from excellent suppliers- Have more focus on core competencies

Outsourcing

Renew marketing strategies and processes- Have more reliable customer profiles- Better collaborate with R&D, production- Increase customer demand and satisfaction

Marketing Improvement

Renegotiate with union and restructure it- Better control labor cost- Reduce operating cost- Reduce “legacy cost”

Restructure of Employee Benefit


43

GENERAL

MOTORS

2005

Comprehension of Recommended Strategies

Operate in multi-business: automotive and financial

Conglomerate

Continue operating in globalenvironment

Globalization

Pursue growth in bothbusiness lines

Growth

Drop out some less important plants aroundthe world

Turnaround

Outsource less importantparts to other suppliers

Outsourcing

A New Set of Corporate Strategies


44

GENERAL

MOTORS

2005


- More and more effort and money to be put into new market, such as China- Fewer internal resources remains for capital-incentive production areas

Outsourcing and Turnaround

1. Define candidate blocks2. Define influence3. Outsource not core blocks

In-house develop

Need more consideration

To be outsourced

Source: Roland Berger Strategy Consultants cited by [Koch A, et al, 2007]

A New Set of Corporate Strategies (cont)


45

GENERAL

MOTORS

2005


Continue with broad-differentiation to serve bigrange of markets

Broad-Differentiation

Glo

bal

Capitalize on R&D andtechnology advancementto accelerate differentiation

Innovation

GM

NA Modify existing products

to create more demandin the US.

Product Development

GM

AP Direct resources to

penetrate the fast growthChinese market

Concentrated Growth

The

Res

t

develop new markets toshift the global marketshare

Market Development

A New Set of Business Strategies


46

GENERAL

MOTORS

2005


- To fight with a mature-start-declining stage in the U.S. market and North America- Focus on “Attribute-oriented” rather than “Component-oriented”

GMNA: Product Development


A New Set of Business Strategies (cont)


• Air-condition system• Heated rearview mirrors• Four-cylinder engine• ABS• 5-gear automatic transmission

• Comfort, ease of use• Overall vehicle design• Environmental friendliness• Safety• Driving dynamics/handling

Past/Present: Component-oriented Future: Attribute-oriented

47

GENERAL

MOTORS

2005


Focus on engineering ratherthan capacity to be productleadership and follow thebusiness strategy ofinnovation

Engineering Focus

Pro

duct

ion

Design and produce basedon the “technology createsvalues” to serve real needsof consumers

Value Focus

R&

D Do research based on the “technology creates values”to tackle consumer’sbehavior change more properly

Value Focus

Track and monitor changesin customer’s behavior andlifestyle to build better internal customer profiles

Customer Orientation

Mar

ketin

g

Change marketing strategyfrom “push” to “pull” to respond to today’s situation

Demand Pull

HR

Restructure employee benefits to reduce overheadcost of health care and retirement plan.

Restructure Benefits

A New Set of Functional Strategies


48

GENERAL

MOTORS

2005


- Require deep collaboration from Production, R&D, and Marketing departments

Production, R&D, and Marketing: Customer-Oriented Technology


R&D Production

Marketing R&D

Production

Marketing


A New Set of Functional Strategies (cont)


1. Brand fit2. Benefit customers3. Benefit manufacturer

R&D Production

Marketing

49

GENERAL

MOTORS

2005


- A use of HMO, PPO and Blue Cross/Blue Shield

HR Department: Benefit Restructure and Human Development

- The most important for a company, who acts as innovator and product leader- Development of deep expertise in science and technology, culture, and skills

HR Department: Human Development

Co-pay and Deductibles ofHMOs and PPOs options

Salaried Workers

$600 million

Blue Cross and Blue Shield

UWA and Retirees

$500 million $1.1 billion

A New Set of Functional Strategies (cont)


50

GENERAL

MOTORS

2005

Strategic Implementation


The Balanced Scorecard Strategic implementation: short-term objective, functional tactic, outsource, etc.

Balanced Scorecard as a tool for setting, achieving and measuring objectives

Source: Adopted from [Shawyun, T, 2006]

51

GENERAL

MOTORS

2005


The Balanced Scorecard: Learning and Growth Perspective

Learning and Growth Perspective

Objectives Measure Target

Human Capital

Increase education and experience of employee Number of employee training in deep functional expertise

Employee participation in professional or trade associations

Percentage of employees with advanced degrees

Minimum five courses per staff per year.

Minimum twice per staff per year.

15% of employees getting advanced degrees within three years

Enhance team-working skill Number of employee training in soft skill Minimum five courses per staff per year

Emphasize a use of Personal Development Plan (PDP)

Percentage of employee who attend thePDP program

Percentage of employees who meet their PDP goals

90% within a year – about 25% quarterly

75% annually – about 20% quarterly


52

GENERAL

MOTORS

2005


The Balanced Scorecard: Learning and Growth Perspective (cont)



Information Capital

Enhance the communication of knowledge and project experience across function

Number of co-development projects

Number of regional and global conference

Internal communication rating

10% of overall projects per year

Regional conference quarterly and global conference semiannually

Reach 85% within three years

Increase information available for access Percentage of employees who has this information available to them


Increase information capital readiness Percentage of accomplishment of information technologies and systems versus needs

Minimum 75% in every area


53

GENERAL

MOTORS

2005


The Balanced Scorecard: Learning and Growth Perspective (cont)



Organizational Capital

Enhance teamwork productivity Number of completed (in time and budget) co-development projects

Number of internal cross-trained employees

Increase 10% per year


Employee satisfaction Number of employee feedback

Turnover rate

Empowerment index (number of managers)

Minimum 75% of employee involve the survey

Maximum 7% per year globally

A ratio of manager to employee decreases 5% per year for five consecutive years

Encourage healthy lifestyle Lost-time accidents

Worker’s compensation claims

Injury frequency rates

Percentage of participants to healthy-promotion initiatives

Decrease 10% per year





54

GENERAL

MOTORS

2005


The Balanced Scorecard: Internal Processes Perspective

Internal Business Processes Perspective


Operational Management Processes

Decrease operating cost Inventory turnover

Planning accuracy

Outsourced parts cost

Labor cost


Maximum 15% of effort, cost and schedule deviations

Decrease to 15% comparing with a current expense within two years

Decrease 4% per year due to a restructure of employee benefits

Increase quality On-time delivery rate

Defect percentage

Warranty claims

Reach 90% within two years

Maximum 0.05 % per part/model

Maximum 0.05% per part/model


55

GENERAL

MOTORS

2005


The Balanced Scorecard: Internal Processes Perspective (cont)



Innovation Processes

Increase a success in innovative projects Dollars spent on research and development

Employee hours on research and development

Number of new projects or services introduced

Number of new product joint ventures

New product or service cycle time

Revenue from new products or services

Increase the R&D/sales ratio to 6% in two years

Minimum 30 hours per week for R&D staff and minimum two hours per week for other Staff

At least two new innovative products or services introduced per years regionally(e.g. product safety, customer health and environmental impacts)

Minimum two new projects per year for each region

Maximum three years before replacement

Increase 10% each year


56

GENERAL

MOTORS

2005





Innovation Processes

Accelerate innovative projects Number of new products or services in the pipeline

Time to market of new products and services

In each region, at least two new products or services being progress concurrently at all time (e.g.. hybrid and hydrogen car)

Faster by 10% each year

Regulatory and Social Processes

Emphasize Corporate Social Responsibility (CSR) activities

Dollars spent on CSR

Employee volunteer hours

Number of CSR activities


Minimum two hours per employee per month

At least 12 activities per year per region


57

GENERAL

MOTORS

2005





Customer Management Processes

Better understanding of customer needs Number of customer profile produced

Number of lead user utilization

Minimum five new customer profiles produced regionally

90% of overall projects conduct ‘lead user’ within three years

Enhance retaining customers rate Percentage of returned customers Grow 5% per year

Deepen customer relationship Revenue from cross-selling multiple products and services



58

GENERAL

MOTORS

2005


The Balanced Scorecard: Customer Perspective

Customer Perspective


Create brand and technology awareness and recognition

Number of ads launched per region

Number of trade show attended

Increase 20% in three years, 8% annually

At least one per region semiannually

Increase customer satisfaction and loyalty level Number of customer complaint

Number of complaints resolved the first time

Customer response time

Number of proposals made

Reduce 25% each year


Reduce 50% in three years, 20% annually

Minimum two proposals per year per region


59

GENERAL

MOTORS

2005


The Balanced Scorecard: Customer Perspective (cont)

Customer Perspective


Increase number of customers Total number of customers

Retention rate

New customer acquisition numbers

Global market share

U.S. market share

Chinese market share




Reach 18% in three years, increase 1.5% annually

Reach 27.5% in three years, increase 1.2% annually

Reach 15% in three years, increase 4% per year


60

GENERAL

MOTORS

2005


The Balanced Scorecard: Financial Perspective

Financial Perspective


Increase profitability Annual revenue

Annual revenue from new products

Gross profit margin from new product

Return on Investment (ROI)



Increase to 15% in three years


Increase shareholder satisfaction Share price

Dividend payout

Increase 75% in one year, then increase 7% annually

Increase 10% annually


61

GENERAL

MOTORS

2005

Strategic Evaluation and Control

The Evaluation and Control Process Monthly progress review and quarterly comprehensive review

Review Underlying Bases of Strategies(Changes in each area)

Do significant differences occur?

Take Corrective

Action

Measure Organizational Performance(Compare planned to actual progress

toward meeting stated objectives)

Do significant differences occur?

Continue Present Course


Yes

Yes

No

No

62

GENERAL

MOTORS

2005

Limitation

Limited Information Almost all information is for GM’s basic facts and current performances.

Strategic analysis is produced from “past performance comparison” only.

Generating more reliable and accuracy analysis results, and implementation and

measurement plans requires “Benchmarking” and “Industry comparison” too.


A Lack of Financial Projections Financial figures is the most obvious indicator for management in decision making.

Create a budget plan

Collect financial informationInterest rate, inflation rate, exchange rate

Find appropriate sources ofcapital investment

Generate capital budgeting scenarios

Calculate capital budgetingindication (NPV, IRR)

Make decisions based onquantitative information

1

2

3

4

5

6

63

GENERAL

MOTORS

2005

Conclusion 97 years of experience, the 5th of Fortune Global 500 company to become a struggling one.

There is a list of problems to overcome before being acquired by investors

For health care and retirement expenses, GM to trade off of money for employee satisfaction

to keep the operation running

Fortunately, its strengths and potential opportunities would help GM to stabilize its status

and then strike back with better understanding in customers and technologies.


64

GENERAL

MOTORS

2005

References

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