GM Motors Final2

8/2/2019 GM Motors Final2

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COMPANY OVERVIEW


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What organizational changes must GM implement in the

North American market to earn above average returns andimprove its ability to compete in future, developing markets?

Case analysis focus on North American market

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

PROBLEM STATEMENT


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- Reducing legacy cost with the United Auto Workers agreement

- Increasing vehicles resale value by reducing sales to fleet

operations

- Sold off stakes as well as the General Motors AcceptanceCorporation

To decrease exposure to failing international operations andto increase liquidity

SIGNIFICANT STEPS BY GM


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Four Point Turnaround Plan

1. Reduce labour expenses2. Cut legacy costs

3. Decrease production capacity4. New designs and marketing strategies

Costs reduction do not guaranty successful competition

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

Must appeal to needs and trends of local markets instead of using aglobal

Current Strategic Plan


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Internal and External Analysis

Strengths

-Extensive cash reserves

-Global network of suppliers and distributors

-Low cost suppliers through competitive bidding

process

-Technological know-how for SUVs.

-Only company to have invested in all 5

alternative fuel technologies-Developed internet distribution channels

Weaknesses

-Poor corporate reputation for green

technology

-Customer perception of low quality

-Bureaucratic processes create delays

-Fixed investment in SUV production

-Inadequate experience in smaller vehicleproduction

Opportunities

Increasing demand for smaller cars and CUVs

-Emerging world markets

-Reduce costs through JIT-Demand for environmentally friendly cars

-Government subsidies

-Increasing public awareness of green

technology.

Rising Demand for Hybrid Vehicles .

Threats

Economy fluctuations affect sales

-Devaluation of the American dollar

-Increasing regulations on CO2 emissions andrecyclable parts

-Decreasing demand for SUVs

-Increasing oil prices

-Rise in commodity prices

The Continuing Global Recession

Intense competition


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Market for green automobiles

Shift in consumer preferences, governmentsubsidies and regulation

Corporate reputation

Bureaucratic decision making

Exploiting Opportunities


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Global supply chain system

Dollar devaluation

Increasing commodity prices

Solutions

Implementation of JIT

Provide value to customers through other means

Defending From Threats


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Porters Five Forces

Bargaining Power of

Suppliers:

Moderate

GM has the largest market share in

the US which could give it much

power over suppliers but it has not

used that and looks at suppliers and

their needs as equal.

Intensity of Rivalry:

Very High

GMs other divisions cannibalize

their own sales as well as all

others. Each company will do what

it takes to real in customers

Threat of New Entrants:

Low

Car manufacturing takes

extremely large amount of capital

to enter. To compete at GMs level

is next to impossible.

Threat of Substitutes:

Very High

GMs market share is continually

dropping. Most other car makers

offer higher quality and other

benefits. Many substitutes

available in the market

Bargaining Power of

Customers:High

Tens of Millions of car buyers per

year and over twenty companies to

choose from. Public is increasingly

drawn in by costly incentives.


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GMs Competitors


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2004

SalesRevenue

$193Billion

$16.2

Billion

$170.98

Billion

$175.48

Billion

324,000 37,000 384,723 324,864

2004

Sales

Revenue

EmployeesAt 2004

Year-end

GMs Competitive Advantage


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Integrated BLS

Failed application

Trade-off between cost and differentiation

Implications of unionized labour force andlegacy costs

Business Level Strategy


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Multi Divisional Structure

Centralization of key processes

Regions represent autonomous Strategic Businessunits

Brands are a subdivision of the SBUs with minimum

control over processes

Minimal links to identical brands in different regions

Corporate Level Strategy


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Problems with current structure :-

Structure focuses on cost reductions

Direct conflict with the intended integrateddifferentiation/cost leadership strategy

Brand level management is almost inexistent at the

SBU level which results in lack of differentiation

Regional SBUs do not have enough control over theirregions.



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Keep all brands but differentiate effectively

Decrease model portfolios of each brand

Engineer an organization change to make the company more flexible

and able to select the right brand for the right market

Increases product differentiation amongst brands and reduces inter-brand competition

Marketing for each brand will be more efficient and customer loyaltycan be captured

Each brand will have a more specific market trend to address thus willbe more competent in predicting demand Lower inventorycosts

Alternative 1


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Alternative 1


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Pros

Uses 8 brands to capture customer loyalty Enables brands to focus on specific market niches Allows for reaching economies of scale and scope throughout the

whole organization No extensive organizational restructuring is needed

Cons

Slow process, would take long before we see if the differentiationefforts have succeeded

As the market demand changes and market niches are exploited oreliminated, brands might start competing with each other once again

Very difficult for GM to control all these brands consistently Organization structure is could result to be less flexible

Alternative 1


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Divest some brands but keep rich model portfolios for remaining brands and reformthe companys structure to provide each brand division with more autonomy

-Divest 4 brands: Buick Saab Hummer Pontiac

-Restructuring in to a decentralized organization in order to put more emphasis on

individual brands rather than regional divisions

- Market research, internal and external analysis required in order to make thisalternative successful

- Unit sold by brand in 2010Hummer: 56 789

Saab: 133 167Pontiac: 145 183Cadillac: 220 000 - growth of 290% compared to 2005Saturn: 226 375Buick: 403 690 - bright spot in China (280 000 units)but overall lost 13 billion in the past 7quartersGMC: 542 000Chevrolet: 1 180 000

Alternative 2


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Pros

Focused resources on less brands Distinct target markets which define brand equity More capital to invest in R&D for each specific brand

More autonomy to brands which decrease decision making time

Cons

Shut down plants and lay off workers

Loss of brand loyal customers Large amount of resources required to settle distribution contracts Initial decrease in sales and profits will affect shareholder value in the

short term

Alternative 2


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Analysis of potential synergies within brands and corporateorganization and market research to determine market segmentsfor each remaining brand to target

Begin to phase out brands

Begin organizational change

Formulation of tactical and strategic decisions to beimplemented

Develop yearly goals, new corporate vision and mission

Invest heavily in to R&D for new designs

Recomendations


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Introduce new brand images and marketing campaigns

Begin to clear inventories

Distribution system alterations

Develop new concepts for vehicles within each brand and beginmarketing

Develop long term supply chain arrangements

Monitor transitional period from old to new organizationalstructure

Recommendations contd.


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Begin fixed investments in specialized assets required

for future vehicles

Realize potential synergies

Continuous quality control and customer feedback

Recommendations contd.


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GM Motors Final2

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