General Motors Was Taken Over Research Paper

  • Length: 12 pages
  • Sources: 10
  • Subject: Business
  • Type: Research Paper
  • Paper: #86566842

Excerpt from Research Paper :

GM's market share is a source of strength because it provides the company with considerable muscle and brand recognition. That is leads the Chinese market and is a major player in the U.S. market provides it with opportunities for economies of scale, and to introduce new products. The company's size gives is considerable bargaining power with suppliers. This in turn allows it some degree of cost control, especially now that legacy costs have been reduced. In addition, GM has a high degree of brand recognition. While its reputation is not always good, the names are well-known to consumers around the world.

GM's reputation does need to be considered a weakness. The company's reputation for quality is lower than that of competitors, which makes it difficult to shift towards any strategy other than cost leadership. GM is at present unsure of its vision. While the case was made above why this is not necessarily bad, it is definitely unorthodox. For the company to embark on any sort of long-term strategy, vision and mission must be defined to guide the formulation and implementation of that strategy. In addition, the company has an overcomplicated organizational structure. This inhibits its ability to implement company-wide initiatives, because some elements of the company are far removed from head office. Consistency in market, human resources strategy and it platform implementation are going to be particularly difficult, given the present size and complexity of General Motors.

Automobiles are still big business, and this means that there is considerable opportunity for a company that is well-positioned and ready to take advantage. One such opportunity is in global markets. Much of the growth in the automobile industry at present is in international markets. Emerging markets in particular are characterized by a large number of first-time car buyers. This creates substantial opportunity for GM. At present, they are taking advantage of this opportunity in China and are moving towards taking advantage in India as well. There is considerable opportunity in a broad range of other markets as well, some of which are probably underserved. There are substantial first mover advantages to be won should GM choose to pursue some of these markets.

Another opportunity comes with improving domestic market share. While the U.S. market is subject to intense competition and flatlining sales, General Motors remains a predominantly American company and one that for most of its history was the leader in U.S. auto sales. The company still has considerable brand power and a solid distribution network in the U.S. The slump in sales can be largely attributed to a mismatch between price and quality, a function of both being unfavorable. This means that GM can improve domestic sales by lowering prices and improving the quality of its vehicles. This may be a loose strategy, but the underlying point is that there is opportunity for GM to improve its domestic business and increase domestic market share, and that doing so would be of significant benefit to the company.

The final opportunity is in eco-friendly cars. With peak oil past, the prices for petroleum are likely to being a long-term upward trajectory. While this is unlikely to have a significant impact in the short-term, over the long-term this represents a significant market opportunity. There are some incentives in a few countries for the development of high-efficiency or alternative fuel cars, and although growth is currently slow, many industry observers feel that when the market begins to demand these vehicles, automakers will want to be ready or lose first mover advantages to their competitors. With GM's size and reach, it has the potential to be a game-changer with respect to fuel-friendly vehicles, should is so desire.

There are also a number of threats in the external environment. The first is competition. One of the reasons underlying GM's decline in the domestic market is the entrance of dozens of new competitors. Many of these were able to outperform GM, and ultimately stole market share from the company. The domestic North American market and the European market remain intensely competitive, and emerging markets are becoming increasingly competitive. GM can expect more competition to enter China and India, both from local sources and major global automakers. Many such makers -- from the U.S., Europe and Japan -- are facing mature home markets and are therefore competing with each other to seek out and capture sources of growth. As long as emerging markets are growing, this competition will only be moderately intense, but if growth stagnates, automakers will see the level of competitive intensity rise.

As Bob Lutz (2009) noted, the economy is critical to recovering sales in the U.S. market. Sales in the Chinese market recovered because the Chinese economy recovered quickly from the slowdown. Sales recoveries in the U.S. will require a similar recovery in the American economy. The outlook for such a recovery is poor at present. The same can be said of most other major markets, to varying degrees. The economic climate has an impact on overall automobile demand, of which GM has a significant share. GM could conceivably build market share and still see a reduction in its sales and revenues, should the market contract further. In particular, consumers often delays purchases, wait for sales, purchase used cars or otherwise take steps to reduce their new automobile spending. There is little GM can do about this risk other than diversify geographically, a move it has already made.

Lastly, the corporate culture at GM is a threat. The inertia and stale thinking that characterized GM's culture culminated in a management team that could not even proffer an estimate with respect to the company's financial standing at year end, back in 2005. Ultimately, the company today is comprised largely of individuals who were with the company during the years when GM fell apart. While there is a serious intent among company management and employees to change their ways, this represents a considerable challenge. Should GM be unable to make a wholesale shift in the corporate culture, the same bad habits that ruined the company could re-emerge and threaten to bring the company down once again.

Recommendations & Conclusion

General Motors posted its first profit in three years in Q3 2010, earning $2.16 billion on $34.1 billion in revenue. The company still faces a terrible economic climate, with new car sales 30% below pre-recession levels. Yet, the company has streamlined its cost structure, largely with respect to legacy costs, and has been able to sell vehicles for higher prices than it previously had. This is testament to improvements in marketing and in product quality and design. GM believes it is on track to return to 17 million in annual sales, close to its record high (Trudell & Welch, 2010, 2). The company's results and upbeat message indicate that it believes its strategy is working. However encouraging short-term results may be, they do not necessarily indicate a long-term trend to success. There are still a number of steps that GM needs to implement in order to restore itself to prior status as the world's pre-eminent automaker.

The first is to develop a clear sense of mission and vision for the company. Vision is particularly important. At this point, the bankruptcy was 18 months ago, which should be enough time for the new management team to understand its environment and capabilities. As such, the company should now have a clear vision of where it wants to be in the future, and how it intends to get there. GM should clarify that vision, and develop a mission from that. The reason this is important is precisely because of how complex the company is. GM sprawls across over 100 countries and dozens of units and brands. A vision and mission can help to unite all of these disparate components, allowing them to work together towards common objectives. Without this, individual units may succeed, but that success may not be broad-based and those successful units may otherwise not contribute much useful to the company.

The second recommendation is to pursue the domestic market recovery vigorously. GM's brand recognition is strong, and the company should focus on heavy, innovative marketing of its strongest brands. Weaker brands should be dropped from the portfolio, as was the case with Pontiac. There are a lot of current GM customers who want nothing more than to have faith in the company going forward. As a spinoff effect, communicating the message of the new GM to the public will also reinforce that message for the company's employees, as not only will they be exposed to it more, but their friends and families will as well.

The third recommendation is to leverage both the marketing success and the production capacity in emerging markets to enter all key such markets. Many of the world's fastest growing economies are emerging markets, and most of the growth in the global automobile industry comes from emerging markets. As such, General Motors needs to focus…

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