An automobile manufacturer's strategic response to the 2008 financial crisis

Company performance is affected by a number of factors. These range from production and marketing strategy to human resources, financial resources, as well as research and development (R&D) (Johnson, Scholes & Whittington, 2010). This paper analyzes the performance of the author\'s company in the last eight years. The author\'s company is an automobile manufacturer serving different market segments in the U.S. and beyond. Attention is particularly paid to industry conditions eight years ago, strategic changes throughout the years (in relation to R&D, marketing, production, finance, human resources [HR], and total quality management [TQM]), and the present state of the company. Also, the paper analyzes implications of international expansion on marketing, finance, and HR, and describes measures the organization can take to ensure social responsibility in production and R&D. Finally, recommendations for improvement are provided.

Industry Conditions

Industry conditions have a significant impact on firm performance. Market demand, technologies, regulations, competition, and economic factors are all events that influence organizational performance in one way or another (Johnson, Scholes & Whittington, 2010). The automobile industry has come a long way in the last few years. In 2008, the industry was experiencing the worst crisis since 1993 (Cutcher-Gershenfeld, Brooks & Mulloy, 2015). Following the 2008/2009 crisis, the industry experienced the lowest demand in more than a decade. Due to the economic effects of the crisis, most consumers postponed vehicle purchases. During times of economic recession, it is common for consumers to reduce expenditure on luxury in an effort to cope with the recession. The inability to purchase vehicles was further compounded by a substantial reduction in credit availability. As a result, car sales declined dramatically, placing most automotive manufactures in immense financial distress.

The impact of the crisis was so severe that the major automobile companies had to file for bankruptcy and seek government bailout. The crisis also resulted in intense restructuring (in terms of ownership and partnerships with dealers) on the part of some firms, discontinuation of some brands, as well as layoffs. These effects were particularly experienced at the author\'s organization. In 2008, sales were down by almost 16%, representing the worst sales performance in one and a half decades. Sales of pick-up trucks and sports utility vehicles (SUVs) were the most affected, with consumers seeking to avoid high fuel consumption. The company also experienced increased expenditure on incentives, discontinuation of a number of brands, sale of some subsidiaries, a temporary shutdown of some manufacturing facilities, termination of several partnerships with dealers, and changes in ownership structure. Other industry conditions that were affecting the firm include unionization, globalization, emerging markets, competition from Japanese automakers, technological advancements, strategic alliances, and environmental sustainability initiatives (Cutcher-Gershenfeld, Brooks & Mulloy, 2015).

Strategies

R&D

R&D activities are integral to a firm\'s performance in an increasingly changing business environment. They are crucial for innovation as well as keeping up with competition and evolving consumer tastes and preferences (Johnson, Scholes & Whittington, 2010). The organization\'s R&D strategy has remained largely unchanged in the last eight years. More specifically, the strategy embodies a considerably decentralized structure. The firm\'s R&D activities are housed under a wholly owned, but independent entity featuring six science offices and six laboratories. Decentralizing R&D activities is crucial for fostering innovation and creativity, which are important ingredients of R&D success (Johnson, Scholes & Whittington, 2010). The firm capitalizes on not only internal expertise, but also external expertise. The organization boasts strong partnerships with suppliers, higher education institutions, and government groups in the U.S. and other countries. The importance of external expertise in R&D cannot be overemphasized. By incorporating external expertise, the firm benefits from a wider array of ideas and perspectives.

Marketing

The marketing function is essentially concerned with reaching out to customers and promoting products. Effective marketing is crucial for creating value and competitive advantage in the marketplace (Johnson, Scholes & Whittington, 2010). Historically, the author\'s organization has positioned itself as a manufacturer of differentiated products. Differentiation involves delivering unique products relative to competitors (Hill & Jones, 2012). This explains why the organization\'s products have traditionally retailed at a higher price compared to competitors. The organization markets premium cars mainly to consumers in the middle and high income segments, with marketing messages (both offline and online) consistently emphasizing design, performance, reliability, value, power, and luxury. In the wake of the crisis, particularly in 2010 and 2011, the organization has discontinued some of its brands, rebranded some brands, and increased its attention to small-car buyers.

Production

Production strategy basically defines the scope of a firm\'s production operations, especially in terms of product portfolio as well as level, quantity, nature, and location of production (Johnson, Scholes & Whittington, 2010). The author\'s organization mass-produces a wide variety of vehicles, ranging from pick-up trucks and SUVs to small cars. The organization has production operations in the U.S. and other countries around the globe. In 2008 and 2009, the organization saw significant changes in its production operations in response to the crisis. One of the major changes involved the idling and temporary closure of close to 20 production facilities. The organization also sold some of its overseas operations. During the same period, the organization\'s production operations have also been negatively affected by a major recall in 2014. Despite these unfortunate occurrences, the company has made tremendous progress in its production operations. In 2010, for instance, the company launched its first hybrid car, and in 2012, it increased its production of flex fuel vehicles.

Finance

Finance strategy basically denotes the strategy an organization uses to fund its operations (Johnson, Scholes & Whittington, 2010). This mainly takes the form of debt or equity, or a combination of both. Before the crisis, the author\'s organization was heavily reliant on debt financing, with its debt burden exceeding $40 billion as of 2008. Since then, however, its finance structure has changed significantly. In the face of bankruptcy and liquidation in 2009, the organization became the subject of government bailout, resulting in majority ownership by the government as well as change of the company\'s name. In 2010, the new organization launched an initial public offering (IPO) that turned out to be one of the largest worldwide. The government sold its stake in 2013. In 2015, the organization embarked on a plan to repurchase shares and increase dividends. The reorganization of the firm\'s finance strategy has played a crucial role in its turnaround following the crisis.

HR

Organizational performance is also influenced by HR activities, which are concerned with the people side of the organization -- recruitment and selection, training and development, compensation and benefits, performance management, and labor relations (Johnson, Scholes & Whittington, 2010). At the author\'s organization, HR activities were significantly affected. In 2008 and 2009, the organization temporarily shut down a number of its factories and sold some of its operations. This meant a reduction in its workforce. A reduced workforce was seen as a valuable strategy of minimizing operational costs in the wake of the crisis. In 2009, a new CEO was installed. In the same year, the organization also undertook changes in its management structure, keen on slimming down the number of senior managers. The restructuring saw the elimination or combination of several management positions. From 2009 to 2011, the organization had three CEOs and three CFOs (chief financial officers). Since then, the organization has focused on maintaining a leaner HR structure.

Total Quality Management

Quality management is without a doubt a crucial ingredient of success in a rigorously competitive business environment. With consumers having several options to choose from, inattention to quality may result in the loss of customers to competitors, consequently affecting the organization\'s top and bottom line results (Hill & Jones, 2012). Quality management is particularly important in the automobile industry. Traditionally, the idea of TQM has been more commonplace amongst Japanese manufacturers, which has given them significant competitive advantage over U.S. manufacturers, especially in terms of fuel efficiency. Since 2009, the author\'s organization has embarked on a robust quality management initiative specifically aimed at enhancing the fuel economy of its vehicles. In 2010, the organization unveiled an all-electric model as well as a hybrid model. In the next four years, the organization also invested fuel-efficient technologies in an attempt to beat competition from Japanese manufacturers. In 2015, the organization announced plans to overhaul its product development processes in an attempt to minimize research and engineering costs, improve exterior design, lengthen the durability of its products, streamline relationships with suppliers, and contribute to environmental sustainability.

State of the Company

With changes in production, marketing, ownership, HR, and quality management initiatives, the organization has recorded tremendous improvements in performance in recent years. By 2010, the organization was back to profitability, with net earnings that year reaching $4.7 billion. The increased earnings in 2010 were largely supported by a substantial increase in sales against the backdrop of a recovering economy. In 2011, sales grew by approximately 6% compared to the previous year. The company\'s impressive performance saw it rejoin the S&P 500 index in 2013. The organization had been eliminated from the list following bankruptcy in 2009. As of 2016, the organization\'s revenues and net income were in excess of $166 billion and $9.4 billion, respectively. In essence, the company is currently in a better shape than it was eight years ago. Nonetheless, there is still room for improvement as the firm increasingly faces competition from Japanese manufacturers. It would be particularly important for the firm to adjust its manufacturing strategy if it is to compete more effectively with Japanese firms. By shifting the bulk of its manufacturing operations to low-cost countries, the organization would be better placed to deliver its products at a much lower price (Johnson, Scholes & Whittington, 2010).

Social Responsibility

An organization\'s competitive advantage and success in today\'s world is driven by not only production, marketing, HR, TQM, finance, and R&D activities, but also social responsibility activities. Whereas organizations exist primarily for profit motives, their operations affect a wide range of stakeholders, including employees, customers, suppliers, and communities (Hill & Jones, 2012). Acknowledging and fulfilling the interests of these stakeholders is the heart of social responsibility. Social responsibility is particularly crucial for automobile manufacturers due to the impact of their operations and products on the environment, consumers, and the society at large.

At the author\'s organization, it would be imperative for social responsibility initiatives to specifically focus on production and R&D activities. The organization has a duty to produce products that are safe for consumers and with little impact on the environment. This duty starts at the R&D stage, where product design and development occurs. The R&D function often dictates the design of the product and the materials used to manufacture the product. At this stage, the R&D function would ensure safety-oriented designs and environment-friendly components. Consequently, production would utilize safe and environment-friendly components in assembling the products, ultimately ensuring consumer safety and less harm on the environment.

It would be important for the organization to clearly convey its commitment to social responsibility. This can be achieved through marketing techniques, notably public relations (PR) (Johnson, Scholes & Whittington, 2010). PR essentially denotes a chain of communications aimed at reiterating or passing a certain message. Through press releases and online campaigns, the organization would ensure its stakeholders -- especially customers, suppliers, regulators, and advocacy groups -- have a comprehensive understanding of its social responsibility efforts.

Overall, the author\'s organization has experienced a major turnaround in the last eight years. The organization has emerged from bankruptcy to one of the leading automobile manufacturers in the U.S. and globally. This has occurred against the backdrop of significant changes in HR, marketing, TQM, R&D, production, and financing processes. Without these changes, it is unlikely that the organization would be in existence today. However, one thing the organization would have done differently relates to its manufacturing strategy. The organization has historically focused on a differentiation strategy, with little focus on cost leadership. As a result, Japanese manufacturers have gained advantage over the firm in terms of product prices. By focusing on a low-cost manufacturing strategy, the organization would be better placed to compete with Japanese manufacturers. Nonetheless, this does necessarily mean departing from differentiation. Indeed, the organization can pursue both differentiation and cost leadership at the same time.