General Motors' organizational challenges and financial recovery strategy

General Motors

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Nadler-Tushman Congruence Model: General Motors

Environmental factors

When General Motors began experiencing financial problems, it was dealing with a number of external circumstances beyond its immediate control. The economy had lapsed into a recession and available credit for consumers was particularly tight. Given that most consumers buy cars on credit, the already-weakened American automotive companies were dealt nearly fatal blows. However, GM was also helped in its recovery by a number of external factors, such as the increased demand for SUVs in China, a type of vehicle which General Motors has traditionally excelled in building. General Motors has established a strong presence in China, stronger than most of its major competitors. "GM's global sales figure for 2010 was a dramatic 12% increase from 2009, a year in which it closed factories and was forced to take aid from the U.S. government to survive" and its sales in China were up "29% as an expanding middle class gained wealth, making it the world's largest car market" (Krisher & Kageyama 2011).

Organizational history

One of the most famous cliches in American business is that 'as GM goes, so goes the nation.' Although this is not necessarily defensible today, the government bailout of GM was undertaken in part likely because of the great symbolic status of the company as well as the feared economic impact of it being allowed to fail. However, even the federal government subjected GM to a great deal of scrutiny in its assessment of its corporate culture when it was contemplating 'bailing out' the firm. Rather than attempting to create new forms of fuel-efficient cars like Toyota, for many years GM resisted more stringent government regulations on the environment. An excessively insular corporate culture characterized by a chiasmic divide between unionized workers and managers gave GM a tone-deaf ear to what was going on in the industry. "With so many management levels and a top-down, seniority-based management style, it was tough to make timely, effective decisions" (Chao 2009).

Yet, along with this rigid sense of a hierarchy and class warfare, GM was also hampered by a curious lack of cohesion, manifested in its proliferation of brands and the different ways in which those brands were built and managed. There was no unified corporate vision and ethos. "GM ran its business as a federation of successful decentralised profit centres. But this created a fragmented management mind-set. With so many autonomous fiefdoms, it was difficult to gain agreement and mobilise behind one single idea. As a result, many strategies and car designs were diluted or overly complex - the result of compromises between divisions" (Chao 2009).

Strategy

GM continues to focus on creating ties with international business entities to facilitate its strong sales abroad. "Chinese law requires that a foreign automobile manufacturer operate in China under a joint venture agreement with a local manufacturer. GM gained a solid partner with Shanghai Automotive Industries Corp. (SAIC)" (Krebs 2009). Despite its much-publicized venture into the American marketplace of 'green' vehicles in the form of the Chevy Volt, GM is focusing its attentions abroad -- continuing its expansion in China, and also turning its attention to India. "General Motors and its Chinese partner SAIC Motor Corp now plan to turn around the fortunes of its Indian unit, General Motors India, in which the Chinese auto maker has a 50% stake" (GM stock good for drive to $25 with room to improve in India, 2012, Forbes). Focusing on the developing, rather than the developed world is GM's new strategy, which also does not necessarily mean a 'green' product, given the appetite for SUVs in China.