Value Propositions for General Motors

Direction of the Business
During the economic downturn of the global economic crisis (2008-2010), General Motors (GM) was adversely impacted by a failure to downsize its operations and focus on core products. As Yip and Hult (2012) note, GM marketed too many models around the world at time when a consolidation strategy was needed. Toyota, for example, succeeded in focusing on core models and even though it sold fewer units it was not hit as hard by the economic downturn. GM on the other hand “fragmented its development funds” and as a result the company “in its effort to increase global efficiencies in cost and design, continues to struggle in its proliferation efforts” (Yip, Hult, 2012, p. 18).
Core strategy. The core strategy of GM at this point is to reduce costs and maximize profitability—the aim being to achieve “9- to 10-percent margins on an EBIT-adjusted basis by early next decade” (GM, 2014). It is approaching this objective through a number of channels. One method is to reduce “less profitable rental car sales in favor of retail sales” (Burden, 2016). Another is to lead in product and technology. A third is to grow the Cadillac brand. A fourth is to continue to pursue growth in China. A fifth is to continue to develop and grow GM Financial (GM, 2014).
Strategic advantage. The strategic advantage of GM is found in the underlining of each of the core strategy approaches. It is GM’s aim to “improve relationships with suppliers, derive more global volume from fewer vehicle architectures and lower enterprise costs for material and logistics” and “to deliver significantly better variable margins on upcoming high-volume product launches, including the Opel/Vauxhall Corsa and Astra in Europe, and the Chevrolet Cruze and Malibu in North America” (GM, 2014).
Comparative advantage. The company’s comparative advantage is focused on capitalizing on location bases throughout the world—in Europe, China, South America and North America.
Internationalization Strategy. The decision criteria for selecting a market to enter are based on the company’s ability to establish joint ventures, develop a brand that appeals to regional consumers, and establish a cost structure that allows for consistent profitability.
Global Strategy
The global strategy has been to unify the strategic approaches of the regions of GM’s international business under the guiding principle of adapting the overall brand to meet the needs of unique consumers in individual markets (Pfanner, 2008). It is marketing entry-level cars in Eastern Europe, trucks in the Middle East, and Cadillacs to wealthy classes in both Central and Eastern Europe and wherever else wealth impresses with demand.
GM established itself as a world player in the 1920s, when it first entered China (Nelson, 2011), and it contributed to the war effort throughout the 1940s via its bases in Canada and the UK. GM entered the European market but GM Europe fell into bankruptcy in 2009, following the economic crisis and numerous brands were sold, including Saab. Since 2009, focus on achieving profitability in Europe has been a key feature of its global strategy. However, GM retained possession of Opel, the German carmaker, and through the establishment of General Motors Ventures in 2010, a venture capital subsidiary, GM has focused on identifying and creating new technologies that will make competitive headway in the automotive industry (Ventures, 2017).
Customer Focus
Customers Served
GM serves a wide range of consumers throughout the world, with markets in North and South America, the Middle East, Europe and Asia. Its clientele have region tastes that create a need for individualized models which may appeal to certain cultural perceptions of what an automobile should be. North American consumers embrace all GM brands—Buick, Cadillac, GMC, as well as GM crossover products—the Chevy Equinox, Chevy Trax, Buick Encore, and GMC Acadia (the crossover products are increasing in popularity in the U.S.). GM has pulled brands from European countries but still sells the Chevy Camaro and the C7 Corvette as specialty products.
China is still GM’s largest national market and following a decades’ long absence from the market, GM is back with Shanghai GM, a joint venture partnership with Shanghai Automotive Industry Corp. The Buick Century, GL8 minivan, Chevy Cruze, and commercial trucks are all sold in China—the three big brands being Buick, Chevrolet and Cadillac.
In the Middle East, the GMC brand is growing as it appeals to the need of consumers there for a more rugged all-terrain vehicle, even as Cadillac sales for the luxury market draw huge demand; while in Europe, GM’s Opel has gained traction amid weakening demand in the sector as a whole. And in Australia, GM’s Holden has continued to show solid sales across the country (GM Global Sales, 2017).
Critical Customers
China is GM’s most critical customer because it is the company’s largest market. Buick is the biggest seller in the nation, with 550,000 models sold in 2011 (Nelson, 2012), compared to 177,633 in America (Cain, 2012). GM must maintain a strong relationship with its JV partner in Shanghai so as to build on its Asian success and keep the moment rolling in a positive direction.
Within the overall global strategy, GM’s strategy in China as in every other region where it operates is to take its base American models and adapt them to meet the needs of the regional consumer. This is what it has done in China with its Buick Century, as Nelson (2012) notes.
As the global strategy is essentially adaptive, GM’s approach to the critical Chinese consumer exemplifies its overall aim—to meet the needs of regional consumers by tailoring products to meet the market demand. For example, in 1998, more than 600 alterations were made to the Buick Century when it was delivered to Chinese markets: these alterations were made to accommodate regulatory and design requirements as well as cultural tastes and needs. In 1998, most owners were not drivers and sat in the back seat—so the Century’s second row seats were given far more leg room than their American versions. Today, Chinese consumers more commonly drive their own cars, so this alteration is not as pronounced any longer—but it serves as an illustration of the strategy that GM takes in providing each region with its own version or variation of a model. Clinics are run so as to give the firm a better sense of what consumers desire; a GM product is chosen as a “donor platform” and meetings with regulators and partners in the region are held in order to develop the product to fit the region (Nelson, 2012).
Supplier Relations
Core Suppliers
GM operates a supply chain of more than 18,000 suppliers all over the world (Hebert, 2015). Its strategy with respect to its suppliers is demonstrated in the firm’s Strategic Supplier Engagement (SSE) program. This program enables GM to develop and improve supplier relationships, through transparency and communication. 85% of GM’s automotive value comes from parts that are assembled prior to arrival at GM facilities—which means that GM is responsible for obtaining 85% of its supplies from outside-the-house production plants. The firm’s ability to maintain a global supply chain is a testament to its strength and endurance on the world’s stage.
Global sourcing is commonplace in the automotive industry, and typically several countries take part in the supply chain process when bringing a final product to market. Global air cargo and the Internet have both helped in this type of supply chain arrangement, and companies “that provide end-to-end logistics services and delivery anywhere in the world” are those most in demand. GM takes as much advantage of this network as any other competitor in the sector.
Internal Pressures
GM has had to rely on Opel, its German division, to address some of its globalization issues. This is not an ideal situation since there is an attendant “high cost of retooling, currency volatility, and local design differences” that delay the process of providing world cars for GM’s regions around the world (Yip, Hult, 2012, p. 18). However, with arrival of Jose Ignacio Lopez, who led procurement efforts at GM, traditional supplier relationships were transformed and suppliers were obligated to go through “rigorous rounds of bidding” while offering “increase supplier efficiencies and lower prices” (Yip, Hult, 2012, p. 121). This has helped GM to alleviate some of its internal pressures considerably.
External Pressures
External pressures are less of an issue as “the Internet enhances global sourcing efficiencies” and “subsidiary requirements can be managed efficiently” and also coordinated through tech-based networks (Yip, Hult, 2012, p. 45). In fact, GM has partner with its competitors Ford and Chrysler to develop the Automotive Exchange Network (ANX), which connects suppliers via automated interactions. The network allows tech- and service-quality standards to be set by the industry’s major players and is indicative of the type of collaboration that can be accomplished when competitors work together to eliminate unnecessary supply chain obstacles.
External supply chain issues are becoming more pronounced, however, as a result of the political climate in the U.S. under the Trump Administration, which has adopted an America First platform. With its slogan, “Buy American, Hire American” more pressure has been placed on American companies to build and hire locally instead of in countries like Mexico, which is where GM outsources a considerable amount of labor in order to lower costs (Yip, Hult, 2012). The positive side of outsourcing to Mexico is that “transportation costs are decreased and assembly plants are able to conduct just-in-time sourcing more effectively,” which enables GM to be more competitive all over the world as a result. However, with the new external pressure from the political sector, GM faces a new crisis—how it will navigate the push for more American companies to build product in America.
Value Generation
Value Proposition Today
GM has several value propositions today. One is sustainability—which focuses on producing product that is environmentally-friendly. While the U.S. has recently withdrawn from the Paris Accord, which identifying key objectives to reducing carbon emissions in the atmosphere, GM is still dedicated to the principles of having a safe environment for generations to come. Thus it is committed to engineering vehicles that are less harmful on the environment.
Another value proposition is consumer-centric—the ability to purchase product online, bypassing showrooms altogether. This model has been well-established already by major online retailers such as Amazon, eBay and others. GM’s focus on this arena is to provide consumers with easier access to purchasing automobiles.
A third value proposition is in GM’s commitment to providing consumers with top-quality products at a low-cost price. GM’s Chief Financial Officer Dan Ammann stated the overall value proposition of the company in these terms:
Number one is producing winning vehicles: great design and performance. And we’ve demonstrated time and again that we know how to do that, everything from the Cadillac entries that were brought and we’re bringing to market this year, around the world to the Opel Mokka and Adam in Europe, all around the world, the new portfolio in South America, we know how to do winning cars, great design, great performance. Secondly is offering those vehicles on a compelling value proposition to the customer. So great value, the right price, the right cost structure to enables us to win with the customer in the market (GM Authority Staff, 2013).
The future of GM. The future of the company is based on its ability to continue to be able to do what it has always done best—which is to deliver a desirable product to the market at an affordable or competitive price. Taking into consideration the firm’s awareness of new variables, such as clean energy, electric vehicles, self-driving vehicles, and nationalist agendas, GM is focusing on achieving its objectives while maintaining a strong policy of corporate social responsibility. What makes GM valuable to its customers is its ability to provide a quality product that meets consumer demands for comfort, style, safety and energy, at an affordable price.
Value and the global strategy. GM’s value relates to its global strategy because it is more focused than ever on identifying the individual needs of each specific region where it operates and delivering quality products to those marketplaces. Its clinics, research, development and design operations all take into consideration the nuances and subtle differences that distinguish one place, one culture from another. By paying close attention to the needs of each regional consumer base, GM is able to target areas for improvement so as to satisfy consumer demand from region to region. This allows GM to circumvent the notion that a “world car” is needed—and while competitors like Toyota and Honda have capitalized on deliver a “world car” to regions, GM’s focus is based on celebrating regional differences and adjusting accordingly.
Determining Success for Its Global Strategy
In order for GM to succeed at its global strategy it has to continue the course—continue to oblige suppliers to be competitive, continue to effectively work with partners in markets like China and South America and Europe where it seeks to regain lost traction. It must discover the needs of these populaces and see how it can deliver a quality product at a low-cost price. It must also consider the local, political, regulatory and emissions laws that are respected by each region. It cannot afford to make the same mistakes that VW has made in terms of rigging emissions tests to overcome environmental protection clauses. GM’s commitment to a better environment is a step in the right direction for securing its global strategy.
Outcomes
Changing the Global Strategy? Ideal Goals
While GM has not been successful in delivering a “world car” that has appeal across Europe, the Americas and Asia, it has taken a different global strategy that unifies its overall outlook on the process of delivering quality products to consumers. That process is more efficient in terms of strengthening GM’s core portfolio of brands, including Buick, GMC, Cadillac and Chevrolet. The global strategy it employs is to research the regions where it seeks to penetrate, enter into partnerships or joint ventures with companies already engaged in delivering product to that market, seek to develop a new product based on one of the core portfolio models, alter it to meet consumer needs and demands, and sell at an affordable cost via easy-to-access channels, such as its emerging online presence.
The ideal goals that flow from this strategy are for GM to develop brand loyalty among new consumers in regions where there is much competition. In China, the Middle East, and South America, there is considerable demand for vehicles that meet specific standards and GM is working to understand those standards and apply them to their own vehicles, modified accordingly. Adaptation is the ultimate key to GM’s success.
While the firm is also dedicated to expanding its financial division and restoring its European division to profitability, it recognizes the need to focus on the basics of selling cars to consumers in diverse settings. Celebrating and upholding diversity is one of the mainstays of modern life, especially in the era of globalization. Even though globalization has allowed more uniformity and universality to emerge in certain behaviors and though patterns, the facts remain apparent: specific regions require specific adjustments to be made and a successful company will adjust as needed in order to appeal to those consumers. Brands may be modified to suit those needs while retaining their basic features or platforms. Much of this is related to how well GM can organize its global supply chain as well. Ideally, its operations will continue to develop in a positive manner in China as a result of thorough R & D, and expansion throughout the Middle East and South America will continue as well, thanks to its excellence in supply chain management and forethought in developing the right product for the right place in the right time.
Metrics
There are many metrics that may be used to measure the success of GM over time as it works to meet its global strategic objectives. For evaluating and prioritizing the desired global strategy outcomes, appropriate metrics include customer satisfaction, sales, stock price, ROI, and employee satisfaction. This latter element is taken out of the playbook of Southwest’s co-founder Herb Kelleher. Kelleher’s belief is that if you treat your employees right they will in turn show the same care and consideration to consumers (Reingold, 2013). In delivering to consumers an excellent product, care and consideration has to be achieve on all ends—otherwise it will not filter through at the final stage, which is the most important one—delivering the quality product at a low-cost to the consumer in every region.
Using these metrics to measure GM’s progress in the future will come by way of survey (for both consumers and employees) and traditional financial statement analysis (evaluating income, balance sheets, cash flows and fluctuations in equity, while taking into consideration a number of variables, such as the points of view of management, shareholders, lenders’, as well as the performance of the business as a whole). For evaluating the company’s overall income (not just sales but all income channels), the following metrical measurement can be conducted:
There are essentially three steps in valuing a firm: 1) forecasting the future financial attribute (free cash flow, accounting earnings, and balance sheet book values) that acts as the essential value of the company; 2) determining the risk that is associated with that forecast; and 3) assessing the discounted present value of the expected future amount at a discount rate that takes into consideration the risk identified in the previous step. These three steps can help assess the ROI of the company for investors and which direction the firm is heading (whether towards an increase in profitability or a decrease over time).
Assessing the company’s stock price over a period of months and years is another way to value the firm. As GM achieves its global strategic objectives, these gains should be reflected in the movement of the stock price, as investors will seek ROI for their investment in shares of the company and want dividend payments (which should increase with the firm’s profitability).

References
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Yip, G. S., Hult, G. T. (2012). Total global strategy. NY: Pearson.