General Motors Global Strategy: Markets, Supply Chain & Value

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 a 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).

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).

The strategic advantage of GM is found in the underpinning 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).

The company's comparative advantage is focused on capitalizing on location bases throughout the world—in Europe, China, South America, and North America.

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). GM 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 affluent demand exists.

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, 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

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 regional 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, and GMC—as well as GM crossover products such as the Chevy Equinox, Chevy Trax, Buick Encore, and GMC Acadia, which are increasing in popularity in the U.S. GM has pulled some 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, GM returned 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 major brands being Buick, Chevrolet, and Cadillac.

In the Middle East, the GMC brand is growing as it appeals to consumers' need for a more rugged all-terrain vehicle, even as Cadillac sales for the luxury market draw strong demand. In Europe, GM's Opel has gained traction amid weakening demand in the sector as a whole. In Australia, GM's Holden has continued to show solid sales across the country (GM Global Sales, 2017).

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 joint venture partner in Shanghai in order to build on its Asian success and keep momentum moving 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 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 accommodated regulatory and design requirements as well as cultural tastes and needs. At the time, most owners were not drivers and sat in the back seat—so the Century's second-row seats were given far more legroom than their American versions. Today, Chinese consumers more commonly drive their own cars, so this alteration is less pronounced—but it serves as an illustration of the strategy GM takes in providing each region with its own version or variation of a model. Clinics are run 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).