GM vs Toyota: Business and Corporate Level Strategies

Introduction to General Motors and Strategic Context

General Motors (GM) is a company based in the United States with its headquarters in Detroit, Michigan. GM is a publicly traded company listed on the New York Stock Exchange. GM designs, manufactures, distributes, and markets vehicles and vehicle parts (Laudon & Laudon, 2011). The company also sells financial services. GM acquired the title of the world's largest automaker in 2011, achieving the highest number of unit vehicle sales since its establishment. For 77 consecutive years — from 1931 to 2007 — GM led global automobile unit sales. However, GM subsequently lost this position to Toyota, which still dominates the market.

The preferences and needs of customers are the focus of a company's core competencies. In a highly competitive business environment, meeting consumer needs allows a company to realize above-average returns. Business-level strategies outline the actions a company takes to provide value to its consumers and to gain the necessary competitive advantages through the utilization of its core competencies in service markets or individual product lines. Business-level strategy refers to the firm's position in the industry relative to its competitors and the forces of competition.

Business-Level Strategies of General Motors

Cost leadership is the fundamental business-level strategy employed by GM. In order to compete effectively in the automobile industry, GM had to implement this strategy with precision. Recognizing that corporations primarily compete on price, cost leadership capitalizes on this dynamic. Through price competition, a company can offer its goods and services at minimal prices, attracting consumers in a specific market. GM has managed to deliver its products at prices lower than those of its major competitors. The company has enhanced its operational efficiencies by effectively allocating and utilizing its limited resources in the development and production of each automotive product. This methodology has allowed GM to sustain above-average returns and maintain an effective flow of products at reduced cost.

Another strategy employed by GM is minimizing the number of brands it maintains in the market. Although this approach goes against the company's original multi-brand model, it is considered necessary to ensure long-term sustainability. The company has been selling or closing some of its non-core business brands as part of a broader restructuring effort. The more brands an automobile company carries, the more it must spread its capital resources to build and market each one. Spreading resources too thinly causes individual brands to suffer, as no single brand receives the funding needed for adequate marketing, production, and development.

A third critical business-level strategy is product differentiation. GM has pursued this strategy by offering unique characteristics and features across its product lineup. Adding value to its products has allowed GM to attract and retain customers without relying solely on price as a competitive lever. GM has achieved differentiation through image management, rapid product innovation, high-quality features, advanced technology, and strong customer service. A simple analysis of GM's main brands illustrates this approach: Chevrolet is positioned as America's number-one mass-market brand, while Cadillac serves as the company's luxury offering. GM creates value by reducing buyers' costs, raising buyer performance, and building sustainability. Reducing buyers' costs is accomplished by offering quality products with fewer breakdowns. Buyer performance is elevated by increasing the enjoyment and reliability of the driving experience. Sustainability is pursued through reputation management and the cultivation of uniqueness perceptions in the marketplace.

Corporate-Level Strategies of General Motors

Corporate-level strategies refer to the overarching strategies employed by a diversified company. They encompass all business-level strategies that affect the entire organization, including how multiple divisions compete and how their individual strategies are integrated and coordinated. Common corporate-level strategies include financial performance management, mergers and acquisitions, effective resource allocation, and human resource management.

In the current corporate environment shaped by globalization, product quality alone does not guarantee market share growth or competitive advantage. Globalization has made it increasingly easy for competitors to acquire similar technologies and knowledge in order to develop comparable products. This is especially evident in the automobile industry, where most manufacturers are developing products with similar features. In such an environment, market dominance is often determined by human capital. The ability of a company to attract, retain, and optimally utilize its workforce provides the competitive edge it needs over its rivals (Aguinis, Joo, & Gottfredson, 2012).

GM has leveraged an effective performance management system to strengthen its human resources. Performance management is a systematic method for identifying, measuring, and developing organizational performance by focusing on the human workforce. The balanced scorecard developed and implemented by GM encompasses multiple organizational functions and operations. It was introduced across all of GM's operations with the goal of strengthening the company's strategic performance management. This has resulted in individual business units better understanding how their capabilities and performance affect the company's overall strategy (Freyssenet, 2011). This approach has helped GM motivate its employees and achieve optimal performance in product delivery, providing the company with a critical competitive advantage.

Conclusion

General Motors and Toyota each demonstrate that sustained competitive advantage in the automobile industry requires well-coordinated business-level and corporate-level strategies. GM's reliance on cost leadership, product differentiation, and performance management has helped it maintain a strong global presence despite losing the top sales position to Toyota. Toyota's combination of lean production, multi-brand differentiation, and offensive competitive tactics has enabled it to dominate the global market. The relative effectiveness of these strategies, however, is not fixed — it depends heavily on the type of competitive cycle in which a firm operates, making strategic flexibility an essential capability for any major industry player.

References

Aguinis, H., Joo, H., & Gottfredson, R. K. (2012). Performance management universals: Think globally and act locally. Business Horizons, 55(4), 385–392.

Freyssenet, M. (2011). The start of a second automobile revolution: Corporate strategies and public policies. Economia e Politica Industriale.

Laudon, K. C., & Laudon, J. P. (2011). Essentials of management information systems. Pearson.

Shimokawa, K. (2010). Japan and the global automotive industry. Cambridge University Press.