General Motors is the international company; the global market share is estimated at 12.5 percent as of 2008 (General Motor, no date), therefore, base on the global market coverage, it can benefit from many regional countries, to allow better access to resources, talents and knowledge.. According to Boston Consulting Group, General Motors is one of the 25 most innovative companies in 2008, it arises from the concept cars like the electric Volt and a renewed focus on design. The workforce is value driven and understands the business mission and vision.
1.2 Intangible resources
The intangible resources of the organization are its brand image and its reputation. General Motors has its strong reputation for innovation and new products in the automotives market. This means that customers will often associate the brand with new technology and products.
1.3 Core competencies
General Motors core competencies including innovation. They constantly strive to deliver new and exciting products to the market, and human resources. General Motors have a well prepared knowledge and flexible workforce who is concentrated on reaching business goals. General Motors starts recommending vehicle installed OnStar satellite in case of an emergency or theft.(Onstar, no date)
2 Factors affecting the Automotive Industry (PESTEL Analysis)
The safer vehicle and the environment in the American market is not restricted at a great disadvantage. Government and authorities in the region made efforts to regulate, eventually start the implement and set the laws and regulation since the 1960s (L.S. Robertson, 2006)
According the number of studies (Catherine Rampell, 2008), is the major user of steel, iron, lead, plastics, vinyl, rubber, aluminum, textiles, and computer chips. The study also mentioned that for each autoworker there are seven other jobs created in other industries.
The consumer automotive market, especially the vehicles market, used to be dominated by men but nowadays is not true. Marketing strategies are also focusing on emotions. The presence of women in the market shall turn out as fallback to cushion declining sales
On the other hand, young consumers increase their spending power by working in a part-time job or by receiving larger allowance from their increasingly financially successful parents.
the internet has a great impact on every industry in the anywhere and has also affect the automobile industry. According to the J.D. Power and associates 2006 New Autoshopper.com Study, 59% of the buyers referred to the internet before making their purchases and out of that 59%, 85% of the serious buyers visit the manufactures website before going to the dealer for a test drive.
On 30th November 2007, the business leaders of 150 global companies published a communiqué to world leaders calling for a comprehensive, legally binding United Nations framework to tackle climate change. In fact, there is a programme in which WWF and businesses collaborate to show leadership in addressing climate change.
3. Porter’s Five Force Anaylsis
3.1 Threat of new entrants
The threat of new entrants is relatively low. This is mainly due to the fact that it will cost a new company a lot of investment cost and know how to enter the automotive market.
3.2 Threat of substitute products
Tthe coverage of destination is limited, besides, bus, metro, taxi are not products that can replace the vehicle. Therefore, the threat of substitute products is relatively low to moderate
3.3 Bargaining power of suppliers
Due to the fact that suppliers are united, they are a very strong threat in the automotive market, nevertheless, the United Auto Worker, the only supplier of labor, has exerted a great deal of the leverage over the benefits and wages provided by the big three, therefore we can conclude that the bargaining power of supplier is strong.
3.4 Bargaining power of buyers
As we look at consumer behavior when buying vehicles the conclusion can be made that their power is relatively low. Mainly the reason for this low power is because individual consumer has some power over price within a given dealership, but low power over manufacturers.
3.5 Competitive rivalry within the industry
Due to the fact that there is a intense completion going on in the auto industry the rivalry within the automotive market is high. There are a lot of choice and intense competition in internet sales that can damage a company when they don’t keep up with their competitors. See appendix 1 for more information.
Summary Porters Five Forces
Framework Porter (1980)
4. SWOT Analysis
4.1.1 Large Market Share
Although GM’s market share in the US has declined, it still retains a competitive 21.5 percent in 2008. They also start to penetrate the Chinese customer automotives market and gain an increasing share.
4.1.2 Global Experience
They have already been a global company for almost 100 years now and have established themselves as the global leader for most of them, they already have global experience.
4.1.3 Variety of Brand Names
GM has been the automotive leader for the majority of the last century. The current GM brands included: Chevrolet, GMC, Cadillac, Buick, Pontiac, Saturn, Saab, Daewoo, Opel, and Holden.
4.1.4 GMAC Customer Financing Program
Since its establishment in 1919 it has proven to be GM’s most reliable way of revenue.
4.1.5 OnStar Satellite Technology
This technology allows the vehicles to be tracked in the event of an emergency or theft, it also allows the driver or passengers the ability to communicate with OnStar personnel at the click of a button.
4.2.1 Behind on Alternative Energy Movement
The alternative hybrid trend has begun to take place in the automotive industry and GM has been one step behind the competition It is a reason that lead them to lose the market share.
4.2.2 Organizational Structure below standard
We can see the organization structure above, it seems to be too vertically integrated. The shortcomings are that it is a lack of communication between employees from top to bottom and may have played a part in GM lag on the hybrid technology.
To review GM’s profit we can see that they are struggling with respect to the size of the company. It is disappointed that shareholder would not happy about.
4.2.4 Too dependent on domestic market
GM overly become dependent on the US market The competition will become tough if they only focus on just one country.
4.2.5 Too dependent on GMAC
GM overly become dependent on its financing company. Maybe it is a very great advantage for GM, but they cannot rely on financing company for gain the profit, if they want to compete with competitors
4.2.6 Poor Credit Rating
GM’s credit status has been declining obviously. According to Standard & Poor’s, they declared billion of dollars of debt owed by GM to be ‘junk’, it will increase borrowing costs and limit fund-raising options for them.(Sharon Silke Carty, 2005)
4.3.1 Alternative energy movement
hybrid technology is giving to GM a opportunity to once again become the automotive industry leader in innovation and technology
4.3.2 Continuing to expand globally
Recently, they found that there is a dramatically increase in China automotive market, that proves themselves to focus and emphasis on Chinese huge potential market.
4.3.3 Low interest rates
It is a opportunity that they can gain immediate revenue in sales.
4.3.4 Develop new vehicle styles and models
As you know the development of the vehicle model never be satisfied, GM should keep attempting the most popular model in the world.
4.4.1 Rising fuel prices
GM the major business pieces is the sales of truck and SUV, but it is gradually declined because of the lack of fuel efficiency, for rising fuel prices this reason,
4.4.2 Growth of competitors
Toyota gains the first mover advantage of hybrid system and become the leader of automotive industry, GM faces the reality they should develop more fuel efficiency vehicle and small car model.
4.4.3 Legacy cost
GM provide a great welfare to their retired employees, so they need to experience it is a serious financial problem more and more retired employees begin to be benefited.
5 Key strategic issues firm face
GM is facing several strategic issues. It will be shown by a number of aspects. The economic recession, Competition, and New entrants.
5.1 Economic Recession
The economy of world is currently in the downturn, or even recession in which will impact a lot of industries and consumers in the world. As the economy slowing down, doing business may find it hard to increase the revenue because banks are not willing to lend money to companies, especially bad credit status companies. As a result, GM may suffer from decrease in sales of automotives. However, they may benefit from hybrid technology, since more people are buying new fuel efficiency car model if consumer intend to purchase a new car.
5.2 Competitor in automotive industry
The competition between the main competitors for instance, Toyota, Honda, Ford, has expanded beyond that of the traditional energy car. These companies are now competing on value adding products, fuel efficiency, design and service of maintenance. In order to achieve competitive advantage companies try to merge or acquire other companies in gain experience and knowledge.
5.3 New entrants
The fast moving and constantly changing industry gives opportunities to new entrants who have not previously specialized in the automotive market as technology can often be easily imitated. In addition an alliance formed by different companies, such as Magna and Sberbank, trying to seek a takeover of Opel and Vauxhall, parts of GM European division. There has also a growing number of new entrants in China due to relatively low investment costs.
6 Strategic Options
The strategic options that GM might realistically pursue had been discussed as below such as product development, market development,, and market penetration as their strategic options. (Ansoff, 1987)
6.1 Product development
Product development is a feasible option because it can be capable both in present and the prospect. This option is also suitable to GM since it is able to exploit the needs of customers. GM is facing the threats of too much competitors in the market and the improvement of technology is increasing rapidly. Doing more researches on GM’s products and investigate and understanding more about the favour of customers are significant. To improve the quality of services in their technology should not be neglected in order to catch up the expect of consumers and the externally needs so the company can be enhanced and stable in the market.
Due to the furious competition between the three consoles company, this strategy is very important.
GM have to develop more innovative new products to catch up the pace of the technological advancement. This could ensure the company to gain a step ahead of its competitiors. The technology industry requires swiftness in developing new and innovative products.
The research and development of the company is doing very well in the past few years. They had been rated the top 25 most innovative company in the world (businessweek, 2008). In skills term, they have talent in which had leaded and developed a lot of innovative ideas which attracted a lot of consumers from youths, adult and even elders!.
Shareholders and stakeholders will agree wholly with GM’s decision as technology investors, they realize that the technology development or innovation is very important to maintain themselves into the market.
6.2 Market penetration
According to (Lynch, R., 2006), market penetration uses the existing range of products or services to attract potential customers or consumers from competitor to expand their own market share. It basically targets the existing customers in the present market of competitors and gain profit from it. The cost is lower, and the chance of attracting consumers is higher.
GM uses price competitive advantage to deal with their competitors, which are Toyota, Honda, Fordâ€¦etc. When GM introduces their brand, it is priced lower than others significantly. GM offer lower prices than competitors and it attract competitors’ consumers to have an attempt on the product due to its low price
This strategy is suitable to be implemented because this allows GM to grab more market shares from their numerous of competitors in the US market,
GM is capable to compete with competitors as they are financially competent with them. Since GM stated that they retain the GM Europe section because they posses good health of liquidity again. This also shows that GM is financially secured and there is no problem for them to compete with their competitors.
Stakeholders of GM will accept the strategy as long it is profitable to the organization and to them.
6.3 Market development
From this strategy options, it involves the strategy of introducing both new and existing products to their existing customers and not overlooking the new customers. From here, both new and existing customers have the options and more information about those products.
From here, they would be introduce their product to both side. They would be able to saturated new opportunities for geographical spread, entering new segments or new users in the environment. Such a change will enable GM in better turnover at medium risk by exploiting current strength or market knowledge. (Lynch, R., 2006)
It is suitable in market development as they tend to target new groups of people, and other new geographic places. (Johnson, Scholes & Whittington, 2008). GM try to targets elders, adult or basically all adult group.
It is feasible for GM as they have enough resources to develop into the new market. According to the U.S. Treasury Department, they has received $1 billion repayment from GM. This shows that they totally have enough fund to research and develop proper strategy in order to venture into the new market or exploring into a new market segment.
Stakeholders and shareholders would surely agree with this strategy as it gain profit for the company and stakeholders or shareholders themselves.
Recommendation of Strategy options
The best strategic option for GM in their current situation is to develop a new vehicle which is alternative energy SUV; this strategy would significantly lead to a growth in sales. In addition, GM can gain a new business partner from Canada-Russia consortium because of their contractual relationship and this would be a great competitive advantage for GM. By using this strategy, which is an external method, it can help GM to solve their problems quickly. An alliance with Magna-Sberbank will also benefit GM in terms of saving expenses on research for the small car technology. This will aid GM in solving the tribulations that they are facing.
7 Implementation Issues
When GM wants to withdraw or retain Europe operation, some obstacles will appear. They are called implementation issues. These implementation issues will be discussed how Government involved in its decision making.
7.1 Russian Government
German Gref, the Sberbank boss stated that he acquires GM Europe section to enter new markets abroad and confirmed it is a really low price to takeover Opel, it can get the permission to get its company technology. Sberbank is a famous creditors of automotive industry in Russia in which inform to turn around its carmaker industry. The Russian Trade and Industry Minister stated that if not the takeover, they will not good enough to develop the international car company
Since the Russian government plans to acquire international technology, all of the international autos keep continue to build some facilities such as manufacturing plants in there to reach domestic market demand. The global companies can avoid Russian import taxes on autos, besides, they can benefit from the domestic low salaries.
Nowadays, to sell the GM Europe, GM will struggle in the Russian market and GM technology.
7.2 US Government
According to American negotiating circle, the US government is not welcomed to work with the Magna as long as Russian companies get extensive access to GM patents. As Magna keen to get access to all developments from the GM patent pool. US government concerns about not only car technology, they concern about Russian getting the military items. On the other hands, GM concerned that the consortium will use GM technology to contribute a potential threat of competitor to GM another brand in the Russian market. (Reuters, 2009)
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In addition, China Beijing automotive offer and promised job cut, and required financial support are much better than the other two, Magna also design Opel the best way for future development, but the GM is welcomed RHJ. According the analyst, GM expects to be able to make a comeback again in the future control of Opel, RHJ operation mode exactly GM wants, RHJ can give a hand to GM achieve a deep restructuring.(Wall street journal, 2009)
7.3 Germany Government
According to Reuters(2009), the Germany Chancellor Merkel played an important role in the incident that Opel will be sold to Magna. Why? Because she takes the mission to save German unemployment rate, this is a political activity, she is preparing the coming election. How Merkel convinces Magna, allowed to retain as many jobs as Germany can be affordable? This is simple word – money. The Germany Government wait for the European Commission approved a loan of 4.5 billion Euros to the Opel. Furthermore, the plants will not be closed in Germany, this seems very favorable for Merkel, and she is expected to easily win the election. On the other hands, it will damage their relationship if there is any failure of Russian involvement in Opel since Germany is apparently work well with Russia about trading. Besides, German election is almost can be said to the future destiny of the Opel that become a political hot potato. Government has invested a lot of money into the Opel, which is an economic decision making, but also the reason of political consideration. To unresolved Opel future, Merkel will be faced more political pressure.
On the other hands, Germany government will not give any financial support to GM Europe section if GM remains it. It makes sense that Government will not help a outsider in which Germany has big three carmakers (Audi, BMW, Volkswagen),to survive its operation. As GM has already damaged the GM Europe section operation and put Opel on the transfer list. Germany cannot build any trust on GM, but by the way they have a good relationship with Russia as I mentioned above.
As a conclusion, GM sales have been affected by the economic downturn and in order to increase their sales the best option is to launch a alternative energy SUV. Besides that, GM wants to protect themselves on the market, and for this reason GM needs to be more innovative and be more sensitive to the current trends of the market. Knowing the needs of consumer will retain GM’s position in the market as the world’s leading producer of mobile phone.
8. Reflective Statement on Leadership
Leadership is defined as entails some degree of voluntarism in ‘followship’ (Pardey, D., 2007). However, Kotter (1990) argues that leadership is about coping with the changes by giving direction.
Kotter’s (1990) leadership framework states that the role of leadership is to set a direction, develop a vision of where the organization should be going and the strategy for change to achieve that vision. Leaders align people to the direction being set, communicating it to people and building commitment to it. Motivating and inspiring people so that they work to achieve the vision drawing on their needs, values and emotions.
Our group were using democratic style of leadership where all of our members were involved in the decision making process. Ryan, our group leader discussed with all of us and decides which part we need to work on step by step. This helps a lot as we were very unclear about the direction we’re heading to.
In my group, there is some communication issues as the all four of us come from different country and background. Sometimes, there will be conflict of ideas and difficulty in presenting the ideas. We got delays in meeting because some of our group members were busy or there were some lack of communication as in setting up our meet up time got messed up and caused some group members turned up and some did not. I learnt that working in a group is not easy as it needs more effort to discuss and accomplish it.
We were each given task to search for the information from external analysis to internal analysis. All of our group mates were very responsible that they all searched for the information on their own part and some of them even helped to search for others’ part of work in detail. This helped our group to have the sufficient information for us to do our work. I learnt that without time management, everything would be in a total mess as we might have hand our assignment late.
We overcome our communication problem by spending more time during our meetings and we make sure everyone understand what are the things that we need to accomplish and understand what our group members were discussing during the meeting. I had learnt that developing a vision is important as it helps our group to do our work on time.
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Vincent J. Galifi. (2009) “Magna Confirms Offer for Opel”, [Online]. Available at: http://www.magna.com/magna/de/media/pressreleases/?i=218 (Accessed:5/01/2010)
Vincent J. Galifi. (2009) “MAGNA AND SBERBANK OFFER SELECTED AS THE PREFERRED SOLUTION FOR OPEL” [Online]. Available at: http://www.sbrf.ru/en/news/index.php?id114=11000080 (Accessed:5/01/2010)
Wall Street Journal (2009) “RHJ improve the terms of its bid for GM’s Opel”.[Online]. Available at:http://online.wsj.com/article/SB125182274337876583.html
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