LASA—Organizational Design and Culture

M3: A2- Strategic Analysis: Organizational & Competitive

Belinda Swift

Business Tactics and Execution

Instructor Dalynn Campbell

November 19, 2014

General Motors: Organizational & Competitive Strategic Analysis

Company Overview

The General Motors Company is a multinational firm that deals with motor vehicles and its headquarters are located in the Detroit, Michigan. It is a one of the main players in the auto making industry maintaining a sizable market share since 1978. The company's mission statement is "A multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to providing products and services of quality that will be appreciated by the customers, and lead to sustained superior returns to its employees, business partners and stock-holders" (Motors, 2014). Its vision statement is "to be a world leader in transportation products and related services" and its values of integrity, responsibility, and individual respect are very clear in its activities (Motors, 2014).

Both the company’s mission and vision articulate their desire to provide quality products and services and to continue dominating the market and gross enough profit to promote continuous growth. General Motors’ values show the reverence they have for their customers and competitors. The company’s culture is to continue producing quality vehicles that fit the customer's desire. The mission, values, and visions reflect the company's objective, which is to continue dominating the market through diversification in its products.

Strategic Goals

General Motors Corporation has a number of strategic goals that aim toward increasing its total earnings by 9-10 percent. Their principal strategy is to take up the leading role in technology and product development. The execution of the strategy is now underway with the upcoming vehicle models to be released in 2015 to include a 4G LTE with Wi-Fi. Also, the corporation has already announced that in 2017, it will release the Cadillac CTS that will have vehicle-to-vehicle connectivity. Plans are also underway for the company to launch the automated driving technology called the "Super Cruise" in the CT6 full-size flagship sedan. In addition, the company is planning on “producing cars that will be lighter in weight due to the welding technology that involves a mixer of steel and aluminum in making car body part” (Aaker, 2012).

The second goal is the establishment of a separate Cadillac flagship brand. This goal will entail the company moving its offices from Detroit, Michigan to Manhattan, New York in pursuit of the luxury marketing that will send the company specializing in selling Cadillac within this region. The newly improved model of Cadillac is bound to happen with the upcoming release of the 2016 CT6 full flagship model in North America.

The third goal is the determination of the company to continue dominating in China. In 2018, the company is planning to invest 14 billion dollars in China by opening up five manufacturing plants and supporting its sales network throughout the region. In addition, the company is planning on launching 60 new brands in china by 2018.

Strategic Alignment

The company's mission and vision all hint to the desire of dominating the world market for as long as possible. In one of the strategic plans, the company is aiming at dominating the market through products and technology. The models to be released in 2015 will have new technological advancements that suits the customer's preference and tastes. This move of incorporating technology in the production of vehicles will see increased demands for its vehicles, hence dominating the market to an extent. Also, the company's desire to earn enough revenues for growth and expansion is seen in the second goal, where the company plans to open more manufacturing plants in China. “General Motors Company sells five million cars annually in China” (Wheelen & Hunger, 2011). Therefore, producing more vehicles in China will prove to be a ready market, which will then boost the company's revenue and growth. However; the massive investment in China is also a significant risk - the reason being that China is vulnerable to frequent natural disasters such as earthquakes that might cause the company huge losses in the event that China does suffer such disasters.

The purchasing power of most people in Manhattan is relatively higher compared to Detroit and therefore, the plan of focusing on producing Cadillac’s in Manhattan will be useful. In Manhattan, the company will be able to enjoy the luxury market and eventually make more profits in the long run.

Recommendations

General Motors should develop a market focus for its products as one of its primary strategies. Market focus refers to the ability of the company's management team to channel human resources and money on market opportunities that lead to maximum growth and steady positive cash flow. The management team should be ready to pull out resources, services and products in market areas that do not provide a constant positive cash flow. The best way in which General Motors can achieve this is by focusing on creating a segment market share for its cars and ensuring a net positive cash flow. This is the biggest weakness that GM cannot afford to ignore.

Creating a segment market share for its cars refers to the ability of General Motors to focus on producing cars based on the customer's choice, preference, and create a market share for its products. It also requires GM to withdraw all the resources and cars from the market if they do not support the customer's preferences and tastes. Consequently, the resources used to produce such cars should be reallocated to other production areas that are preferred by the clients. General Motors cannot continue to produce cars that do not compete well in the market. It is recommended that GM scrap out such cars and concentrate on producing the customer preferred models.

Creation of a positive net cash flow will be upheld by scraping out unprofitable cars from the market. GM cars compete against themselves in the market and hence creating a large market variety with low sales per product that do not result to considerable profits. Therefore, it is imperative for a corporation to compare the net income flow against the loss for each and every product and focus only on the profitable ones.

Like major automobile companies, GM should focus on two from five major divisional portfolios. These divisions should have a low priced division for the low-income earners and a highly priced portfolio for the large income earners. For instance, it can specialize in producing Chevrolet as the low-priced models and Cadillac for the highly priced cars. This will lead to a higher income as most of the resources are now focused on the production of these two units that are highly preferred by the customers.

SWOT Analysis

1. External Influences that Affect Decisions at GM:

General Motors operates in the midst of a number of external factors that act as its threats and opportunities to the company. First, there is an ongoing global recession that was detected in 2009 which is a threat to the company. A major consequence of the recession is the decreased purchasing power of the consumers which in turn, affects the demand of GM cars. Secondly, the automobile industry faces a downturn in its sales of light vehicles in major European countries, with Japan and GM not being an exception. Since 2008, the demand of automobiles in the mentioned countries has been declining by a significant margin, and hence GM suffers in the end. However, the demand for heavy vehicles such as trucks is on the rise and GM will benefit. GM is also in constant competition with other automobile industries such as Toyota and Honda, which are the main competitors in the Asian continent including China. Therefore, GM must focus on giving quality products.

2. Internal forces that affect the decisions at GM:

Internal factors refer to those factors that affect the business or corporation internally and are controllable. Most of these factors are either strengths or weaknesses. First, “GM has a weak organizational structure that is criticized for its poor communication between the seniors and the juniors” (Goussak, Webber & Ser, 2012). Poor communication has resulted in the company's poor performance. Secondly, GM has a poor marketing expertise. It focuses on producing so many products that compete against themselves in the market and the returns gained per product are very minimal. GM should copy the marketing strategy of their competitors who focus on creating two divisions. Thirdly, the company has closed most of its dealers' networks. “In 2008, GM closed 715 dealerships in Canada and later closed 200 more worldwide” (Klepper, 2002). These closures affect the availability of GM’s products in the regions affected therefore; the customers may opt to go for the next available product from other automobiles. An internal factor, which is strength, is that GM is backed up by a large number of employees who are well-educated and skilled engineers. In addition, GM has a strong management team that dedicates itself in meeting the company's goals.

The Uniqueness of GM

GM has a differentiation strategy of developing 13 different brands of cars. There is no other automobile industry that has ever applied such a strategy. The GM's CEO in the 1920’s encouraged this strategy and had a slogan that stated "a car for every purse and purpose." In the 20th century, the strategy was very fruitful, and GM dominated the market. GM had manufacturing plants in 34 countries and made sales to 140 countries. GM reigned in the market for a long time and was able to compete entirely against the likes of Ford and Toyota. In the United States alone, GM had a market share of 51 percent (Wheelen & Hunger, 2011).

Competetive Advantage

However; in the 21st century, this strategy is proving to be insufficient due to the changing consumer preferences and the increased competition. Moreover, producing many brands means spreading resources over a large number of brands that result in little attention being given to each brand. Consequently, other automobile companies were able to fully develop fewer models, which were more preferred by the consumers. Eventually, the competitive advantage of GM is undermined and now must re-structure its strategy in order to compete effectively. For instance, after introducing the Saturn brand to the market, GM then opted to introduce the Oldsmobile model almost immediately after. Introducing Oldsmobile was a smart move but had an adverse consequence on the Saturn model. GM could have at least given Saturn more attention for five years in order to develop it to suit more consumers. Thus, Saturn is doing very poorly in the market today.

International Market Strategy

General Motors still holds the diversification strategy as its primary strategy in competing in the international market. The diversification policy holds for the production of 13 models with each model having its pricing target. For instance, Cadillac is considered as the car for the luxury market and Saturn as the car for the lowest earners. To an extent, the diversification policy is providing for the local customer preferences and needs as long as prices motivate the customer. However, the low attention given to each brand is not effectively catering for what the customer wants. Therefore, in order for GM to compete effectively in the international market, it must pay more attention to each and every brand based on the customer's views.

References

Aaker, D. (2012). Building strong brands.

Goussak, G. W., Webber, J. K., & Ser, E. M. (2012). A Critical Needs Plan for General Motors: A Cultural Pluralism Approach. Review of Business & Finance Studies, 3(2), 45-53.

Klepper, S. (2002). The capabilities of new firms and the evolution of the US automobile industry. Industrial and corporate change, 11(4), 645-666.

Motors, General. "General Motors." (2014). Retrieved from: www.gm.com

Wheelen, T. L., & Hunger, J. D. (2011). Concepts in strategic management and business policy. Pearson Education India.