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General Motors was founded by William Billy Durant on September 16, 1908. At that time there were less than 8000 automobiles in America that were powered by steam or electricity and some even by gasoline. At that time there was a rising demand of automobiles and the automobile manufacturers were forecasting it to be extremely profitable. Daunt was initially a leading manufacturer of horse-drawn vehicles in Flint, before making his entrance in the automobile industry. At the beginning, GM held only Buick Motor Company but later acquired several other successful companies like Oldsmobile, Cadillac and Pontiac.
A company named Opel, Germany based was a recognised brand all over the world in the automobile industry under the patent Motor wagon System Lutzmann, was also acquired by the GM in its first thirty years.
The scientific inventions such as the light bulb, telephone and the radio made the world expect some interesting discoveries about the automobiles. As the demand for the automobiles increased to a heightened level, General Motors set up its production plan and design and marketing inventions for others to follow.
Adding Chevrolet, Vauxhall, and Opel diversified the selection and added to the reach of GM. With the philosophy and strategy of, "a car for every purse and purpose," and a series of landmark innovations that changed the automobiles itself, GM's vehicles went beyond transportation becoming statements and aspirations in their own right. During these years, GM also opened more than a dozen new plants outside the United States.
The milestone 1927 Cadillac LaSalle, with curves rather than sharp corners and a long, low stance, made people see cars as far more than just a mode of transport. Designed by Harley Earl, the LaSalle was a world apart from the high and boxy Ford model T, marking the beginning of true automotive design.
Hard times in America and political change in Europe throughout the 1930's brought new uncertainty, but GM's commitment to innovation continued unabated. The return of peace after World War II brought a new optimism with the consumers eager for goods that had been out for reach for so long. GM responded with unprecedented string of milestone designs that continues to inspire to this day.
In addition to the innovations like independent front wheel suspension, unibody construction, and the one-piece steel roof, General Motors pushed the envelope in design with a succession of vehicles including the 1949 Buick Roadmaster, the Chevrolet Corvette and BelAir, and the 1959 Cadillac El Dorado.
During the war GM supplied the Allies with more goods than any other company. In 1940, former GM President William Knudsen was chosen by President Roosevelt as Chairman of the new Wartime Office of Production Management. By 1942, 100 per cent of GM's production was in support of the Allied war effort. GM delivered more than $12 billion worth of materials including airplanes, trucks and tanks.
The 1960's and 1970's were a time of new challenges and great change. Environmental concerns increased gas prices and foreign competition led to an unprecedented downsizing of vehicles across all GM vehicle lines. It was the largest reengineering programme ever undertaken in the industry, ushering in an age of lighter, aerodynamic and more fuel efficient vehicles.
In 1971, GM pioneered the use of engines that could run on low-lead or unleaded gasoline. After two years, GM came with the offer of giving an airbag in the production car. After two more years in 1974, GM introduced the catalytic converter in the car that reduced carbon emissions.
GM played a lead role in developing the guidance and navigation system for the first moon landing aboard Apollo 11, and designed and manufactured the Lunar Roving Vehicle for Apollo 15. The LVR was the first vehicle driven on the moon and is currently on display at the Smithsonian National Air and Space Museum in Washington D.C.
Although GM was always active internationally, the urgency of operating as a single global unit came with the shrinking of the world itself in the 1980's and 1990's.
The transition into the digital age and the concern about the environment became prevalent topics at the turn of the 21st century.
The environment in which the GM operates is dynamic and turbulent and ever changing and those changes have to be incorporated within the company. Since the company operates in the automobile industry where the changes take place very frequently and innovations are necessary and research and development are the key issues that are incidental to the success of the company, therefore the company needs to focus on these things. The following factors have affected GM the most and for which GM needs to look out for in the future.
"G.M. is a multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment."
"GM's vision is to be the world leader in transportation products and related services. We will earn our customers' enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation
of GM people."Â
GM is huge company and has many famous brands like, Buick, Pontiac, Saturn, Hummer, Saab, Daewoo, Opel, Holden, Chevrolet, GMC, and Cadillac.
GM wide range of fuel efficient cars which compete with the industrial leaders.
GM has a very large market share at 26%. Although it has dropped but yet it is very high in us economy. GM has also some share in Chinese market which it is constantly increasing.
OnStar Satellite technology is provided with every vehicle. This technology allows the company to track the vehicles and the drivers can contact the onstar help.
Low innovation has always been problems with GM.They are far behind in the race of technology. They are not doing enough research in the alternative energy cars. The hybrid cars which are the latest trend in the industry, has eluded GM.
Communication gap between the management and the employees has also adversely affected GM.
They are bankrupt and have huge loans so that means they have to work under many covenants.
The biggest opportunity for Gm is to look into the alternative energy cars. This can expand the GM's brand range and help it to compete in the industry.
Further Global expansion can help GM to survive in the unattractive industry.
New vehicles can be created wit research and dedication.
Low economic growth in the car manufacturing business has stumped most of the manufacturers.
Car manufacturers on government support are making cars at a loss but yet there cars are in the market and cutting the market share of other companies
Japanese car manufacturers are making better cars at low price which is the main competition for GM.
Change in technology in the industry has been an issue. Honda and Toyota have advanced in technology at a higher rate than GM.
Rising oil prices have also caused the industry to rethink there strategy
Potters five force analysis
Potter described five forces that effect the organization
Existing competitors: American auto industry has become much more intense with the rise of foreign competitors like Toyota, Honda and Nissan. The Reason there is such high rivalry is that there is a lack of differentiation opportunities. All the companies make cars, trucks or SUVs.
Threat of entry by new competitors: new entrants intensify the competition and capture market share. This gives rise to a price war and cutting of margins. There are some barriers, like machinery, capital, technology etc that decrease the threats of new entrants. In the motor industry there are high turnover barriers as well as high capital and technology.
Pressure from substitute: the real substitutes for cars are buses and other public transport, but they do not pose that much treats.
Bargaining power of buyers: Buyer power refers to the ability of individual customers to negotiate prices that extract profit from the seller. Customers can easily, and with little cost, switch to other auto dealers. This gives the customer a very high bargaining power.
Bargaining power of supplier: Auto manufacturers require inputs, labour, parts, raw materials and services. The cost of these inputs can have a significant effect on profitability. In case of GM this is an issue as the labour union in Detroit has great power over the company.
To generate strategic options for GM we shall use Ansoff matrix
For GM according to this have 3 real options
Product development: This will require Gm to do a lot of research and rely on the existing market share to generate enough cash to cover all its debts and make profit.
Market development: this is another good option as this will require GM to explore the globe and create new market for its existing product.
Diversification: This is the most risky option but none the less an option. although potter said that "diversification generally destroys value" but still this can be considered if GM can pull it off.
Another option for GM is the potter 3 generic strategies
Differentiation: although there is little margin for that but with research it can be achieved.
Focus: GM can develop a product for a focused niche and target that market. This can reduce its crisis. Knowing who your customers are is very important for the company.
Cost leadership: this is hard to achieve with competitors like Toyota. But with economies of scale it is possible.
Along with these options GM always has the option of restructuring and liquidation.
Potters Test for strategies
This is the part where the strategies are accepted and rejected on the bases of there merit to the stakeholders. Potter described 3 tests for a strategy
Suitability: this test determines whether or not the strategy is suitable for the business and the stakeholder. At this point the stakeholders can be indulged into the business strategy and there opinion can be obtained through different channels. There reservations and there demands can then be incorporated in the strategy.
Feasibility: Means that how practicable the strategy is for the business to apply. does the business have enough resources for the task or not.
Acceptability: The strategy that has been developed is it acceptable to all the stakeholders. Is there any objection from any of the major stakeholders? What are the down sides of the strategy for the stakeholders?
The best strategies for GM can be product development, market development, focus, diversification, Restructuring and liquidation. GM has to create a type of Hybrid vehicle that will allow it to keep up with the pace of the competitive environment, but must be a product that stands out from the crowd at the same time. Prime example of their idea for a Hybrid SUV, it fits the GM profile with maintaining the SUV portion, but allows the firm to stay with trend patterns.
GM must also re-evaluate the market they are trying to approach, because for so long they have continued with a tradition outlook for automobiles, but now that times are changing their original target market is not looking for what they once were. General Motors needs to take a step back and take look at how they want to position themselves and towards what market since what they have been doing is no longer in favor for the company. An example of what GM could possibly do is producing a futuristic vehicle, which has been heard in rumors from Toyota about their next plan of action. If General Motors could provide a "futuristic" vehicle before Toyota has the chance to hit the market with theirs GM would be a step ahead of the competition. General Motors most desperately needs to review possibilities. This is only going to be achieved if something drastic is changed. Restructuring the product development pace would be a start as well as cutting back on employees. The company needs to be re- evaluated in many ways, but GM has been strong for many years that it is very possible for the company to dramatically change its structure.
Liquidation and bailout are the last options for the company. Bailout by the US government is the more possible of the two as many jobs hang in the balance with a great increase in the rate of unemployment in the US.
To monitor the progress of a company as to how much have they adhered to the strategy we need a monitoring system; a set of mile stones to guide the company to the ultimate goal.
For this the strategy needs to be broken down into small objectives to be achieved. Then these objectives are broken down into Tactical functions which are achieved on day to day basis. So for each day that passes there is some progress towards the goal. The objectives can be qualitative or quantitative i.e. budgets or customer satisfaction level.
Monitoring is important as it is true that "what you can measure is what you get"