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Importantance of Startegic management has become vital role of business management, where it take key dirving force of any leading business. Stategic mangement is looking at overall business and that link buisness and fuctional areas. Mainly to make strategic decsion major informiotion sorurce that used external and internal sources. Global environment has been changed. So many factors are influenced on decision making. Those factors are e, economic risk, country political changes, legal environment changes and technologies. To analyze key value drivers of business and affected factor are analyzed by corporate managers and functional mangers (operation manager, marketing manager, human resources manager, IT manger, Production manager). All level of managers are must have experience in overall knowledge of business and its operational style. Otherwise they are not capable enough to develop strategies opportunities and threat from arising in the external environment. Therefore every excutive or manager need to have deepest knowledge startegic mangement concept and theories. If they do not have such knowledge regarding particular subjective areas, they might face in so many difficulties when making corporate and operational decision making. Therefore every manager needs to absorb such knowledge to manage their operational and routine activities efficiently and effectively. To become multi discipline and result oriented manager not very easy task within the limited time frame. That expects lot of focus for business operations. GM case study is providing valuable of understanding strategic decision maker's roles and required knowledge to get understand and sort out problems of strategic managers faced. This case study provides hidden weakness of each areas and future strategic focus where managers need to look at Main highlights of highlighting this assignment report are
Different strategic levels
Way of decision making at each level
Analysis of Core competencies of GM
Application of five forces analysis
Future strategic planning
Selection of business direction
Strategic decisions implication
Major levels of GM
According to strategic management theories, available types of level are;
Corporate level look at;
Vision and mission
analyze internal and external environment
allocation of resources for business
Overall financial control
Business/Divisional level look at;
Operate in particular market such as domestic or regional or market segment.
Functional level look at;
operational or functional performance of the each business division
Research & development
Here look at as whole of the business. Mainly analyzes and focused on;
type of business company - GM is operating as a corporate "auto making industry"
How do we expand this business or get out of the business.
In that corporate aspect mainly focused on corporate objective
To reach corporate objectives, top management is developing corporate strategies. Those corporate objectives can be divided into two subsections such financial and non financial. Financial objectives of the company might be;
Level of business growth
Maximize share holders wealth
Increase the overall profitability company as a whole
Maximize profitability of different segments
Expand business and increase level of investment
Level of cash need to operate business efficiently - cash flow
Cost of capital
Increase return on capital employed
Increasing the market share
Non - financial objectives
Increase no of customer
Develop corporate image and brand - Via CSR activities
Quality of service or product
GM corporate objectives are as per case
Focused on the creating positive cash flows
increase market share
reduce cost (variable and fixed cost)
Business level (SBU)
GM major business units called divisions;
GM situations business level strategy is to penetrate in the market by segmenting market into sub component sections. Those strategic division or business a unit tries to compete successfully with other competitors by offering different product range.
Functional /Operational level
Functional activities areas where focused on specialized activities
Production or operation - includes Factory location, technology that apply, manufacturing techniques, outsourcing.(capacity, process technology, work flows, quantity)
Evaluating financial resources
Cost of new funds
Usage of finance effectively
Working capital management with in the business units
Cost of production analysis (fixed, variable and overheads)
Here look at;
Satisfy customer need profitably
Do favourable and promotional pricing
Distributing method - GM used dealers
After sales service expected
Do campaign market testing
Research & Development
Level of investment is going to investment for new invention
New precuts and techniques (product innovation and process innovation)
Human Resources Management
Future business expansion required labours
Way of performance appraise
Promotion and of Demotion of people
Cost of training and development
Helping to reduce expenditure administrative work in GM
Create new distribution channel
Identification of core competitive advantage and effect to five forces analysis
According to case study GM capabilities or core competencies as follows;
High Capacity of plant
GM is having 41 assembly centers and manufacturing facilities in USA as well as there are 158 assembly centers and manufacturing facilities plant capacity in globally to maintaining demand of the market.
High level of Individual brand awareness
Chervolot, Cadillacm, Isuzu GMC, Buick, Holden, opel, Vauxhall are the most renowned and penetrate brands names in the market.
Power of corporate brand
GM has completed 100 years in 2008. GM Corporation was started 1908.Since that era they having gained production experience of motor car. Thefollwing main are has kep GM more strong position.
Know - how strategies
GM runs their business across 120 countries in the world. That reflects wider market coverage in the world. Largest markets are China, USA, UK, Brazil, Germany, Canada and Italy. These countries business is well established.
Marketing capability can be evaluated based on the market segmentation. Company has divided market based on the income (Demographic base). Each segment focused by different group of customers. Therefore other players whom are having low potentiality enter into those particular markets.
Main joint ventures that GM has created;
GM - Daewoo
FAW - GM
SAIC - GM
SAIC - GM - Wuling
Michel porter five forces analysis can be done through the following ways;
Industry comparison (same industry, adjoining industries) and
Factor which drives industry leading strategies.
This analysis helps to evaluate core competencies of the GM and determine the industry profit and individual player profit. Following diagram shows areas involved considered under this analysis.
Threat of new entrants
Bargaining power of suppliers
Rivalry amongst current competitors in the industry
Bargaining power of customers
Threat of substitute
Analysis of the five forces effect on GM
Threat of new entrants
new entrants determinant factors are;
Economic of scale
Car industry is having high fixed cost to recover need do high sales volume which means high BEP. GM is a one of big player market where they can gain high economies of scale comparing other players. Those main reasons are;
Technology that they using
Level of market segment
Distribution channel efficiency
Productivity of labor
New entrants can't afford the high fixed cost at the initial stage therefore very limited chance to enter into car market.
Wider rage of brands
Different market segment covered by GM by offering different brand, Which is creating entry barriers to another player. Only that they can gain niche market opportunities.
GM has already developed their distribution channel and having wider market coverage .In this situation also very low chance to take dealer choice for new players. To get their attention need to pay premium for distributors.
High level of Capital investment
Auto making industry major key driving factor is how much of amount is going to invest for this business. Especially, continuous R & D need to keep customers with the business. If the existing player already acquired high volume of sales, very low potential to recover amount of capital invested in business via sales.
Bargaining power of suppliers
GM is large auto maker of the industry, therefore GM buy high volume of inputs (metals, irons, plastics, tires, electrics components) from suppliers. In this situation there is no high bargaining power for suppliers than GM. because of supplier sales and profitability might depending on this level sales. Car market is having low no of sellers and sell product are differentiated by each supplier or producers this mere reason is to having low bargaining power of suppliers. On the other hand if there are limited supplier, that will create high bargaining power of suppliers.
Threat of substitute
Major substitutes are;
This is also making effect on GMs existing market. To minimize this threat GM needs to go for that market segment.
Bargaining power of customers
Having Low have bargaining power of customers due to following reasons
GM has offered different variety of product range for the customer - many choices.
Different price level
Prices are somewhat high other players compare to GM
Product quality and safety is most important factor for car users - GM is in the strong position
The above reason create l very low potential to barraging for customer in existing car market.
Rivalry amongst current competitors in the industry
Rivalry amongst current competitors are Toyota, Honda, Benz, in the industry is determining factors are
market growth rate
Business environment uncertainties and
As per above mentioned factors GM is in well secured position
Analysis of Environmental issue and developing strategy for 2011
Changes in external environment and internal environment directly affect on GM strategic decisions therefore needs to screen both external environment and internal environment at pre strategic development stage. Hard affect creating environment is macro environment that consisted political & legal, economic, social, technology and physicals environment as well as GM need to look at internal analysis (strength and weakness) future arising risk and mitigating strategies for that.
External Environment analysis
Changes political environment is directly affect on the key strategic decision of the business. Role of the government and supporting for the business is depending on economic policy and foreign trade policy and relationship with the external countries. Under this are need to carry out the following analysis
Each country where GM is operating need to analyze political risk and government changes, support and contribution auto making industry. Here this analysis help the following areas;
Nationalization - once political party has changed, they might be look their local products as well as more close and friendly countries investment and their business keep up their relationships.
Taxation policy - Every budgeting reporting tax such as corporate tax, VAT capital allowances, etc.
Foreign trade regulation - this helps to determine import and export market activities.
Changes in the economic environment are creating huge impact on the business. Regionally and globally need do analysis trend of economic.
Trend of GNP - Trend of GNP shows economic growth as well down. This help to determined income, export and import and balance of payment. The above mentioned sub sectors making huge impact on the strategic decisions.
Business cycles - Need to look, whether there is economic depression or boom to decrease or expand production of the companies
Disposable income - By looking at disposable income can determined the price of the cars, segmenting the market
Interest rates - this affect on the cost of borrowing as well as impact on capital expenditure of the company.
Inflation - Directly affect on factors of production such as materials, labor and components which are used to produce car.
Capital market growth - growth of capital is positive sign of investment and source of fiancé is become easy.
Legal environment showing that new legislation as well as strengthening future existing legislation or regulation to protect different parties in the countries. Here following are can be identified;
Construal law, corporate law and those impacts that decide business supporting or encouraging as well as discourage business expansion provision for mergers and acquisition, anti competition, etc.
Effect of protection law such as employer's protection, customer protection, environment protection (tax for reduction of carbon emission).
Technology environment creating new distribution channels such as make an online ordering for car, new technological application for motor vehicle assembling or develop user friendly features, hybrid vehicles.
Additional areas need to be analyzes by the GM
Company financial position
This can analyze via balance sheet. by looking at financial position of the company can be determined level of short term and long term liquidity, gearing level, efficiency of capital employed, etc. This is very important for the company in terms of marinating stability.
Industry cost structure
Industry cost structure is help to determine the cost of the production, pricing policy, marketing investment and new product developments. Not only GM has to identify future emerging cost and their adverse effects to develop cost minimizing strategies, while maintaining substantial level profit.
Contributors of Company capital and return
One of the most important sides is capital structure that drives dividend policy, profit retention rate and new expansion, power of creditors in businesses, level of capital investment in business. Owners of capital expecting substantial return on the business as well company expect to expand business future; these two objectives are clashing each other. This must be care fully analyzed to minimize interest gaps.
This also making huge impact on the GM business, if the competitors carry out mega promotion or produce fuel efficient and sophisticated featured car make huge impact competing segment. Competitors tried create barriers to prevent new market opportunities by using merging and takeover strategies. On the other hand they try to attack existing distribution channels by using different strategies.
Cost of capital Return On Investment
To create sustainable business growth and substantial return to investors as well company itself need to analyse cost of capital.
Risk factors need to be analyze
Effect of changes in exchange rate
Effect of exchange rate is directly affected on the profitability of the company as well as creating loss on company. Because of money appreciation and depreciation derived by economic activities like import and export.
Threat from natural environmental risk
Some of natural environment effects are making impact business. Cyclones, heavy raining, flood, snow are directly affected plant operations and product distribution.
Changes in Interest rate risk
Interest rate makes huge impact on cost borrowings. This is directly affected on financial cost of business and profitability. As well as, it will make impact on the cost of material and components ultimately that will leads to reduce the profitability and raise the price of the product.
Labour turnover rate
Highly trained or experience staff might acquired by competitors by giving high salaries as well attractive benefit. This issue directly affect on plant operations, raising new staff training and development.
Trade secret and leakage of information
There risk to leak trade secrets and top importance information (financial and non financial) which are directly influence on decision making and operational activities of business. Such information leakages strengthen competitors. It is very good opportunity for them attack on weaker areas. Some situations if the inland revenue get to know about that information, tax issues will are begun.
Behaviour of Employees
Negligence, Omissions, fraud, judgmental errors, less knowledge of operations and decisions making might create high risky situations where create huge loses, impact on reputations and loosing the customers.