How general motors needs to regain focus

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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.

Technological innovation

Know - how strategies

Marketing capability

Market coverage

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

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.

Strategic alliances

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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 playermarket where they can gain high economies of scale comparing other players. Those main reasons are;

Technology that they using

Level of market segment

Business experience

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.

Channel Converge

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 premiumfor 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;

Jeep

Van

Cab

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

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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

Cost structure

market growth rate

Production capacity

Business environment uncertainties and

exit barriers

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

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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.

Competitors activities

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.