Business, according to dictionary, refers to something being concerned with the sale and purchase of, or with trade and commerce. Over time, after centuries of research, the perspectives and the very fabric have changed, giving a new dimension to this phenomenon called business. The prime objective of this article is to deduce the business environment and also comprehend its gravity on management students and the entire business enterprise. To understand this better, PESTEL also known as PEST analysis will be applied on the GENERAL MOTORS COMPANY, it will help analyze the various factors which constitute a business environment and the strategic decisions taken in the last half decade. Subsequently, conclusions and recommendations will be accomplished.
There are innumerable factors that exemplify an organization and all these factors affect the decisions and the strategies which the organization chooses to make. The factors might be external such as competitors, customers, suppliers and may have a direct effect on the functioning of a company. These directly effecting factors are referred to as Micro environment. In the same way the factors might be external and can affect the functioning of the company indirectly such as social, technological, political, legal and environmental. These aspects are termed as Macro environment (Palmer and Hartley, 2006).
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The primary objective of any organization is to manifest profitable and successful artifice which is only possible if the organization is enlightened about the weaknesses and can make maximum out of an opportunity when it strikes. To apprehend the business environment of a company, PESTEL analysis can be utilized to evaluate political, environmental, economic, social, technological and legal factors. PESTEL analysis helps evaluate the macro-environment better and subsequently produce fruitful strategies. Another important method of analysis is the SWOT which examines the external aspects as threats or opportunities and the internal factors as strengths or weaknesses. These methods altogether constitute and help derive the most efficient strategy to achieve the desired goal.
A deep analysis will be conducted on the GENERAL MOTOR COMPANY. A definite conclusion is subsequently deduced presenting the possible reasons which have led the company serious deficiencies in the past five years, the company being one of the oldest and unarguably top most automobile manufacturers all over the world, and the possible decisions taken by the company heads which led to such catastrophic outcomes.
ORGANISATION DESCRIPTION AND BACKGROUNG
Founded on September 16, 1908 famously known as GM, General Motors Company is a group from the United States of America, with its head branch located in Detroit Michigan. The company is massive, with its establishment in 34 countries and employees numbering about 244,500 from all around the world, including sales and services in about 140 countries. According to the statistics in 2008, GM has ranked as the largest automaker in the U.S and the second largest in the world. The General motor Group owns a series of world class car manufacturers which makes GM group indisputably the world’s biggest automobile entity. The General Motors Company is headed by Edward Whitacre.Jr. as the Chairman of the Board of Directors and the Chief Executive Officer. With automobile brands such as Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Jiefang, Opel, Vauxhall and Wuling under its hood, it is a daunting task to manage this business, which is spread in almost every continent. In recent times the company has faced humongous challenges, which has made the company choose new business strategies and reform itself. (www.gm.com, 2010)
GENERAL MOTORS COMPANY BUSINESS ENVIRONMENT
Acquiring business in a single country has its own challenges, regardless of the nature of business, being constantly under the microscope and constantly maneuvering itself according to the trends and the demands of the consumers is directly proportional to profit the company makes. Moreover if the company is multinational, the risks, challenges and the opportunities multiply.
In the year 2007, the constant hike in oil prices had a deep impact on the automotive industry; the impact was not only by the changing retail habits of the consumers but also by the pricing pressure from the raw material. Moreover, the industry also faced constantly increasing external pressure from the public transport industry, as the consumers were curtailing private vehicle usage. ()
The United States of America is one of the world’s largest consumers for light vehicles, passenger cars and light trucks. This segment was dominate by ‘the big three’ namely the General Motors, Ford Motors and Daimler-Chrysler, which account for about half of total number of cars and trucks in the automotive industry.
Holding almost a monopoly in the automobile industry, ironically GM group is going through losses in recent times. PESTEL will be unveiled on the General Motors Company which will consequently give the strategies and the decisions taken.
To commence with the economic factors, the whole continent was going through recession in the year 2008 and everybody, right from customers to the raw material suppliers were curtailing there expenses which just made the condition more suffering. This also left a deep impact on the macro-environment which resulted in unemployment. As an automobile industry, besides being a merchandiser, GM group is also a major consumer of various metals, textile, rubber, plastic, vinyl and computer chips.
When the business cycle is at the stage of recession known as recovery, it becomes even difficult for the potential customers to keep up with the routine purchasing habits. This means that the customers purchase only the things which are economical and are of absolute importance. The new protocols imposed by the Fiscal Policy Institute (FPI) resulted in a hike on the organization by the government which resulted in the increase of selling prices, thus making the vehicle out of reach of purchase. Inflation as well as deflation marks a straight blow to the cost of products and the services. For instance, if more tax is levied on customers, it implies diminished income which finally results in lower expenditure.
All these circumstances directly affect the potential customers to turn away from GM and chose more affordable and economic automotive products. Furthermore, for international markets, the inconsistency in the exchange rate gave others an added advantage.
Political environment can be inferred as all the aspects of the government which affect the sales and the purchase directly or indirectly, i.e. any one of the aspect affects the functioning of a company positively as well as negatively. The rules of the government have always been against the ignorance of the company towards environmental as well as safety regulations since 1960. The company has been always ignorant towards safety equipments such as seatbelts, airbags, ABS (antilock braking system) and environmental friendly products such as large engines and catalytic converters, with an idea to keep its vehicle notoriously strong, unconventional and pleasurable. But the change in the norms worldwide took a heavy toll on the firm. The world now had new demands and new set of trends which had no place for unsafe and oil gulping engines.
Furthermore, the antagonistic image of the president of the United States of America George. W. Bush also led to boycotting of American produced vehicles. This situation intensified with the war between U.S.A and Iraq which resulted in further worsening of the sales figures of General Motor Company throughout the world. But somehow, the new government rules were passed to promote local sales in the country by limiting imports and developing local companies which played a major role in the persistence of GM group through crucial times.
As time has progressed, so has technology, which is a dominating factor in the performance of a firm. As a matter of fact, companies should be ready to mould themselves according to the demands of the customers which rapidly changes due to advancements in technology and subsequent transformations in the market. The company not only makes full use of the evolving technology to constantly innovate itself for the cut throat competition by the rivals but also uses it for reaching out to the customers and understanding their needs and comfort better. Technology is also used by the company to reach out to the customers more efficiently through more effective distribution channels.
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For General Motors Company the technological aspect was analyzed through raw materials. The new improved products made from plastic and fiber glass were not only reliable but at the same time more economical, which is a beneficial step towards both, the merchandiser as well as the consumer. Technology brings in good opportunities I addition to new hurdles too. Another breakthrough where technology benefited the company was with the enrollment of the internet in the systems. Not only could customers place their orders online, but also solve their queries, making the business deals effortless, thanks to the internet. The GM group has found a plan which is long term called as the business-to-business and business-to-customer. There is yet another factor about technology that has resulted in the betterment of GM group; it’s the perception towards research and development (R&D). In recent times companies spend a lot more than earlier times on R&D, ensuring total safety, performance and economy to the potential customers.
General Motors takes special care about connecting with faithful customers, even after the company has passed its maturity stage and is now in the reform stage. The company has potential customers who are not volatile and will stick to the brand GM.
Social aspect is also one of the vital contributions for analysis of any firm. The condition is simpler when dealing with a national entity but gets complex when a multinational firm is under consideration, reason being each county has a different perception towards its buying habits depending upon education, requirement and various other features such as urbanization.
Social factor has been a boon to GM because the firm is in existence for almost a decade now. It has been a global leader in sales and services for almost seventy years. This is a factor which gives the company its name and status, which is treated with respect and associated with reliability and endurance. Considering the aforementioned positive social factors, the company still had to suffer setbacks due to distinct values and attitude of the consumers and naÃ¯ve strategies GM that imposed in some countries. Cutback was the new trend of the customers and GM had to adapt itself to stay in the market. Hence, the bulky and consuming engines had to be replaced with high technology fuel efficient ones such as hybrid.
Point out what the challenge/problem was?( this the problem highlighted by the professor)
What were its consequences on General Motors? ?( this the problem highlighted by the professor)
What did GM do to deal with it in the best possible way? ?( this the problem highlighted by the professor)
To understand the environment of the General Motors Company in a gist, it is one of the world’s oldest and largest enterprises in automobile business. The firm produces all the big brands of vehicles which are in the dream car list of almost every individual; it enlists Chevrolet, Pontiac, Buick, Cadillac, Hummer, Saab, GMC, Saturn. It shares alliance with Suzuki and Isuzu. GM also shares technologies with the current world leader Toyota and Honda Company. The firm is always known for its exotic cars and setting world standards of driving experience. The vision of GM has always been par comparison and to be a leader in automotive products and associative assistance. Its motto is to provide enthusiasm in customers via endless betterment through reliability, joint effort and innovation of the GM group. For GM to become a world leader in automotive business the firm had to shift on to alternatively fueled automobiles and advanced standard products that makes an impact on international consumers’ and gives them the assurance that they can associate with quality and innovation.
Even though the group is not at its best in recent times globally, one of the greatest advantages is that the company has stayed in the business for almost a century which makes it the world’s most globally experienced group and consequently gives it a cutting edge over the others when expanding globally is considered. Adding up to it is the ‘OnStar Satellite Technology’ installed in vehicles which is helpful in catastrophic conditions like theft. This technology allows the driver of the vehicle to communicate with the OnStar assistance whenever necessary. With so many advantages on its side, GM’s average of US $ 701 /vehicle increased to about 108% in the year 2001.
Standing tall and dominating over its rivals for a very lengthy period, the rivals have found many loop holes that could e used to take down GM. The main reason for its downfall is the employment structure of GM. The company is still a leader in building revenues but the number of employees are way more than the rivals.
One the biggest weakness of GM is investing in the project of hybrid and alternative sources. The company has been doing research for years and blowing up a lot of monetary resources without desirable results. This is the biggest blow which has almost single handedly outcaste GM from the world competition. More over, after liquidation, approximately 67% of the firm is owned by the US treasury department. Hence, they are too dependent on the government which hampers its power to make decisions. Also, the competitors are too strong to focus on just one country. Lastly, considering the topic of poor organization structure again, the association is vertically structured, this being a cause of lack in communication. This directly affects the productivity.
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