General Motors was known as one of the world's best automotive, started in 1908 with 76 years of management and leadership at its best. Its global headquarters located in Detroit, with employees of 204,000 people all over the world and operates business in 140 countries. General Motors core business of producing cars and trucks operates in 34 countries and selling and servicing these vehicles through the following brands: GMC, GM Daewoo, Holden, Buick, Cadillac, Opel, Vauxhall and Wuling. It has the largest market in United States followed by China, Brazil, Germany, U.K, Canada and Italy. GM's main element, in which it is industry leader, is its vehicle safety, security and information services. As of 2008, General Motors is the ninth largest publicly traded company in the world. Recently the company has endured major financial confusion, including a 38 billion dollar loss in 2007. GM needs a sense of urgency regarding revising a strategic plan that incorporates the next generation of vehicles. In today's global economy and highly competitive auto industry GM has no time for delay.
Factors affecting General Motors and other car industry.
Industry involved in the design, development, manufacture, marketing and sale of motor vehicles are known as automotive industry. More than million of motor vehicles, including cars and commercial vehicles were produced worldwide in 2007. Figures show that in 2007, around 71.9 million new automobiles were sold worldwide in which 22.9 m sold in Europe, 21.4 m in Asia-Pacific, 19.4 m in USA and Canada, 4.4 m in Latin America, 2.4 m in the Middle East and 1.4 m in Africa. Though the markets in North America and Japan were inactive but in South America and Asia markets grew very strongly. Russia, Brazil and China were the one who showed rapid growth compare to others.
In 2008, automotive industry were experiencing a combination of pricing pressures from raw material cost and changes in consumer buying habits due to rapid rise in the price of oil. G.M and other automotive industries were also facing external competition from the public transport sector, as consumers re-evaluate their private vehicle usage. U.S is the world's largest consumer market for light vehicles, passenger cars and light trucks which are conquered by big three companies i.e. General Motors, Ford Motors and Daimler/Chrysler. But recently these three industries were started to lose their market share to other rivals within the industry. General Motors are facing huge competition by domestic company such as Ford Motors and Daimler/Chrysler and also by foreign companies such as Toyota Motors and Honda Motors who are able to produce car much cheaper cost than General Motors.
In 2006, General Motors has been bankrupted and has been avoiding a filing for years. For years it has been using cars as razors to sell consumers a monthly package of razor blades- in the form of highly profitable car loans. And the reasons for its bankruptcy are because they were focusing mostly on their finance division rather than it vehicle design operation. GM cars were poorly designed and build, took long time to manufacture as compare to its toughest competitor Toyota who has better designed and high quality and cheaper. In past GM controlled half of North America vehicle market but presently it has only 19 percent control as GM has been ignoring competition due to which Toyota and other industry took over the market share.
Since General Motors were focusing on making profit from finance they did not care about building better vehicles. It was managing in bubble as GM rewarded those employees who followed the old way of doing things and those who praises CEO wisdom and carry out his orders.
Since 1960, there were more powerful and strict laws and Government intervention that has affected GM and other car industries. Mostly, all regulation was related to consumer increasing concern for environment and concern for the safer automobiles.
Automobile Industries plays an important role on every countries economy. As Automotive industry are major user of computer chips, aluminium, textiles, copper, steel, iron, lead, plastics, vinyl and rubber. Research and study had shown that for every autoworker there are seven other jobs created in other industry which include aluminium to lead to vinyl.
Today's people are mostly concern about their status and society judges on the basis of what type of car one drives. Manufacture takes advantage of this thought and target the market. Every one want attractive and nice car which other people admires. Consumers feel better when they driving nice and new car.
Internet had played a significant role in automotive industry. A study showed that about 60 % buyers referred to internet before making their purchase and out of that 60 percentage. 88 % buyer went to auto website before going and taking test drive.
Huge Market Share:
Although General Motors market shares has dropped in United States but it still has very much competitive at 26 percent. On the other hand, it is increasing its share in Chinese market and world wide. They still believes that they have an opportunity to become automotive leader once again as it was before.
Although General Motors share have decline recently but they have capability of becoming leader once again due to vast experience of almost 100 years. As GM current opportunity is to expand globally and it has got experience to do so.
Variety of Brand names
General Motors had been leaders in the past and reason for that is wide variety of quality brand names that differentiate it from other automotive manufacturer. Its current brands include GMC, GM Daewoo, Chevrolet, Pontiac, Saturn, Hummer, Saab, Holden, Buick, Cadillac, Opel, Vauxhall and Wuling.
GMAC Customer Finance Program
Since, General Motors Acceptance Corporation establishment in 1919, it has proven to be GM's most reliable source of revenue.
On Star Satellite technology
Star Satellite technology was developed in1996 with a subscriber of more than 3 million and it is the standard of all GM vehicles. The benefit of this technology is that vehicle can be easily tracked at the time of emergency or theft. On the other
hand, it allows the driver as well as passengers to communicate with On star personnel just in one click of button.
Behind on Alternative Energy Movement:
This is one of the biggest weaknesses of General Motors. The alternative energy/hybrid technology has already taken place in the automotive industry and GM has been one step behind the competition in terms of alternative energy vehicles. As a result, GM faced lots of problem including loss of market shares and fall in company profit. Now days for any automotive company looking for success must be Hybrid friendly and fuel efficient.
Poor Organizational Structure:
This is the second and significant weaknesses of GM. Its organizational structure seems to be too vertically integrated. As a result, there is lack of communication between top level management and bottom level management and may have played a part in GM falling behind on the alternative energy movement.
General Motors profit has been certainly falling and they are struggling with respect to the size of their company. General Motors profit margin was about 1.5 % and the ROE has dramatically decreasing by dropping to 10 % in 2004. At this situation shareholders are not happy and they are becoming less interested.
Fully Based on US market:
For any one who is concentrating on one particular market can't be successful. This is what happened to GM's case, it fully dependent on the US market. It must take advantage of the opportunity to expand globally. Due to high competition, it is becoming too strong to focus on just one country.
Over Dependent on General Motors Acceptance Corporation (GMAC) Financing:
The other important weakness of General Motors is that it is too dependent on its financing program. Although, it is accepted that it is a great strength for GM, however it will be a problem if it solely rely on financing and can't turn profits, in order to compete with Honda and Toyota who are rapidly growing.
Poor Credit Status:
GM's credit status is steadily declining same as everything else. It is losing credit in market and amongst the customer. Its current ratio is merely above 1 and its acid test is even lower.
Poor strategies and lack of Foresight:
Due to increase in oil prices, consumers began to turn away from SUV's, but still General Motors predicted much of its operating success on its ability to sell newly unpopular vehicles. While companies like Toyota, were concentrating on light vehicle and in improving efficiency where GM assumed sales would continue in future.
Alternative energy movement:
GM is already behind its competition with regards to the research and development of hybrid vehicles. Moreover, Hybrid technology are still very much new giving GM the opportunity to become automotive leader in innovation and technology as it was before.
Continuing to Expand Globally:
Presently it has been observed by GM that there is an increase in Chinese market, which proves their needs to be more emphasis for foreign markets. If GM get into these markets and successfully grow with their continuing focus on the US market then they can be in the positive direction.
Low Interest Rates:
The low interest rates have the potential to generate an sudden rise in sales if GM have right marketing strategies.
Develop new vehicle styles and models:
To survive in competition GM must manufacture new vehicle style and model which attract the consumer because everyone knows that what is in today will be out tomorrow.
Rising Fuel Prices:
Rising Fuel Prices will be a problem for General Motors. As GM being a large producer in both trucks and SUV's sales have drastically decrease due to the lack of fuel efficiency. And the rise in fuel prices has played an important role in the discovery of hybrid and more fuel efficient vehicles but for GM which already lacking behind in the competition of hybrid technology; fuel price will definitely create a problem for General Motors.
Growth of Competitors:
General Motors who have been leaders in past has now been in trouble with the growth of its competitors. As its biggest competitor Toyota who is continuously growing and with the first step in the direction of hybrid technology can be big problem for General Motors.
General Motors is responsible for providing generous pension benefits to its employees, which at the time seemed like a great idea but they are now experiencing problems as more and more people begin to collect.
4. Increased Health care costs:
GM and other big companies with quality employee health care benefits, is now experiencing a large financial hit that only gets worse as time passes on.
Rising Supply Costs:
This is the biggest threat that not only affected General Motors but also affected whole automotive industries. As a result, each company were forced to cut their manufacturing and production costs as much as possible, without compromising the quality of the products.
ALTERNATIVE FORMS OF ORGANISATION DEVELOPMENT
Organizational Development is a system which differs from other systems of organizational change by putting stress/focusing on process rather than problems. In fact, change system focuses on identifying problems in an organization and then trying to alter the behaviour that creates the problem. OD is a methodology intended for use in complex situations to provide intervention strategy for change management. OD finds the behavioural interactions and the pattern that creates or sustain problem. In fact, OD does not change the behaviours, but they focus on creating a behaviourally healthy organization that will automatically solve and prevents the problems. OD generally considered long term effort that is of at least one to three years in most cases. In addition, it mostly focuses on combined management where manager and workers of different level communicate and unite to solve the problem. OD understands the fact that all organization is different and same solution can't put in every company. The other feature of OD is that it gives importance to team work and small group.
The important features of OD programs is the change agent, that is group or individual which makes OD process much easier. Almost all change agent are consultant from outside who are experienced in managing OD programs but sometimes companies may utilize its inside managers. The benefits of consultant from outside are that they provide a different outlook and have a less biased view of the organizations problems and needs. The disadvantage of outside change agents is that its lack an in depth of understanding of main issues mainly one specific organization.
On the other hand, outside agents may have some problem of securing the trust and cooperation by the main people in the organization.
Implementing OD Programs
OD efforts mainly involve of two groups of activities which are action research and interventions. Action research by Lewin and John Collier was originated in 1940. It is a systematic process of collecting data of a particular organization, giving feedback for action planning and calculating results by gathering and reflecting on more data. This Data collecting method includes surveys and questionnaires to interviews, random collection, drawings and various tests.
Action research can be said as diagnostic component of the OD process. The only easy technique of classifying OD interventions is by group size and interrelationship which contains interpersonal relationships, intergroup system, group processes and the whole organization.
General Motors Structure
General Motors foundation Board of Directors serve as the governing body for all contributions, drawing upon GM staff and operating unit input to guide the overall humanitarian process. General Motors Foundation recommends an annual budget and sets policies, guidelines, criteria and strategic direction, and approves major contributions.
At General Motors, its Corporate Relations department reviews all event participation and vehicle and donation requests, with the help of other GM operating units, as necessary. In addition, reviews of all memberships are done by its Corporate Relations and Public Policy Centre.
Under the supervision of the General Motors Foundation (GMF), variety of improvised contributions sub committees are centered on GM's identified program areas of education, health and human services, public policy, environment and energy and civic and community relations and set strategic direction within its scope as well as review and evaluate proposals before submitting recommendations to the General Motors Foundation. Many proposals originate and pertain to the communities where GM operates. In addition, Local Community Relations Committees in GM plant city communities have been established to administer local requests. General Motors Foundation refers such proposals for consideration and handling to the appropriate local committee.
System Involving Stakeholder
Any individual or organization, which can be positively or negatively impacted by, or cause an impact on the actions of a company, government or organization are known as a Stakeholder. There are three types of stakeholder which are as follows:
1. Primary stakeholders: These are the one who eventually affected, either positively or negatively by an organization's actions.
2. Secondary stakeholders: These are the one who are the intermediates that is a person or organizations who are indirectly affected by an organization.
3. Key stakeholders: These include Primary stakeholder and Secondary stakeholders who have significant influence or importance within an organization.
The objective of analysing stockholder is to develop cooperation between the stakeholder and the project team which assures successive outcomes for the project. In addition, stakeholder analysis is performed when there is a requirement to simplify the cost of predicted changes or whenever new projects are started and in connection with organizational changes. It become necessary to identify all stakeholders in order to discover success criteria and to turns these into quality goals.
US Government will be GM's major stakeholder as it has entered into bankruptcy after 101 years of existence and it failed in convincing its debtors to forgive 90 % debts. The government are willing to takeover GM bankruptcy but want as much as possible be in active as responsible as it can. Its alternative energy movement are the another stakeholder of GM. No matter GM is behind but its competition is with regards to the research and development of hybrid vehicles. However, hybrid technology is still very much new that gives GM the opportunity to become once again automotive industry's leader in innovation and technology.
There is an opportunity for General Motors to expand it automotive market globally. As GM recently seen that there is increase in the Chinese automotive market, which proves their needs to be more emphasis put on foreign markets. If GM gain access to these markets and successfully grow along with their continuing focus on the US market then there is a chance for GM to become automotive leader once again as it was earlier. With the right marketing strategy the low interest rates have the potential to generate an immediate increase in sales.
Developing new vehicle styles and models can create an opportunity for GM to rule in automotive industries. GM should always be attempting to develop the automotive world's most popular vehicles and as every one knows what is new today will become old tomorrow.
General Motors has to focus on external problems to overcome it current situation. Before manufacturing any car GM has to identify the external problems such increase in fuel price, changing consumer values, foreign competition and economic.
Model for change - STAR MODEL
Star model has been designed for organisational framework. This model use design policies which helps to make organisational decision and behaviour. The framework contains of series of design policies that are controlled by management and can influence employee behaviour. The policies are the tools with which management have to become skilled in order to shape the decisions and behaviours of their organizations effectively.
Star Model's design policies fall into five major categories. The first one is strategy, which determines direction. The second is structure which determines the location of decision making power. The third is processes, which goes with the flow of information and they are used to respond against information technology. The fourth is rewards and reward system, which power up to motivate the people so that they can perform and meets organizational goals. The last category of Star model is made up of policies which are related to people i.e. human resource policies, which influence and continuously shows the employees mind sets and their skills.
Strategy is the one of the most important method for any organization who looks for success. The strategy of company explains the goals and objective that to be achieved as well as the values and missions that to follow. Mainly it shows direction of the company where it is going. The strategy specifically defines the products or services to be provided and which market to be served, and what type of value to be offer to the customer. In addition, it also specifies sources of competitive advantage. It also defines the criteria for selecting an organisational structure.
General Motors has wide experience and they are taking this opportunity to all their business activity. Rising fuel prices and increased political pressures regarding global warming that created challenges to GM which provided opportunity to develop quickly and to manufacture alternative fuelled vehicles. But for GM, it got global presence in these critical emerging markets and has the knowledge and expertise in alternative vehicle technologies required to move the company forward. Consumer always thinks of GM when they think of innovative technology.
Structure decides the location of decision making power. Its policies can be categorised into four parts:
Specialisation: It determines what type and number of job specialities are required.
Shape: It determines the span of control at each level in the order.
Distribution of power: It determines the level of centralisation against decentralisation require in the organization.
Departmentalisation: This basis to form departments like function, product, process, market or geography.
A process is a sequence of successive events that lead to a product or a service offered. It is the combination of ordered operations whose end is the attainment of determines result. It is the flow of information and decision processes across the organisations structure. The processes can be either vertical through planning and budgeting or it can be horizontal through lateral relationships.
4. Reward Systems:
A reward system functions to align the goals of the employees with the goals of the organization. It influences the motivation of organisation members to make employees goals in line with the organisation's objectives.
The persons dimension has to do with norms that govern the contracting of staff and the mobilization of the membership.
Importance of the Star Model
This model helps to identify the causes of problems.
The lack of spirituality on the part of the people is rarely the true fundamental problem.
Implementation/Recommendation for change process in General Motors:
General Motors can redirect its profits and be able to maintain survival for the future if they adopt strategies such as Market Development, Market Penetration, Product Development, Restructuring, Retrenchment, and Liquidation.
For General Motors, it should start with product development then market development, liquidation and restructuring. The reasons for product development is that being at the top of priorities GM has to create a new type of Hybrid vehicle that will allow it to keep up with the competitive market, but at the same time the product must stands out from the crowd. It idea for Hybrid SUV, which fits the GM profile with maintaining the SUV portion, but also allows it to stay with the current market trends.
General Motors must also re evaluate the market which they are already trying as from years it is following old traditional outlook for automobiles but now it should look the competitive market and must change accordingly. General Motors needs to take a step back and must take a look at how they want to position themselves and towards market since what they have been doing is no longer in favour for the company. General Motors must manufacture different futuristic vehicles which have been heard in rumours from Toyota about their next plan of their action. And if General Motors manufacture the futuristic vehicles before Toyota then there is a chance to hit the market once again and it can stay ahead in competition.
Moreover, Liquidation is important to GM as it is an asset which is much higher than revenues and if GM could convert its assets into cash then automatically there will be readily available funds. As a result, GM would not have to depend on its US sales, which only include 2/3 of that market and its financing approach wouldn't be as much of a risk. This Liquidation can help out the financial parts of the organization.
Last but not least is restructuring, which General Motors most desperately needs to review possibilities. The company has taken a large hit in recent years and needs to find a way back to the development pace would be a start as well as cutting back on employees because the company is growing in size but not in profit. 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 come above these issues.