General Motors Case Study Strategy and History

“A car for every purse and purpose” – Alfred P Sloan Jr, Former President & CEO General Motors. General Motors, one of the world’s largest automakers, traces its roots back to 1908.

With its global headquarters in Detroit, GM employs 205,000 people in every major region of the world and does business in some 157 countries. GM and its strategic partners produce cars and trucks in 31 countries, and sell and service these vehicles through the following brands: Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Jiefang, Opel, Vauxhall and Wuling. GM’s largest national market is the United States, followed by China, Brazil, Germany, the United Kingdom, Canada, and Italy. Company History:

General Motors was founded on Wednesday, September 16, 1908, in Flint, Michigan, as a holding company for Buick by William C. Durant. Durant started acquiring many companies like Oldsmobile, Cadillac, Cartercar, Elmore, Ewing, Pontiac etc. Durant lost control of GM in 1910 to a bankers trust, due to the large amount of debt (around $1 million) taken on in its acquisitions. Durant left the firm and co-founded the Chevrolet Motor Company in 1911 with Louis Chevrolet. After a brilliant stock buy back campaign, he returned to head GM in 1916.

GM surpassed Ford Motor Company in sales in the late 1920s thanks to the leadership of Alfred P. Sloan. Sloan was inventing new ways of managing a complex worldwide organization, while paying special attention to consumer demands. Car buyers no longer wanted the cheapest and most basic model; they wanted style, power, and prestige, which GM offered them. During the 1920s and 1930s, General Motors assumed control of the Yellow Coach bus company, and helped create Greyhound bus lines. They replaced intercity train transport with buses.

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 to procrastinate. As stated, GM has just too much at risk in not becoming an industry leader in alternative fuel technology. Fuel-economy legislation is sparking the race. This is a critical time in auto industry with many threats, but opportunities as well. The next several years will redefine GM. Vision Statement

The GM vision is as follows: GM’s vision is to be the world leader in transportation products and related services. GM will earn our customers’ enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation of GM people.

The proposed new vision for GM is as follows: For GM to become the automotive industry leader in alternative fueled vehicles and providing superior quality products that global consumers call to mind when they think of quality and innovation. My vision for GM is to be the industry leader in innovation, and where all other industry competition strives to imitate. Mission Statement

The current GM mission statements are as follows: Drive improvements in market share, revenue, brands, people, responsiveness, and cost effectiveness through the implementation of global common metrics and best practice sharing. The new proposed mission statement will be as follows: GM will become an industry leader, not a follower. To regain lost market share that was lost to foreign competition, and once again be the auto industry leader in sales and market share in today’s global market. Values Statement

The auto industry just like the global economy is going through tremendous change, due to rising fuel prices, and environmental worries, such as global warming. GM must use these threats as opportunities, and take advantage of changing consumer buying habits. GM needs to change consumer perception of the company, from a dull, poor quality, vehicles to innovative, quality, and environmentally friendly company.

To do this GM must portray an image that states that GM values what the consumer wants and what the environment needs. Listen to what consumers are saying directly and indirectly about GM’s current products, and create innovative, green, vehicles that turn consumers into customers. At the same time provide GM stakeholders pride and financial incentives to remain with GM. Environmental Analysis

GM and the entire auto industry are currently challenged with the perfect storm. The auto industry is being hit by a weak US and global economy, rising fuel prices, and social and political environmental concerns and issues. In order to overcome these potential threat, GM should consider mass producing a range of alternative fueled vehicles, i.e. fuel cell, electric, and hybrid. SWOT Analysis

Strengths 1. Large Market Share Although GM’s market share in the US has dropped it is still very much competitive at 26 percent. They also have an increasing share in the Chinese market. With the right decisions there is no reason for GM to not become the automotive leader it once was. 2. Global Experience

As explained above even with GM’s recent decline they still have the market share and the experience to bounce back. They have been a worldwide company for nearly a century now and have established themselves as the global leader for most of them. If you recall I mentioned above that a current opportunity for GM is to expand globally and as we can see they already have the experience to do so. It is just a matter of the correct planning and proper implementation of those plans that will decided whether or not GM’s goals are achieved. 3. Variety of Brand Names

GM as I mentioned has been the automotive leader for the majority of the last century. A large reason for that is the wide variety of quality brand names that appeal to all target markets. The current GM brands include: Chevrolet, GMC, Cadillac, Buick, Pontiac, Saturn, Hummer, Saab, Daewoo, Opel, and Holden. 4. GMAC Customer Financing Program

Since its establishment in 1919 it has proven to be GM’s most reliable source of revenue. 5. OnStar Satellite Technology Developed in 1996 OnStar currently has over 3 million subscribers and is standard on all GM vehicles. This technology allows the vehicles to be tracked in the event of an emergency or theft. It also allows the driver and or passengers the ability to communicate with OnStar personnel at the click of a button. Weaknesses

1. Behind on Alternative Energy Movement This is GM’s biggest weakness. The alternative energy/hybrid trend has begun to take place in the automotive industry and GM has been one step behind the competition in terms of alternative energy vehicles. This has led to many problems including loss of market share and a decrease in company profit. In order for any automotive company to be successful from this point forward they must be Hybrid friendly and fuel efficient. 2. Poor Organizational Structure

As we can see in exhibit 1 of the case GM’s organizational structure seems to be too vertically integrated. This causes a lack of communication between employees from top to bottom and may have played a part in GM falling behind on the alternative energy movement. 3. Stagnant Profitability

Looking at GM’s profit we see that they are certainly struggling with respect to the size of their company. Their profit margin was about 1.5% and the ROE has dramatically decreased over the recent years dropping to 10% in 2004. This is a situation that shareholders will not be pleased with. 4. Overly Dependent on US market

GM has become too dependent on the US market and must take advantage of the opportunity to expand globally. The competition is becoming too strong to focus on just one country. 5. Overly Dependent on General Motors Acceptance Corporation(GMAC) Financing GM has become too dependent on its financing program. Granted it is a great strength for GM, however they once again cannot rely solely on financing in order to turn profit, especially if they want to compete with Honda and Toyota who are rapidly growing. 6. Poor Credit Status

GM’s credit status has like everything else has been steadily declining. Their current ratio is just barely above 1 and their acid test is even lower. Although, I don’t see them getting denied based on their credit at this point, the seriousness of the matter is certainly apparent. Opportunities

1. Alternative Energy movement It is obvious that GM was behind its competition with regards to the research and development of hybrid vehicles. However hybrid technology is still very much new giving GM the opportunity to once again become the automotive industry’s leader in innovation and technology. 2. Continuing to Expand Globally.

Recently GM saw an increase in the Chinese automotive market, which proves their needs to be more emphasis put on foreign markets. If GM can infiltrate these markets and successfully grow along with their continuing focus on the US market they will be headed in a positive direction. 3. Low Interest Rates

With the right marketing strategy the low interest rates have the potential to generate an immediate increase in sales. 4. Develop New Vehicle Styles and Models This is an opportunity that will never be satisfied, meaning that GM should always be attempting to develop the automotive world’s most popular vehicles, and as we know, what is in today will be out tomorrow. Threats

1. Rising Fuel Prices With GM being a large producer in both trucks and SUV’s, sales have drastically decreased due to the lack of fuel efficiency. The rise in fuel prices has played a significant role in creating the opportunity for development of both hybrid and more fuel efficient vehicles. As you will find with most threats, an equal opportunity will usually emerge as is the case here with GM’s opportunity mentioned above. 2. Growth of Competitors

GM no longer has the luxury of being the known leader in the automotive industry and faces the reality that they are in serious trouble. As I mentioned earlier Toyota took the first step in the direction of hybrid technology and has since drastically grown and become the questionable automotive frontrunner to start the 21st century. 3. Pension Payouts.

Part of this threat is their own doing and the other is simply unavoidable. GM is responsible for providing generous pension benefits to its employees, which at the time seemed like a great idea, however they are now experiencing problems as more and more people begin to collect. 4. Increased Health Care Costs

GM, like many large companies with quality employee health care benefits, is experiencing a large financial hit that only gets worse as time continues. 5. Rising Supply Costs, i.e. Steel Once again this threat affects the entire automotive industry and forces each company to cut manufacturing and production costs as much as possible, without taking away from the quality of the product. Core Competence

The core competence of General Motors is innovation. This is the driving force behind its $190 above turnover. General Motors has been utilizing innovation in service ad technology to secure itself a dominant position in the automobile industry, since 1908. In 1911, it conceptualized, engineered and commercialized the self-starter engine for the first time. Then in 1926, its product Cadillac was the pioneer in devising a nationwide service strategy.

In 1996 General Motors introduced OnStar satellite technology which allows equipped vehicles to be tracked in case of an emergency or theft and allows the passengers to communicate with OnStar personnel. Other new car concepts include minicars such as Chevy Aveo. However in the case of hybrid vehicles, General Motors was unable to keep up to the pace of the market demand.