Strengths1. Large Market ShareAlthough 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 ExperienceAs 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.
3. Variety of Brand NamesGM 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 ProgramSince its establishment in 1919it has proven to be GM’s most reliable source of revenue.
5. OnStar Satellite TechnologyDeveloped 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.
Weaknesses1. Behind on Alternative Energy MovementThis 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 StructureAs 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 ProfitabilityLooking 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 marketGM 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 StatusGM’s credit status has like everything else has been steadily declining. Their current ratio is just barely above 1 and their acid test is evenlower. Although, I don’t see them getting denied based on their credit at this point, the seriousness of the matter is certainly apparent.
Opportunities1. Alternative Energy MovementIt 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 RatesWith the right marketing strategy the low interest rates have the potential to generate an immediate increase in sales.
4. Develop New Vehicle Styles and ModelsThis 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.
Threats1. Rising Fuel PricesWith 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 CompetitorsGM 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, who 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 CostsGM, 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. SteelOnce 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.
5 ForcesAnalysis of five forces helps organizations understand the business environment of their industry and carve out a position that is more suitable for the organization As identified by Michael Porter, forces that influence the industry are competitive rivalry, threat of substitute, barriers to new entrants, bargaining power of buyers and suppliers Competitive rivalry
With high degree of concentration in U.S, Japan, Korea and Germany, rivalry in Automobile Industry is intense. U.S and European markets with high market share is a playground for global automobile companies. Since the growth is slow in these established markets, global players are fighting fierce battle to grow their market share. With huge growth potential in the emerging economies like India and China, most of the global automobile manufacturers are changing their strategies to reap the benefits.
Rivalry in the automobile industry is further heightened fixed cost of manufacturing across the players and cost of switching for the consumers. Threat of substitute
Even though there are reliable alternatives to transportation, threat to automobile industry is fairly low except for mega cities with high population density. While there are several transportation systems available which are less expensive, they don’t offer the same level of convenience and independence of the cars. Moreover, owning personal transportation vehicle is a status symbol in some parts of world and it has social and cultural impact. With increasing focus on developing infrastructure in emerging economies, threat of substitute is sub seeding in those markets too. Barriers to new entrants
With unprecedentedly high level of capital investment required, starting a new automobile company is very challenging. Achieving the scale of economy required to compete with the existing and established player is extremely difficult. With the manufacturing facilities required automobiles is highly specialized, retooling may not be easy in the event of a failure. While barriers for the new entrants to the industry are substantially high, entering new market for the existing player is fairly easy. Bargaining power of buyers
In the current situation, with majority of the global automobile manufacturers having global presence, options available with the consumers is high and they enjoy the benefit of power. With most of the manufacturers offering similar products and with low cost of switching between the competitors, buyers walk away as winners. Bargaining power of suppliers
If there is any battle for power between the Automobile Manufacturer and the supplier, power is clearly with the manufacturer. With increasing standardization, parts and services are becoming commoditized. With hardly few major manufacturers, power equation surely is with the manufacturer