This research paper presents some recommendations and a related action plan to address the strategic changes which are deemed crucial to the survival of General Motors (GM). An overview of the contemporary situation at the corporation is provided in this section of the paper, which is then followed by specific recommendations and a strategic plan of action to bring about the changes which are necessary for the company’s survival in these turbulent times.
The recommendations and action plan are framed within the concept that “the strategic management process is based upon the belief that organizations should continually monitor internal and external events and trends so timely changes can be made as needed. In the first instance an overall justification and rationale for change should be the primary concern which guides any strategic undertaking, hence, the extent of change as to be instituted by General Motors (GM). As Mintzberg et al.
(1998) point out, ‘Every strategic change involves some new experience, a step into the unknown, the taking of risk. Therefore no organization can ever be sure in advance whether an established competence will prove to be strength or a weakness. ’ (p. 34). In this regard, for General Motors (GM) it may be argued that the established competencies at strategic level are few, whilst the need for change is absolute. Hence, this report sets out how effective change could be realized through: ' The adoption of a recognizable Relationship Marketing Approach.
' The re-configuration of General Motors as a recognizable Learning Organisation with enhanced Employee Involvement practices. ' The redress of financial deficits through the more widespread adoption of Total Product System (TPS), and correlative achievement of a shortened cash conversion cycle/stock conversion period. First, a relationship marketing (RM) approach is not predicated purely upon marketing itself, but the re-location of the customer or end user at the centre of operational logic. As Christopher et al.
(2002) point out, “this is not some altruistic or idealistic view of the firm as the provider of customer satisfaction at any cost, rather it is a hard edged business model that recognizes that long term profits are more likely to be maximized through satisfied customers who keep returning to spend more money” (p. 2). Second, the learning organization approach to influence change relies on the re-configuration of the macro and micro levels of the manufacturing process around the collegiate pursuit of end-user satisfaction.
This notion is supported by Hyman and Mason (1995) who point to the fact that “the learning organization is one in which managers perceive their position in the organization, and their relationship with subordinates, in a radically new way, utilizing new metaphors and ways of understanding (p. 145). Hyman and Mason (1995) even went further to suggest that, ‘Japanization’ was the key to the development of ‘learning organization’ that focuses on Employee Involvement practice (p. 144).
The cumulative effects of such changes, Hyman and Mason (1997) contends can be achieved through the pan-corporate adoption of a Toyota Production System (TPS) and this should facilitate an uplift of net present value through the dramatic reduction of buffers of inventory. Adopting the Toyota Production System (TPS) call for careful examination of the whole manufacturing process from the customer’s point of view, for it is only through the customer’s eyes; those companies such as General Motors (GM) are in a position to observe a process that separates the value added activities from the non-value added activities (Liker, 2004, p.
27). General Motors already has some experience of these operations through its New United Motor Manufacturing Incorporated or NUMMI joint corporate venture with Toyota Motor of Japan during the 1980’s. As Womack et al (2007) indicate, ‘NUMMI was to make no compromises on lean production. The senior managers were all from Toyota and quickly implemented an exact copy of the Toyota Production System” (p. 82). Unfortunately, the principles of this experience were not extrapolated more widely into GM operations.
Therefore, according to Christopher et al (2006), the survival and consequent re-establishment of General Motors as an important strategic player within the industry and on the world stage rests on the extent to which the company can: ' Create value for current and potential customers. ' Create value for the organization and the industry in which it operates. ' Build and sustain successful market relationships. ' Successfully manage relationships within crucial networks. ' Successfully integrate marketing, customer service and quality.
' Develop and implement, within a specific time frame, a comprehensive relationship strategy. The Current Situation at General Motors On the 30th, March 2009, the newly appointed CEO of GM, Fritz Henderson, reported that, “the administration has made it clear that it expects GM to expand and accelerate its restructuring efforts. I want the American people to know that we understand and accept this guidance. The road is tough, but the ultimate goal ' a leaner, stronger, viable GM ' is one we share’’ (2009).
Despite these reassurances, neither Henderson or new chairman Kent Krusa are assured of unconditional support from Steve Rattner, the former private equity investor who heads the Obama administration’s General Motor’s ‘task-force’. By the new June 1st deadline, the company must secure concessions from its employees via the UAWU, and the bondholders, or file for bankruptcy: this ' at present quite likely ' contingency would see both Henderson and Krusa follow outward-going CEO Rick Wagoner.
No one can be absolutely sure what the post-bankruptcy General Motors would look like. However, it is probable, that the company would be dis-aggregated into much smaller, diffuse organisations, - a process with uncertain implications for branding. General Motors (GM) employs 243,000 people in 34 countries, and the parent company in Detroit controls enterprises as diverse as Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. (2009).
In addition to the working capital it currently receives from the US taxpayer, Braithwaite (3. 4. 09) reports that Generals Motor is seeking €3. 3bn of loans or guarantees from European governments which includes about €2. 5bn from Germany, for its operations on the continent, which it has warned could run out of cash next month. There is little evidence however, that the company’s overtures will be any better received in Europe. In summary, to many, General Motors still appears over-complex, and inefficient.
Its plants are reckoned by Gapper (2009) to be operating, on average, at 75 per cent of capacity. The corporation, in common with many others, has also lacked focus on shareholder value and this has become even more problematic, especially when equated to short term rise in share price. As Gapper (2009) contends, companies such as General Motors have increased debt levels to pay more to investors through buy-backs, whilst Wall Street merely saw equity rose in value. Shareholders are, furthermore, inchoate and disparately focused.
Source: General Motors, (2008), ‘Financial Highlights’, Annual Report 2007, p. 6. Figure 2 Source: General Motors, (2008), ‘Financial Highlights’, Annual Report 2007, p. 6. As Figures 1 and 2 show, GM’s revenue and output appears outwardly healthy: however, as Christopher et al. (2002) point out, ‘…Firms need to consider customer value and shareholder value together. Placing too much emphasis on either one of them…could have an adverse long terms impact…value is created over time and is subject to changes and external influences such as other stakeholders.
’ (p. 192). In other words, there is little merit in marketing a value proposition attractive to customers if it produces such low dividend that shareholders will seek to undermine it. This may be conceptualized in terms of Value Determination. (p. 194) Figure 3 Source: General Motors Corporation, (2008), restructuring Plan for Long Term Viability: Submitted to Senate Banking Committee and House of Representatives Financial Services Committee, December 2nd 2008, p. 21.
Source: General Motors Corporation, (2008), Restructuring Plan for Long Term Viability: Submitted to Senate Banking Committee and House of Representatives Financial Services Committee, December 2nd 2008, p. 21. A similar point may be made with regard to the restructuring of costs. As Figure 3 shows, GM is keen to foreground the overall downward pressure it has applied to costs, as part of its restructuring and funding bid. However, the figures in Figure 4, i. e. structural costs as a percentage of revenue are not quite as healthy, and it is this kind of disparity which has led to official objections in Washington.
Recommendations Given the current situation, the following is recommended as the way forward for General Motors. a. Make the organization more competitive: In a piece entitled ‘Time for a new driver’, the Economist (2009), points to the ineptitude with which the General Motors has been adequately engaging the North American market, hence, its desire to stay within its comfort zone. According to the Economist (2009), the auto-task force found General Motors to be less than bullish on its intent to reshape itself as a formidable competitive force within the industry.
The task force cited a number of issues in this regard - “contracting domestic market share, poor pricing structure in the face of doubt with regards to the quality of the products produced by the company, coupled by a weak product mix, a number of underperforming dealers, the failure of the European arm of the company to acquire eternal investment or government support and a legacy health-care and pension liabilities that will reach 6 billion a year by 2013”(The Economist, 2009) are all factors which must adequately addressed if General Motors is to become more competitive.
More specifically, although General Motors is certainly undergoing turbulent times and some level of uncertainty as it seek to transform itself into a lean organization there are a number of significant steps which can be taken to ascertain a more a more competitive posture. In this regard, the advice of Vasilash & Sawyer (2005) is still pertinent to the current situation. General Motors competitive position will be strengthen if it works towards: ' Becoming a more ‘transportation’ (mobile) company by offering more flexible and valuable transportation information to its customers.
' Facilitating stakeholder collaboration by involving anyone interested in its network in the process of reinventing its business. By communicating in a two-way manner with any GM worker, dealer, or supplier about the transportation business future, stakeholders can strengthen GM, and themselves, in the process. As a result, GM stakeholders will become stronger and more willing to be flexible as the company struggles as a large company undertaking rapid change.
Engaging in power-up designs, for according to Vasilash & Sawyer (2005), "While GM has some great in-house designers today, far too many of them come from a Corvette mindset and lack an orientation to expand upon cars and trucks (p. 1) In essence, General Motors must be more engaging in its efforts to be more competitive by reducing costs over the terms expressed in Fig. 4, through targeting of North American productivity in particular and becoming more innovative. b.
Provide high quality customer services: One of the contributing factors to General Motor’s demise is the fact that “customers doubt the quality of GMs products” (The Economist, 2009, p. 61). Also, as mentioned previously, a weakening product mix as customers taste and tighter fuel economy rules eat into sales of high-margin trucks and sports utility vehicles (The Economist, 2009) has beg the question of whether General Motors has become out of touch with the average consumer sentiment with regard to the quality of the service it provided.
No one doubts toe formidable position the company holds and the industry which is due to the fact that General Motors is a quality company. For example, in a quality survey conducted in June of 2008 GM claimed top honors in the large pickup segment for the light-duty Chevy Silverado pickup and a number of other products. (Hoffman, 2008). However, in spite of these successes the company chooses to continue the production a sale of a number of products which ultimately damages its reputation for high quality customer service.
Even though, it faces the likelihood of controlled bankruptcy, experts such as Huffman (2008) argue that “GM has never had a stronger line up of cars and trucks. From the good Chevrolet Cobalt SS, turbo charged and solid Saturn Astra, to the sweet-natured Cadillac CTS and the brilliant Chevrolet Corvette ZR1, the organization’s product portfolio is strong” (p. 1). However, each of these excellent models has been bugged down by more inefficient models and the company’s attitude to quality. In fact, when compared to its counter part Toyota, General Motors has had a reputation for poor quality.
For example, White (2005) found that despite a massive overhaul of manufacturing and engineering systems over the past two decades, a spate of rankings and reports show General Motors cars and trucks still lag behind the best from Japan and Europe. To improve in this area General Motors should focus on the rationalizing its brand, focusing on more efficient vehicles and repositioning theses around its highest selling brands - Chevrolet, Cadillac, and GMC, which collectively comprise 83 per cent of sales.
Also the company should focus on rationalizing its dealership networks both in terms of the number of outlets and the brand carried by each outlet. c. ) Become a learning organization: Garvin (1998) describes a learning organization as “an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behaviour to reflect new knowledge insights” (p. 51).
Having established this premise, Garvin (1998) then went on to argue that learning organizations are skilled at five main activities: (a) systematic problem solving; (b) experimentation with new approaches; (c) learning from their own experience and past history; (d) learning from experiences and best practices of others; and (e) transferring knowledge quickly and efficiently throughout the organization. On the issue of General Motors as a learning organization, until recently the company had relied on its strength as a producer of big cars. It seems that the company had not learned from the past.
Sorge (2000) suggest that such attitude is grounded in the belief that General Motors dominated the automotive business even though the company has always been in and out of declining fortunes. The current situation, however, calls for a reflection on the past and bolder steps towards understanding where the organization should be positioned in the future. Such position requires an attitude which embraces continuous improvement and life long learning aspirations for all internal stakeholders. Hence, in becoming a learning organization General Motors must focus on a number of key performance areas.
Given the defining parameters of Gavin (1998) General Motors, should seek to be more cognizant of what Sorge (2000) outlines as, (a) making managers more accountable for their actions; (b) Empowering employees to make decisions; (c) learning from current experiences and developing an attitude towards creating a company that is agile enough to accept the idea that the future is chaos, and move with the change; taking crucial steps towards rationalizing the company, that is, move towards preparation for what might be most imminent ' bankruptcy reorganization.
This reflects an understanding of making quick effective decisions based on past experiences and lessons from the operations of competitors. This recommendation in no was advocates that General Motors are not inclined to learn from its past experiences. That the company has become a world leader in the industry attest to its resilience and the changes it has made based on past experiences. For example, even in these tough times the company continues to succeed in places like China and Russia.
Given the current situation, however, it seem like General Motors must move towards a new and more focused direction towards becoming an organization of learners. c) To have employees become more creative and innovative: There is no doubt that one of the major strategic moves towards a newly revamped and economically viable General Motors is a massive reorganization of its workforce. Such reorganization includes downsizing its labour force. On the other hand, given the need for the company to revamp itself, it will be critical for employees who are seen as critical success factors in this attempt are more creative and innovative.
Such move includes a new direction and attitude towards the kind of training and development which are geared towards making employees more proficient at the jobs with the intention of making the company more competitive. The end goal must be a focus on utilizing the creativity which currently exist which giving employee pool the leverage to build on their expertise, creativity and innovative thinking through effective training, development and opportunities.
As Liker (2004) puts it, significant waste lays in “unused employee creativity, losing time, ideas, skills, improvements, and learning opportunities by not engaging employees” (p. 29). In this regard, one would agree that, in part, a move towards this direction is for General Motors to make a more extensive use of Toyota concepts such as the Obeya middle-management ‘pan-optican’ operations room for problem solving exercises. e. ) Recruit, retain and reward a competent work force: With regard to recruitment, the current situation dictates that a strategic move towards this end is a freeze on recruitment.
General Motors is restricted in its ability to recruit new personnel, for example, the Dayton Business Journal (2009) estimates that by this year end General Motors will cut 47000 jobs in USA and 14% of its employees globally. One the issue of retaining and rewarding its current workforce, General Motors must be cognizant of the fact that irrespective of the economic situation, its position as a key player in the automotive industry must be more resilient, economically viable and competitive must continue to develop and implement a system of extrinsic as well as intrinsic rewards, which links employees to the end-user.
In the end as Armstrong (2002) points out, “reward strategies and the processes that are required to implement them have to flow from the business strategy” (p. 4) and this should be the case of General Motors. f. ) Become more technological in operations: “General Motors has the scale, technology and reach that a capital-intensive, highly competitive global industry demands” (The Economist, 2009, p. 61). This does not mean that the company in its effort at rationalization should neglect to continue to focus on the elimination of waste in the form of:
' Overproduction: in which a unit is manufactured prior to its requirement in the overall production series. ' ‘Waiting’: the definition of an object when it is not being processed, or transported for such processing. ' Transporting: any movement of units or components which adds nothing to the manufacturing process or product, but which is created by other factors, i. e. the location of some facilities in relation to the overall process.
' Inappropriate or over-processing: fixed capital which is either too complex or too expensive, contributing to costs which cannot be recovered by through higher productivity. ' Unnecessary Inventory: the accumulation of work in progress (WIP), absorbing expensive facility space, and obscuring the overall efficiency (or in some cases, inefficiency) of the overall process. ' Unnecessary or Excess Motion: unproductive, unhealthy and/or activity on the part of employees which is legitimate in terms of the dynamics of the existing process, but has contingent increases costs.
' Defects: in addition to quality and branding implications, defects also require multiple costs, the duplication of effort and retracing of steps in production which completely destroying cost analyses models. ' Production of inefficient models of vehicles. g. ) Overcome employee resistance through a developed plan: Given the current situation, employees’ resistance can be tempered through a more collaborative effort between the trade unions and management.
In so doing, one of the key strategies from which the company can benefit in this regard is to utilize the complimentary principles of Genchi, Genbutsu, and Kaizen, which entails a continuous scrutiny of facts, and as Hyman and Mason (1995) advocate, implying “continuously striving for improvement in every aspect of the organization’s business through the genuine involvement of its employees, the workforce is seen as a key strategic resource, and it is from this starting point that one can best understand…employee involvement”(p. 167). CONCLUSION
There are a number of possible scenarios of change which can be deliberated upon to bring about the kind of restructuring and transformation needed at General Motors. The first scenario is about heightened consumer awareness of environmental issues and contingent shift to technological alternatives. As the UK Carbon Trust (2005) argues, ‘’climate change will become more visible as an issue over the next 5 years, from extreme weather events, to press coverage of the political debate over issues such as post-2012 international emissions regulation and the need or otherwise for nuclear power” (p.3).
This report argues that in this context, climate change could become a mainstream consumer issue by 2010. Given this situation, a key strategy in General Motor’s strategy is the need for a move towards the relevant lithium-ion offerings in place at the right price. For example, if it could reduce the price of the Chevrolet Volt from the prohibitive $30,000 to the current market price for a saloon, i. e. $20,000, it could apply significant leverage to the Toyota Prius.
The second scenario is based on a strategy towards the usage of conventional carbon-based technology which would allow General Motors to retain its market share through innovation, modification and lower speed limits. Putative partner organizations to General Motors such as Fiat are already developing projects such as the Multi-air , which combines electronics and hydraulics to produce a two-cylinder, 80 mpg engine which emulates the performance of four cylinder units, but with a 20 per cent fuel saving. General Motors could be the first to market with such an offering in the US, gaining considerable leverage over Ford and Toyota.
As the Economist (2009) noted, “GM has started making some good, desirable cars in efficient, flexible factories. Thus, they need to capitalize further on this strategy. The Third scenario relates to the fact that there is a sustained upturn in the US/global economy. If/ when this occurs, General Motors will be carrying (barring the situation where the contingency of bankruptcy has already occurred), excessive private and public debt. This makes it highly problematical for the company to return to the inefficient North American based manufacturing operation and service its liabilities.
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