General Motors Company Case Study

 

GENERAL MOTORS COMPANY CASE STUDY

 

Table of Contents

1.0 Introduction

2.0Reasons for Initiating Strategic Change

2.1 PESTLE Analysis

2.1.1Political

2.1.2 Economic

2.1.3Technological

2.1.4 Social-cultural

2.2 Porters Five Forces

2.2.1Competition

2.2.2 New entry barriers

2.2.3Buyer’s negotiating power

2.2.4 Bargaining power of suppliers

2.3 Internal Factors

2.3.1 Political

2.3.2 Cultural

3.0 Changes made to the Strategy of Organization

3.1The overall cost leader

3.1.1 Cost-cutting

3.2 Differentiation

3.2.1 Technological bases

3.3 Positioning

3.3.1 Resources and Capabilities

3.3.2 McKinsey 7-S framework

4.0 Evaluation of Strategic Change Implementation

4.1 Theory E&O(Radical)

4.2 Logical Incrementalism

5.0 Conclusion

Bibliography

 

  • Introduction

The company landscape is moving very quickly; innovative technologies are evolving and taking shape from the old to the new approaches, new consumer tastes, new developments in the industry, and tactics to better monitor and motivate workers (Quinn, 1989, p.20). When clients are an emperor of the industry, and much of the enterprise now invest trillions on organisational research and growth, the management and professionals of today’s companies are now forced to focus on organisational change in the companies (Khan & Hashim, 2014). Since the company operations are now globalised, every organisation aims to sustain the existing clients, train the workforce, and introduce and adopt modern manufacturing models. The organisation’s operations to be controlled better.

Strategic change means taking all necessary steps to strengthen the current situation in the future, implementing the change plans to maximise benefits, and determining whether the organisation’s goals are met or not (Khan & Hashim, 2014). General Motors (GM) company was set upin 1908. GM was then the only car-making company in Michigan, United States. It first became a holding Buick company, by 1920 it became the world’s biggest engine manufacturer and had massive popularity at the Alfred trade show, when it produced a new product and design car each year because of its leadership, and gave the business such a reputation(Inkpen, 2008, p.447).

Chevrolet, Buick, Pontiac, and Cadillac are the other brand of the company. Cars produced these various brands by the company that year so that no other rivals could compete with multiple vehicles in the company. However, when the Japanese car manufacturers came into being, the business was challenged particularly by Toyota Japan, particularly on the North American markets, greatly disturbing GM competitiveness. The GM’s sales index decreased in 2001 since Toyota conquered the market. Therefore the GM secured loans from the US Government and Canada to finance the business during this crisis era. In 2009, the company was solvent and transferred to a Chinese company its many brands(Maiorescu, 2016, p. 556). Now the firm has redeveloped and changed its role in the industry. The corporation currently operates again in the main models, including GMC, Cadillac, Buick, and Chevrolet, in the United States. The GM case study analyses the rationale for strategic change, transformations made to the organisation, and critically evaluation of the implementation of the strategy based on theories and evidence.

 

2.0Reasons for Initiating Strategic Change

2.1 PESTLE Analysis

This analysis scrutinises the macro environment, including political, social, technological and legal factors (Whittington et al., 2020).

2.1.1Political

In the last decade, the global automotive market was dominated by political influences. The price of petrol has risen over the previous period, and the demand for gas scrubbing SUVs and other large vehicles has also slowed. Emissions standards in most countries have been strengthened with an increased knowledge of global warming.

2.1.2 Economic

GM has kept their low-interest rates actively to boost the economy, with developing countries’ GDP growth remaining strong. A growth opportunity is evident in ride-sharing, where markets are estimated that by 2025, the sector will rise to hit a volume of over a 150billion (Maiorescu, 2016, p. 560). Asian markets, particularly China and India, are projected to develop faster about increasing demographic and increasing urbanisation. In combination with the enormous growth prospects in the US, these are perfect opportunities for growth for automotive firms. With Maven Gig and Car Sharing, GM has launched offerings in this market. Maven Gig uses vehicles to provide consumers with access to cars suitable for driving sharing by organisations such as Uber Technologies Inc. and Grub hub Inc. Maven car-sharing operates by enabling drivers to use Maven-owned, peer-to-peer car-sharing vehicles. The system is offered in 24 cities in the United States, Canada and Australia. Coupled, Maven Gig and Maven Car Sharing were capable, with 245,000 reservations and around 35 million all-electric powered miles, of generating 172million miles until ending month2018, with about200,000 subscribers(Maiorescu, 2016, p. 562), Maven will have significant growth potential in the years to come. Financial instability also weakened the firm’s cash flows significantly.

2.1.3Technological

There is an opportunity for automated driverless cars. General Motors has carried out testing of the Chevrolet Bolt EV, a fully automated vehicle Cruise AV, during the past year, aiming at mass production without the steering wheels or pedals of self-drive vehicles before 2019. In the future, driverless cars worldwide have tremendous reach. GM would meet the current requirement for an auto without driver controls with large-scale manufacturing. It would also assist GM in combating Ford’s rivalry, which also began its trials. GM will make decent profits and raise revenues even in other parts of the globe by using this idea as to its vehicles and SUVs. In 2019, GM will launch a private, commercial Ride-Share Service, which will eventually expand as they travel to various cities (Fitzgerald et al., 2014, p.1).

The transition in innovation has seen many shifts in the nature, construction and movement of vehicles worldwide. Consumers need new cars, which have become lighter with galvanised steel design and safety with the use of development in safety devices. Technologies in fuel handling and engine configuration have also increased fuel efficiency. The technology is evolving so much that car manufacturers can’t maintain design by developing new technology. Electrical devices and computer devices have improved the user interface. The internet affected the car sector, as with other industries. Consumer options for their car purchases have been more educated.

2.1.4 Social-cultural

The Social-cultural aspect has a significant impact across territories on the automotive sector. Demand in North and Europe is mainly derived from substitute sales since many households already have a car or more. Consumers can pay for their taste and expectations. Among the US population, “Made in America” is increasingly recognised, and therefore, car production is rising in America(Lorsch,1986, p.2). Similarly, European-made cars are benefiting from increased local demand while European consumers favour their brand. In recent times, vehicles have become a status symbol, and the demand for luxury automobiles has grown. The needs of consumers in any sector mostly rely on the cultural elements of the country. While in markets such as India, people seek “value for motor vehicles,” luxury is required in advanced economies. In the present market, consumers demand fuel efficiency and protection.

2.2 Porters Five Forces

2.2.1Competition

GM is strongly influenced by stiff competition due to high exit barriers for businesses such as General Motors. High exit hurdles are pushing companies to stay in the market and to look for more competitive solutions. GM was profoundly affected by the Japanese Toyota Corporation, the new competitor in those times. The business sold about 3 million, and the closest competition was Toyota and China-based firms (Maiorescu, 2016, p. 558). North America remains the world’s biggest economy for GM. This competition significantly disrupted the overall efficiency of the GM.

It is essential to preserve quality and continuity. Historically, GM faces a challenge in reassuring its buyers that it manufactures the world’s best vehicles using depleted oil stocks and increased petrol costs that has brought about a sharp decline in sales of SUV and trucks. GM is a significant producer facing GM’s highest heat rivals and poses a threatening challenge For GM to be the pioneer in the automotive sector(Tichy, 1983). GM is the biggest producer. It is now facing harsh competition from other players in the intensely competitive automaker market, having paid moderately in the past and the rising labour costs. The increasing cost of healthcare and pension pay-outs add to the problem. The entire automotive industry is affected by the increase in raw material costs, like steel. The organisation was forced to reduce manufacturing costs.

2.2.2 New entry barriers

A new automotive business is challenging to start with the unprecedently high amount of capital investment expected. With barriers for newcomers to the industry considerably high, it is relatively safe for established players to penetrate a new market.

2.2.3Buyer’s negotiating power

In today’s circumstance, where most of the world’s automakers have a global footprint, customer choices are open, and they profit from power(Tichy, 1983). Buyers go as winners as most companies sell the same goods and have low costs of flipping between rivals

2.2.4 Bargaining power of suppliers

If the Automotive Manufacturers and vendors are struggling with power, influence is noticeable to the producer. Parts and services are gradually becoming marketable because of standardisation. The power balance is definitely with the producer with only a few big manufacturers.

2.3 Internal Factors

These factors look into the microenvironment of a business, including organisational culture, human resources, financial resources, etc. (Whittington et al., 2020)

2.3.1 Political

The additional impetus to reform GM was workers’ high labour costs as it paid almost $75 an hour relative to Toyota $45 an hour, as a trade union deal with GM. In addition, the GM is required to operatethe facility with a limited output of 80 per cent; this plays a significant role in the company’s insolvency (Bayou & De Korvin, 2008, p. 302).

2.3.2 Cultural

In 2015, negative publicity showed that GM trucks were cheating for close to five years between 2011 and 2015 on pollution levels, which undermined its confidence (Mezias et al., 2001, p.71). Failure to diversify is another cultural issue. GM mainly specialises in the design and manufacturing of cars. The decrease in the automotive industry would be harmer for GM with all its assets in one market than other car manufacturers with diverse portfolios. On quality issues, safety is the first and foremost law of car production. Minor deficiencies and problems of quality can cause death. In 2015, it became apparent that GM used faulty ignition switches in millions of vehicles, which resulted in over 120 deaths and 270 injuries (Beer et al., 1990, p. 158). Concerning reliance, GM largely depends on SUVs and trucks. In 2019, GM’s car revenues fell by 3%, with demand for SUVs and collecting trucks declining by 2% as a result(Beer et al., 1990, p. 450).

Furthermore,GM is strongly dependent on the US market than any other automotive manufacturer. A drop in earnings on the US market will be disastrous at the bottom, with a significant share of his revenues coming from the market. The mentioned weaknesses affect the GM organisational culture calling for strategic changes.

 

3.0 Changes made to the Strategy of Organization

The ultimate GMCompany needed to make or transform the market, so it decided to make adjustments in some business fields, including structural modification, cost change, changing processes and culture change.

3.1The overall cost leader

3.1.1 Cost-cutting

The theory aims at the lowest cost relative to other companies in the industry (BARKER III & Duhaime, 1997, p. 13). The first steps GM has taken are the reduction of the cost. To preserve profit level, the enterprise has lowered the prices for specific brands, including Saturn and Hammer. The corporation frequently reduces salaries for its workers, a big concern for the company. In the last year, the corporation reached the cost reduction goal of up to fifteen billion.

Although GM has made a desperate effort to cut costs and raise revenue, they operated on deals to reduce labour costs and successfully grow in developing markets like India and China, both with their affiliates in America and in the US Increased emphasis on electric vehicles to improve models for fuel-efficiency. In 2008, however, global economic instability forced automotive sales down to near-stagnation and drowned GM’s business money. On 1 June 2009, the company filed for relief from bankruptcy. The US Treasury has extended a bridge loan if the business restrains from the crisis (Bayou & De Korvin, 2008, p. 287).

3.2 Differentiation

3.2.1 Technological bases

GM has an extensive portfolio of well-established products, such as Caddillac, Chevrolet, Pontiac, GMC, etc. GM is experiencing a comprehensive breakdown of just 100 000 kilometres where Japanese cars are up to 300 000 kilometres long (Fitzgerald et al., 2014, p.1). To reduce carbon emissions, GM directed the automotive technology movement. First, it introduced Airbag’s manufacturing vehicles and thus improved safety standards. GM has ground-breaking combustion technology in many of its engines, delivering a high fuel economy of more than 30 MPG. They have alsocontributedto the development of electric car lithium battery technologies.

3.3 Positioning

3.3.1 Resources and Capabilities

GM is now developing its own mobile devices, electrical controllers and body control technology that hit most rivals. GM provides a robust backbone information system with a worldwide IT application and GM Buy Power domain oriented web-based search engine customers (Dutton & Duncan, 1987, p. 103). GM is ranked No. 1 Innovator in its scorecard in the automobile and travel industry for four sequential quarters in 2011 among 183 companies listed by the patent committee. 1.123 US global product innovation patents were awarded to GM (Beer et al., 1990, p. 160).

The New GM Corporation with the US Treasury, the Government of Canada and its principal shareholders were set up on 10 July 2009. This current GM is a smaller, slightly less-branded, more oriented distribution network with its syndicates on sustainable work contracts. GM has reached ten successive quarters of productivity as of the second quarter of 2012, given the uncertain market and the demanding climate. It is an enormous turn for GM (Lorsch,1986, p.2).

3.3.2 McKinsey 7-S framework

The GM has altered the company’s philosophy, eliminated the GM from the automobile product board and the car policy of 8 managers, who were solely responsible for reporting to CEOs. It is mainly aimed at accelerating the decision-making system day-to-day. The GM has since changed its philosophy to make workers more productive and accountable (Bayou & De Korvin, 2008, p. 287).

 

4.0 Evaluation of Strategic Change Implementation

4.1 Theory E&O(Radical)

Theory E, based on economic value, is combined with Theory O, based on organisational capabilities to evaluate the effectiveness of the change process (Whittington et al., 2020).

The cultural concept was focused on the top-down approach and, in contrast to most firms, neglected the participation of staff entirely. Others indicated that the organisation had not taken a top-level approach in which the team fell happy. The company motivated the staff to adopt a top-down approach instead of only showing workers what they are doing. The GMhas also been effective because of cultural reform, as workers are now mindful of duty and obligation, and the firm has enabled employees to increase productivity(Lorsch,1986, p.2).

GM has paid generous wages, health insurance and other perks for its vast workforce base following other American automotive manufactures. At one point, the total cost of health care per car in the US was over $1500, three times more than that for Japan(Fitzgerald et al., 2014, p.1). While the organisation was concerned with this generosity, GM created a solid human resources base. It has helped them be competitive.

The reduction in costs was necessary for change organisation but faced a significant issue with the union’s approval. The corporation agreed that the salaries of workers could not be lowered and the capacity level maintained (Mezias et al., 2001, p.71). As GM’s recruitment figures of 98 to 2009 seem to cut costs, it has dropped from 226,000 to 101,000 employees and now focuses on sales rather than more cut-offs and even the firm has decided to lower its manufacturing workforce from 55000to 35000 (BARKER III & Duhaime, 1997, p. 13). In addition, that will surely save the business costs.

Through organising several seminars, GM has initiated several HRD programs such as “GoFast,” which have successfully reduced bureaucracy for over $500 million and have encouraged problem-solving onsite. GM has often physically accumulated enormous physical energy, which plays its power, through its life for more centuries.

4.2 Logical Incrementalism

This theory focuses on learning from experiences for future improvement, which promotes interrogation,discussion,creative intelligence, expertise and abilities.

Fig 1 logical incrementalism. Adapted from Google

 

Rick Wagoner’s CEO, Human Leadership Unit, has been a GM director since 2000. GM undertook ambitious restrictions under his guidance. His primary focus during his term was on SUV fuel and light trucks. Although these cars offered high profits, it was not affordable due to the rising price of energy. Vice President Bob Lutz was then well-known as a leader who pioneered progress in the production of electric vehicles. However, his design was not given adequate attention. The worst decision in GM’s leadership was a halt to the electric car initiative and not a resource and priority on hybrid vehicles. Wagoner outlined in an interview with Motore trend. Akerson became Chairman and CEO in July 2009 when the US federal government took over GM’s authority.

Under the management of Akerson, GM has built a $23 billion biggest IPO ever. His management team has succeeded mainly in restoration of viability and recovering the market share lost by improving customer opinion of the quality of the GM product. GM products were enabled to reinvest in production and new jobs to support the US economy restore through constant expansion.

 

 

5.0 Conclusion

GM made improvements to the company to operate well, increasing its selling volumes and maintaining worldwide market shares, but the changes were insufficient. Therefore the company required more exposure to the situation and adopted some other amendments to retain its status and succeed in the foreign market. Using theories of Overall cost leader, differentiation, and positioning (Whittington et al., 2020), GM made changes in its cost, structure, and culture, thus increasing its profitability and competitive edge. Since faced with heavy rivalry and bankruptcy, the GM now again enhanced the company’s operations and remained the world’s largest automotive manufacturer; the company has recently changed and increased the company’s working situation.

 

 

 

Bibliography

BARKER III, V.L. and Duhaime, I.M., 1997. Strategic change in the turnaround process: Theory and empirical evidence.Strategic management journal,18(1), pp.13-38.

Bayou, ME and De Korvin, A., 2008. Measuring the leanness of manufacturing systemsa case study of Ford Motor Company and General Motors.Journal of Engineering and Technology Management,25(4), pp.287-304.

Beer, M., Eisenstat, R.A. and Spector, B., 1990. Why change programs dont produce change.Harvard business review,68(6), pp.158-166.

Dutton, J.E. and Duncan, R.B., 1987. The influence of the strategic planning process on strategic change.Strategic management journal,8(2), pp.103-116.

Fitzgerald, M., Kruschwitz, N., Bonnet, D. and Welch, M., 2014. Embracing digital technology: A new strategic imperative.MIT sloan management review,55(2), p.1.

Inkpen, AC, 2008. Knowledge transfer and international joint ventures: the case of NUMMI and General Motors.Strategic Management Journal,29(4), pp.447-453.

Khan, M.A. and Hashim, M., 2014. Organizational Change: Case Study of General Motors. InASEE Zone 1 Conference, University of Bridgeport, Bridgpeort, CT, USA.

Lorsch, JW, 1986. Managing Culture: The Invisible Barrier to Strategic Change.California Management Review,28(2).

Maiorescu, R.D., 2016. Crisis management at General Motors and Toyota: An analysis of gender-specific communication and media coverage.Public Relations Review,42(4), pp.556-563.

Mezias, J., Grinyer, P. and Guth, W.D., 2001. Changing collective cognition: a process model for strategic change.Long range planning,34(1), pp.71-95.

Quinn, J.B., 1989. Managing strategic change. InReadings in strategic management(pp. 20-36). Palgrave, London.

Tichy, N.M., 1983.Managing strategic change: Technical, political, and cultural dynamics(Vol. 3). John Wiley & Sons.

Whittington, R., Regnr, P., Angwin, D., Johnson, G. and Scholes, K., 2020.Exploring Strategy Text and Cases. Pearson UK.

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