Gm Business Environment Essays

Gm Business Environment Essays Gm Business Environment Essay Gm Business Environment Essay 1. INTRODUCTION OF GENERAL MOTORS 1. 1 Brief introduction General Motors Company or better known as GM is an American multinational auto manufacturing corporation traded as NYSE:GM, TSX: GMM. Its headquarter is in America. The company was found first in 1908. In 2008, the major recession and global credit crisis drove car sales to near depression levels and dried up private sources of capital. GM, critically short of operating cash, received a bridge loan from the U. S. Treasury, under conditions that the company further accelerate a tough restructuring of its operations that had been underway for several years [1]. General Motors Corporation then filed for bankruptcy on June 1, 2009. In June, 2009, with a support from the U. S. Government, a new GM was reborn with four brands in the U. S. : Chevrolet, Buick, GMC and Cadillac. Since then, the company has grown up rapidly with more than 70% of its sales coming from outside of the U. S and become one of the world’s largest automakers. GM now employs over 209,000 people in every major region of the world and does business in more than 120 countries. GM and its strategic partners produce cars and trucks in 31 countries. They sell and provide services for the brands: Chevrolet, Buick, GMC, Cadillac, Daewoo, Holden, Isuzu, Jiefang, Opel, Vauxhall and Wuling and China is the biggest market. After the bankruptcy and getting support from the US government, GM has changed their strategy and now re-emerging at the new GM is a very competitive spirit. 1. 2 GM mission and vision statement The New York Times evaluate that for most of the 20th century, General Motors was the biggest company in the most important industry in the world. : And after one of the biggest corporate collapses in history, the new GM made one of the biggest rebounds ever[2]. â€Å"Vision statement is concerned with what the organization aspires to be†. (Johnson et al. , 2010; p164). GM’s vision is to design, build and sell the world’s best vehicles[3]. ‘A mission statement aims to provide employees and stakeholders with clarity about the overall purpose and raison d’etre of the organization†. (Johnson et al. , 2010; p164). GM works to be the leading auto manufacturer in style, technology, services and marketing of the auto business and surely in innovation. 1. Company’s core values According to Johnson, Scholes and Whittington (2008), core values are the underlying principles that guide and organization’s strategy[4]. GM has some main core values focusing on five main areas: customers, employees, communities, dealers and suppliers. (1) Customers. the company always keep in mind that motor vehicle safety begins with the driver and convince customers with quality and safety. GM listens to their customers and the relationship with customers is critical to their vision. (2) Employees. GM’s business can not be developed well without innovative and skillful employees. GM welcomes and encourages all employees to perform at their highest potential toward achieving the company’s business objectives and each individual’s professional goals. The company invest in educating and training their employees. (3) Communities. GM support communities in various ways including sponsorships and participation in events such as Education, Health and Human services, Environment and Energy and Community Development [5] (4) Dealers: GM wants to create a profitable dealer network across all GM bands that reflects consumer diversity. (5) Suppliers. GM has developed and grown competitive, diverse supply base that will work together with GM to design, build and sell the world’s best vehicles. 1. 4 Company’s objectives â€Å"Objectives are statements of specific outcomes that are to be achieved. † (Johnson et al. , 2010; p55). Like other companies in the industry, GM’s objectives are (1) maintaining consistent levels of investment in engineering and product development to provide clients world best vehicle, (2) become profitable and minimal level of debt, (3) maintaining cost discipline to achieve bigger market share and (4) be responsible and sustainable to community and environment. . GENERAL MOTORS’ BUSINESS ENVIRONMENT ANALYSIS 2. 1 External environment PESTLE To analyze the impacts of external environment on GM’s business, the framework PESTLE will be used. â€Å"The PESTEL framework categories environmental influences into six main types: political, economic, social, technological, environmental and legal. † (Johnson et al. , 2010; p55). Political factors: More laws and regulations are applied in different countries due to the economic downturn, import policy, fuel policy and consumers’ concern for environment and safety. For example in tax policy for importing cars in Vietnam is very high 100% 200%. In some poor countries where GM has office or branches, politics problems also affect auto industry. Economic factors: the economic downturn, inflation and unstable exchange rate have reduced the spending power of consumers. The credit crisis in Europe and economic problems in many other countries. Social factors: many people are jobless and reduce their spends or change the demand of vehicle. The gap between the rich and the poor is bigger and bigger in the world. Owning and driving a car shows the owner’s wealth and social status. Moreover, more people like environmental friendly vehicle. Technological factors: Technology is changing everyday and it requires the company to be updated and be more eco-friendly due to the trend of consumers. Many people have habit of using internet to look for a car before going to the shop and buy it so internet is really need to be focused on. Legal factors: more rule and regulations for safety standards and environmental impacts are being applied in many countries. Environmental factors: The environment is more and more polluted, too much smoke from factories and transport vehicles. This means that too much fuel has been used and need to be reduced. Therefore, many recent disasters like typhoons in Thailand, China, Earthquake in Japan and China where GM has the biggest markets really affected to the company’s business. 2. 2 Competitive environment Porter’s five forces framework â€Å"The Porter five forces framework helps identify the attractiveness of an industry or sector in terms of competitive forces. The five forces are the threat of entry into an industry, the threat of substitutes to the industry, the power of buyers, the power of suppliers and the extent of rivalry† (Johnson et al. , 2010; p55). Firstly, the threat of entry into an industry is low because there are many existing competitors in the industry and it costs lots of money to jump into the automobile business. Secondly, threat of substitutes to the industry is fairly high. Because of the economic downturn, the trend of using eco-friendly vehicles to save fuel and protect environment and traffic jams, other vehicles such as public buses, MRT, BTS are more preferable in many countries now. Thirdly, even the many consumers reduce their demand of buying a car, however, the bargaining power of buyers is low because simply they can not make a car themselves. The power of suppliers is fairy low because they can not produces a completed vehicle and really depends on its the company and the market. Raw materials are also easier to find in the high technology world. The last one is competitive rivalry which is really strong in automobile supplying market. Toyota, Ford, Volkswagen, Nissan, Huyndai and many other companies are competing with GM everyday with new models, new shops, new plants For example, Ford is going to set up more plants in India and Huyndai have created more cheaper cars. In general GM is now facing very competitive environment with high power of buyers, threat of substitutes to the industry’s products and services and very strong competitive rivalry in the automobile market. In general the industry is not favorable to profitability and the core competence of GM is innovation. 2. 3 Competitors and markets Even now there are not many new entrants to the industry but there are many existing competitors in the automobile business. They are all big and developed such as Toyota, Ford, Volkswagen, Nissan, Mazda, Huyndai, Mercedes and BMW, etc The three biggest competitors of GM are Huyndai Toyota and Honda Motor. Please see the financial report of GM for the last 3 quarter in 2011 and you can see. Toyota Motor Corp is a Japanese auto manufacturer that is the closest competitor to GM, especially in terms of number of cars produced and market share. In 2008, when GM was in the bankruptcy, Toyota Motor Corp. became the largest automobile manufacturer in the world continued remaining in 2009 and 2010. Huyndai Motor Corp is a Korean company that is also close competitor to GM in terms of product lines and competitive price. Huyndai Motors also focus on mini and mid-sized sedans which are more preferable by the middle class consumer. Ford Company is a very closer competitor to GM in terms of its size and innovation. With a long history, Ford has become the leader in harnessing nature as an energy source and using zero-emission hydroelectric energy. Looking at the US News Ranking for cars, Ford is the company who has most cars at the top lists[6]. In 2010, massive recalls from Honda and Toyota caused an alarm to the auto industry and really shared GM more markets. GM is now attracting more customers by innovating their existing products and selling them at very competitive prices; and positioning themselves better into the new markets. 3. COMPANY STRENGTHS AND WEAKNESSES 3. 1 Strengths Beside the external and competitive environment, the internal strengths of GM has really helped gain lots of its lost market share since they got back to their business in 2009. GM is still one of the leading company in the world automotive industry. These are the strengths of the company: Large market share is the core strength of GM. According to the Wall Street Journal, by the end of October 2011, GM had achieved the biggest share of the total market (18. 3%) in the US market[7]. [pic] [pic] Technology potential: GM’s global research resources allow the company to quickly investigate and integrate new technical areas of expertise. Safety and quality commitments: GM has announced that quality and safety are at their top of the agenda. GMs Passenger Sensing System is designed to help reduce the potential for inflation-induced injuries or fatalities to smaller occupants New business model centered on GM’s vision of designing, building and elling the world’s best vehicles. Good reputation of many brands such as Chevrolet, Cadillac, GMC, and widely global distribution networks. Innovation and responsibility: GM is now providing more and more eco-friendly and sustainable vehicles to reduce impacts on the environment. This is absolutely suitable with the new trend of consumer. GM has the new team focused on results. The company has gathered and promoted many strong engineering talents with rich education. 3. 2 Weaknesses Many people said that retail was GM’s strength. Yes, it was. However it has turned to be a weakness as the company has invested too much money to maintain the their global distribution system for so many brands without getting profit back. GM has launched many new brands recently and spent a lot of money to promote, do marketing and maintain them together with existing brands while many of them don’t make any profit. Looking at GM’s annual reports[8] and comparing with the other competitors, GM has a poor financial strength. [pic] Source: Automotive Industry Competitor Analysis (CPM), available at www. carfreaks. info 3. 3 Value chain Analysis The value chain describes the categories of activities within and around an organization, which together create a product or service†. At GM, the value chain can be analyzed as the table below: (4) 3. 4 Managing people for capability development GM is an multinational corporation and employs about 210,000 employees in all over the world. Their employees are from more than 120 differ ent countries with different history, culture and lifestyle. So to manage well and develop the strategic capability of the company is very important. GM has done quite well educating and training. The company provide and encourage their staff to a lot of education and training. GM has built the content and classroom-ready lesson plans to help inspire students to pursue Science, Technology, Engineering and Math careers[9]. GM also applies staffing policies to develop an motivate their employees. The company also develop people’s awareness to direct people doing their right job to achieve company’s objectives. The new business model and the new leadership at GM have changed their management style to manage, value and motivate well their followers. 4. STRATEGIC RECOMMENDATIONS FOR GM To implement the above portfolio strategy for GM, we use tools to put strategy into action. Implementation strategy is the final step of the strategic management process and many people said that this step is the most difficult step and it’s even more important than the strategy because if the company creates right strategy but implements it incorrectly, the strategy can not be supported to achieve the company’s objectives and vision statement, sometimes seriously the company probably goes to bankrupt or gets bad problems with the business. The tools to implement GM’s strategy can also be seen as the strategic recommendations for GM. They include structural type, leadership, information and control system and human resource. 4. 1 Structural type GM is a multinational company and structure is a key thing for success. The transactional structure which â€Å"combines the local responsiveness of the international subsidiary with the coordination advantages† (John et. al. , 2010, p441) will be a suitable type for GM. Because with this structure, each national unit such as in Vietnam, China and Thailand can operate independently following the strategy of the mother company and be more responsible for their business. Each country manager and management board must understand the culture where their customers and their employees live. GM should use Balanced scorecard to acknowledge expectations of different stakeholders who affect GM’s business, and to learn short-term innovation as well as long-term success. Balanced scorecard can be used at different levels, criterion and perspectives. 4. 2 Human Resources GM is a big company and their employees live and worked from over 120 countries in the world. GM recruits, chooses and employs right local people to work for the company and follow the overall strategy. However, human is not like other resources. Human Resources (HR), managers and management board should understand the local culture and diversify. Employees are very important for GM’s business. Good employees should be valued, motivated and given chance to education and promotion. In each country, GM should have different and specific rules and regulations for employees there. HR also needs to be sensitive with employees’ expectations and difficulties to encourage and motivate them well. 4. 3 Information and control systems GM needs to update and control information to make sure that the strategy is processing correctly. Moreover, information should be shared and communicated between staff in the company to make them feel comfortable to catch up any changes or problems. Information systems are to provide strategy-critical information on a timely basis, and whatever inventory, materials management, customers services, cost accounting and other administrative systems are needed to give the company important strategy-executing capability. These internal systems must support the management process, the way the managers at GM work together, as well as monitor strategic progress. [10] 4. Finance factors Finance is an important determinant of strategic success. To implement the strategy, it may cost the company money and it should be budgeted, estimated and control carefully because financial statement of GM has not been brightly yet. The company still have debts and financing need to be taken care carefully. 4. 5 Market leader GM has many well-known brands and another suggestion for GM to develop their mar ket to be the market leaders is that GM should increase their existing market share to high their growth also find new markets for the existing vehicles. Beside the Red Ocean Strategy which focuses more on head-to-head competition, GM should apply and develop Blue Ocean Strategy to create new markets by developing products, building good relationship with dealer networks and customers, finding niche market to focus on 5. CONCLUSION General Motors Company (GM) with a long history in the automotive industry has got back and step by step gaining its lost market share in the bankruptcy in 2008. With many strengths and competitive advantages, GM has gained huge market share in the U. S. nd many other countries such as China, Russia Moreover, in 2010 Toyota and Honda fell into many recalls which gave GM more opportunities to recover more quickly. [1] Company history and heritages, Globalization section, available at GM’s website: www. gm. com [2] Retrieved from topics.. [3] Akerson D. , â€Å"We are building a New General Motors†, General Motors Company 2010 Annual Report, p. 2 [4] G. Johnson, K. Scholes and R. Whittington, ‘Corporate value’, Exploring Corporate Strategy, 8th edition, Pearson Education, 2008, p 163 164 5] More information at gm. com [6] U. S. News Ranking for cars, trucks, SUVs and hybrids can be viewed following this link: http://usnews. rankingsandreviews. com/cars-trucks/rankings/cars/ [7] Source retrieved from http://online. wsj. com/mdc/public/page/2_3022-autosales. html [8] General Motors Company annual reports are available at gm. com [9] Company Innovation, information is available on GM’s official website gm. com [10] Information retrieved from: strategy-implementation. 24xls. com/en106