general motors 2005: crisis and way out
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1
General Motors – 2005
GENERAL
MOTORS
2005
2
GENERAL
MOTORS
2005
Outline
Company Background
Current Situation and Basic Facts
External Environment: Opportunities and Threats
Internal Environment: Strengths and Weaknesses
Analysis of Strategic Factors
Strategic Formulation, Evaluation, and Recommendation
Strategic Implementation, Evaluation, and Control
Limitation and Conclusion
Question and Answer
3
GENERAL
MOTORS
2005
Company Background
Creation 1897-1909
General Motors was found by William “Billy” Durant on September 16, 1908 in MI.
Started with Buick, then acquired Oldsmobile, Cadillac, and Oakland (Pontiac)
Acceleration 1910-1929
GM set the pace of production, design, and marketing innovation for other to follow.
Added Chevrolet, Vauxhall, and Opel
Philosophy of “a car for every purse and purpose”
Emotion 1930-1959
During World War II, GM still committed on innovation
100% of GM production was in supported the war including airplane, truck and tank
4
GENERAL
MOTORS
2005
Company Background
Revolution 1960-1979
Due to environmental concern, increase in gas price, GM did the largest reengineering
program ever, with an age of lighter, aerodynamic, and more fuel-efficient vehicles.
Acted as a pioneer, an air bag, and reducing emission with catalytic converter for instance
Also played a lead role, in developing guidance and navigation system in Apollo 11
Globalization 1980-1999 GM re-invented itself as an integrated global team and focus on innovation growth.
Opened the big plant in Spain, Joint venture with China and India
Added Saab and HUMMER to strengthen both the reach and variety of vehicle sold worldwide
Innovation 2000-Present
Environmental concern about the energy, GM has created innovation vehicles.
More fuel-efficient engines to biofuels and hybrid, and Hydrogen fuel cell.
5
GENERAL
MOTORS
2005
Current Situation and Basic Facts
Operation Performance
Two main businesses: Automotive and other operations, and Financing and
insurance
Automotive business with four main sectors: GMNA, GME, GMLAAM, and GMAP
Plus one type of business that GM acts as an investor.
General Motor North AmericaGeneral Motor EuropeGeneral Motor Latin America/Africa/Middle EastGeneral Motor Asia Pacific
6
GENERAL
MOTORS
2005
Current Situation and Basic Facts
Operation Performance (cont)
GM’s automotive business has eight divisions, which are Chevrolet, Saturn,
Cadillac, Hummer, GMC, Pontiac, Buick and Saab
Regardless of decline in demand or non-profitability, GM had to run its plants at
80% capacity, minimum due to its union agreements.
It seems like GM’s operation is in trouble, especially in non-profitable product lines
and over capacity production
7
GENERAL
MOTORS
2005
Current Situation and Basic Facts
Financial Performance
Total Net Sales of Automotive
$193,517 million $(89) million
Automotive business
Stock Price, Market Capitalization and Liquidation
Stock Price: 73% Market Cap: $15 B Liquidation: $19.8 B
Net Sales
$2,805 million
Net Income
8
GENERAL
MOTORS
2005
Current Situation and Basic Facts
Financial Performance (cont)
GMAC’s Net Income
2003: $2.8 billion
2004: $2.9 billion
2002: $1.9 billion General Motor Account Commercial
The financial performance mirrors that GM is in trouble with its core business –
Automotive.
9
GENERAL
MOTORS
2005
Current Situation and Basic Facts
Marketing Performance
Offering a car to feed every market segment and every geographic area.
An increase in sales – an increase in GM’s total net sales in 2004.
Unit sales versus Net sales and Revenues
2004 2003
Auto & Other: (dollars in millions)
Total net sales and revenues ▲$161,545 $155,831
GMA net income (loss) by region:
GMNorth Amr ▲$1,583 $811
GMEurope ▼$-976 -504
GMLatinAmr/Africa/MidEast ▲$85 -331
GMAsiaPacific ▲$729 $577
GM Vehicle unit sales by region: (in thousands)
GM North America
Industry -- North America ▲20,275 19,841
Industry -- US. ▲17,302 16,970
GM Europe ▲20,606 19,537
GM Latin America/Africa/Mid-East ▲4,240 3,585
GM Asia Pacific ▲17,070 15,925
10
GENERAL
MOTORS
2005
Current Situation and Basic Facts
Marketing Performance
Offering a car to feed every market segment and every geographic area.
An increase in sales – an increase in GM’s total net sales in 2004.
Despite 52,000 sold unit per model, GM is about to lose 8% in overall sale in April.
By the end of 2005, GM would lose its US. sales about 5.2%.
GM is going down to the marketing problem very soon according to critics.
Market Share of Automotive
GMNA 2004: 26.7%
GMNA 2003: 27.4%
U.S. 2004: 27.2%
U.S. 2003: 28.0%
Global 2004: 14.5%
Global 2003: 14.6%
11
GENERAL
MOTORS
2005
Current Situation and Basic Facts
Human Resource Performance
By the end of 2004, GM employed about 340,000 employees worldwide (110,000
salaried workers)
GM paid $21.5 billions for the worldwide payrolls; $8.7 billions for US. Hourly
payrolls.
Average labor cost per active hour worked U.S. hourly decreases 6%.
2004: $73.73
2003: $78.39
6% Health Care Trend Rate Operating Expenses
GM is now carrying on the “legacy cost” ($1,600 per vehicle sold). This puts GM in
a cost disadvantage situation compared to competitors.
GM has spent $5.6 billion on health care, retirement and pension plan.
12
GENERAL
MOTORS
2005
Current Situation and Basic Facts
Research and Development Performance
R&D budget spending on 89 models in eight divisions
$13.7 billion
Chevrolet Saturn Cadillac Hummer GMC Pontiac Buick Saab
Due to too fragmented in R&D budget distribution, each model has to be stayed
longer in the market (nearly four years).
13
GENERAL
MOTORS
2005
Current Situation and Basic Facts
Strategic Posture
Conglomerate strategy – Automotive and Financial
Pursuing growth
Globalization strategy: Global industry
Functional Level
Business Level
Corporate Level
Broad differentiation
Product leadership
Not low-cost Strategy
Capacity over real demand and engineering
Design and engineering compromise
Being differentiated requires building creative talent and flair, strong capabilities in
basic research and corporate reputation for quality/technical leadership – Not GM
14
GENERAL
MOTORS
2005
External Environment: Opportunities and Threats
Remote Environment
Economic Factors
An increase in gas prices
An increase in a health care trend rate
Social Factor A change in lifestyle to concern more about environment
Technological Factors
Alternative vehicles for alternative energies (Hybrid and Hydrogen car)
Ecological Factors
Global warming concern
Eco-efficient
15
GENERAL
MOTORS
2005
External Environment: Opportunities and Threats
Remote Environment (cont)
Remote Environment Factors
Factors Opportunity Threat
Economic An increase in gas prices An increase in health care trend rate
-
-
√√
Social People’s attitude toward environmental impact √ -
Political N/A - -
Technological Hybrid car and hydrogen car technologies √ -
Ecological Global warming concern Eco-efficient
√√
-
-
16
GENERAL
MOTORS
2005
External Environment: Opportunities and Threats
Industry Environment
Threat of New Entrants
Mature industry
Reached economies of scale
Very high start-up cost
Hard to access distribution channel
Power of Suppliers
Requires many parts in production
Many suppliers in the industry
Low switching cost
Industry Competitors
Intensity of Rivalry
Very High
New Entrants
Very Low
Suppliers
Very Low
Buyers
Moderately high
Substitutes
Moderate
Threat of New EntrantsBargaining P
ower
Bar
gain
ing
Pow
er
Threat of Substitutes
of Suppliers
of B
uyer
s
Forces Driving Industry CompetitionAdopted for GM case
17
GENERAL
MOTORS
2005
External Environment: Opportunities and Threats
Industry Environment (cont)
Power of Buyers
Be a significant portion of revenues
Low switching cost
Not being large
Threat of Substitutes
Walking, riding bike, train, etc.
Cannot compare in usability
Not a new potential trend
Industry Competitors
Intensity of Rivalry
Very High
New Entrants
Very Low
Suppliers
Very Low
Buyers
Moderately high
Substitutes
Moderate
Threat of New EntrantsBargaining P
ower
Bar
gain
ing
Pow
er
Threat of Substitutes
of Suppliers
of B
uyer
s
Forces Driving Industry CompetitionAdopted for GM case
18
GENERAL
MOTORS
2005
External Environment: Opportunities and Threats
Industry Environment (cont)
Intensity of Rivalry
Mature and low growth
High number of competitors
High competition in market share
A lack of differentiation opportunityIndustry Competitors
Intensity of Rivalry
Very High
New Entrants
Very Low
Suppliers
Very Low
Buyers
Moderately high
Substitutes
Moderate
Threat of New EntrantsBargaining P
ower
Bar
gain
ing
Pow
er
Threat of Substitutes
of Suppliers
of B
uyer
s
Forces Driving Industry CompetitionAdopted for GM case
19
GENERAL
MOTORS
2005
External Environment: Opportunities and Threats
Industry Environment (cont)
Industry Environment Factors
Factors Opportunity Threat
Threat of New Entrants - -
Bargaining Power of Suppliers - -
Bargaining Power of Buyers - √
Threat of Substitute Products - -
Intensity of Rivalry among Competitors - √
20
GENERAL
MOTORS
2005
External Environment: Opportunities and Threats
Operating Environment
Competitive Position
Cannot compete with the Koreans and Chinese on price
Also cannot compete the Japanese on quality and the Europeans on performance.
Less effective in R&D spending
Bad in tracking and collecting customer profiles
Creditor
Private equity firms and hedge funds are ready to acquire potential companies.
21
MT6280 Strategic and Competitive Policy Management Piyorot Piyachan 4829524
GENERAL
MOTORS
2005
External Environment: Opportunities and Threats
Operating Environment (cont)
Customer Profiles
A continued expansion in GM market share – China from 2002 to 2004
2003: 8.60%
2004: 9.30%
2002: 4.20% 121.42 % Increase in two years
Time for “technology generates values” to replace “technology creates demand”
• Air-condition system• Heated rearview mirrors• Four-cylinder engine• ABS• 5-gear automatic transmission
• Comfort, ease of use• Overall vehicle design• Environmental friendliness• Safety• Driving dynamics/handling
22
GENERAL
MOTORS
2005
External Environment: Opportunities and Threats
Operating Environment (cont)
Operating Environment Factors
Factors Opportunity Threat
Competitive Position R&D advantage position Product quality Customer profile Price competitiveness Breadth of product line
-
-
-
-
-
√√√√√
Customer Profile Expansion in China market The presence of “technology generates value” approach
√√
-
-
Suppliers N/A - -
Creditors Private equities ready to take over √ -
Labor Market N/A - -
23
GENERAL
MOTORS
2005
External Environment: Opportunities and Threats
Summary of External Environment
External Factor Analysis Summary (EFAS): GM case
External Factors Weight Score WeightedScore
Opportunities People’s attitude toward environmental impact Hybrid car and hydrogen car technologies Expansion in China market The presence of “technology generates value” approach Private equities ready to take over
0.050.150.100.050.08
32423
0.150.300.400.100.24
Threats An increase in gas prices An increase in health care trend rate Bargaining power of buyer Intensity of rivalry among Competitors Competitor’s R&D advantage position Competitor’s product quality Competitor’s customer profile
0.050.150.030.120.050.070.10
2132322
0.100.150.090.240.150.140.20
Total 1.00 2.26
24
GENERAL
MOTORS
2005
Internal Environment: Strengths and Weaknesses
SWOT Analysis
Core Competencies
Tangible Global market share (14.5% as of 2004) Global market coverage Net sales of $193 billion in 2004 340,000 employees worldwide Number of plants Diversity of products Financing and insurance businesses
Intangible World’s largest auto manufacturer Global brand and image Power to set industry standard
Research and Development potential Technology potential Production and capacity potential
Resources Capabilities
Core Competencies
25
GENERAL
MOTORS
2005
Internal Environment: Strengths and Weaknesses
SWOT Analysis (cont)
Corporate Culture
DNA of being number one makes inflexibilities and overlooks future problems.
Result in over capacity, offering too much incentives to attract new employees
Marketing
Sale volume per model and U.S. sales
Causes: wrong marketing strategy. Try to “push” rather than “pull”, too many
product lines with 89 models
52,000 unit
GM 80,000 unit
Toyota
2005: 5.2%
U.S. sales
26
GENERAL
MOTORS
2005
Internal Environment: Strengths and Weaknesses
SWOT Analysis (cont)
Finance
2003: 0.81
2002: 0.92
2004: 0.74
Current
2003: 0.65
2002: 0.77
2004: 0.54
QuickLiquidity Ratio
Ability to pay short term obligation
GM is losing itsability to cover liabilities comparedto prior years.
Result
2003: 0.94
2002: 0.98
2004: 0.94
Debt to Asset
2003: 1.17
2002: 2.09
2004: 1.09
Debt to Equity Leverage Ratio
Percentage of fundprovided by debtand equity
GM can reduce riskfrom creditors andStockholders.
Result
27
GENERAL
MOTORS
2005
Internal Environment: Strengths and Weaknesses
SWOT Analysis (cont)
Finance (cont)
2003: 0.41
2002: 0.48
2004: 0.40
Asset TurnoverActivity Ratio
How much revenue is being generated for every $1 of
capital employed
Currentlynon-evaluable
Result
2003: 0.015
2004: 0.015
2002: 0.010
ROS
2003: 0.006
2004: 0.006
2002: 0.005
ROI Profitability Ratio
a company's operational efficiency and utilization
GM can betterutilize its assets togenerate revenue.
Result
2003: $482,029 m
2002: $379,142 m
Asset
28
GENERAL
MOTORS
2005
Internal Environment: Strengths and Weaknesses
SWOT Analysis (cont)
Research and Development
Not too bad performance as the revival of Cadillac
But with too many product lines, the budget is too fragmented and not enough
Operations and Logistics
Compromises car design and engineering to boost up productivity and keep plants
happy
Human Resource Management
Carry on a large expense in health care and pension – so called “legacy cost”
340,000 employees
No of Employees
$5.6 billion
Health care and Pension
$1,600 per unit
Legacy cost
29
GENERAL
MOTORS
2005
Internal Environment: Strengths and Weaknesses
Summary of Internal EnvironmentInternal Factor Analysis Summary (IFAS): GM case
Internal Factors Weight Score Weighted Score
Strengths Global market share (14.5% as of 2004) Global market coverage (six regional areas) Net sales of $193,517 billion in 2004 340,000 employees worldwide Number of plants Diversity of products Lucrative financing and insurance businesses Global brand and image Research and Development and technology potential Production and capacity potential
0.020.110.030.080.070.050.020.010.070.08
4444435435
0.080.440.120.320.280.150.100.040.210.40
Weaknesses Decline in global market share and U.S. sales DNA of being number one Inflexibility in managerial style Inappropriate marketing strategy (push strategy) Bad operational practice (capacity over engineering) Too much health cost and retirement expenses Decline in employee and union relation
0.120.010.010.070.080.140.03
3222212
0.360.020.020.140.160.140.06
Total 1.00 3.04
30
GENERAL
MOTORS
2005
Analysis of Strategic Factors
Problems and Challenges
Problem1: High Health Care and Retirement Expenses By the end of 2005, $5.6 billion to be paid out for the expenses
Holding the “Legacy Cost”
Problem2: Decline in Global and U.S. Market Share
Continued decline in global and U.S. market share
Cash drain out will then affect to GM’s liquidity status within five years.
Current US. market share is 25.6% but the threshold is 25%.
2003: 14.6%
2002: 15.0%
2004: 14.5%
Global Market Share US. Market Share
24% 20%
Cash Flow
$19.8 $17.4 $12.9 $(0.6)
In five years
31
GENERAL
MOTORS
2005
Analysis of Strategic Factors
Problems and Challenges (cont)
Challenge1: Chinese Market Expansion
Due to a significant increase in market share in China
To capture and dominate the market, GM has to move and move quickly.
Challenge2: Alternative Vehicle Development
Due to an increase in gas price, and environmental and pollution concerns
Hybrid car and Hydrogen car
Source: autospies.com
Sat
urn
Aur
a
Hy-
Wire
Source: evlender.org
32
GENERAL
MOTORS
2005
Analysis of Strategic Factors
Problems and Challenges (cont)
Challenge3: Competitive Advantage Revival Due to intensity of competitive rivalry and threats from potential competitors
To regain competitive advantages
Challenge4: Environmental Friendliness
Due to a trend of customer environmental concerns
A long term challenge to create another source of competitive advantages
33
GENERAL
MOTORS
2005
Analysis of Strategic Factors
Review of Vision and Mission
VISION:"GM’s vision is to be the world leader in transportation products and related services. We will earn our customers’ enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation of GM people."
MISSION:"GM is a multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stockholders will receive a sustained superior return on their investment."
The current vision and mission statement are still proper to GM in order to drive
the company forward with the current company and industry situation.
34
GENERAL
MOTORS
2005
Strategic Formulation, Evaluation, and Recommendation
SAFER Framework
The main framework to formulate, evaluate and recommend an appropriate set of
strategies that the organization can use to pursue its staked out position in the
industry [Shawyun, T, 2006]
Situational Analysis
The Input Stage
TOWS Matrix
The Matching Stage
QSPM
The Decision Stage
35
GENERAL
MOTORS
2005
SAFER Framework: Situational Analysis
Strategic Factors Analysis Summary: GM case
Strategic Factors Source
Global market coverage (six regional areas) 340,000 employees worldwide Number of plants Research and Development and technology potential Production and capacity potential Decline in global and U.S. market shares Inappropriate marketing strategy (push strategy) Bad operational practice (capacity over engineering) Too much health cost and retirement expenses
StrengthStrengthStrengthStrengthStrength
WeaknessWeaknessWeaknessWeakness
Hybrid car and hydrogen car technologies Expansion in China market Private equities ready to take over An increase in health care trend rate Intensity of Rivalry among Competitors Competitor’s R&D advantage position Competitor’s product quality Competitor’s customer profile
OpportunityOpportunityOpportunity
ThreatThreatThreatThreatThreat
Strategic Formulation, Evaluation, and Recommendation
36
GENERAL
MOTORS
2005
SAFER Framework: TOWS Matrix
Strengths (S) Global market coverage (six regional areas) 340,000 employees worldwide Number of plants Net sales of $193,517 billion in 2004 Research and Development and technology potential Production and capacity potential
Weaknesses (W) Decline in global and U.S. market shares Inappropriate marketing strategy (push strategy) Bad operational practice (capacity over engineering) Too much health cost and retirement expenses
Opportunities (O) Hybrid car and hydrogen car technologies Expansion in China market Investors swoop in GM businesses
SO Strategies Innovation for hybrid and hydrogen car to serve global market.
Concentrated Growth in China.
WO Strategies Product Development for U.S. market.
Market Development for global market.
Divestiture the Financial sectors to cope with health care and retirement expenses.
Bankruptcy declaration to eliminate health care and retirement payment.
Renegotiation with union about health care and retirement contracts in the next two years.
Threats (T) An increase in health care trend rate Intensity of Rivalry among Competitors Competitor’s R&D advantage position Competitor’s product quality Competitor’s customer profile
ST Strategies
Turnaround GM’s assets (plants) to make GM smaller and more manageable.
Turnaround GM’s product lines to make GM more compact.
Innovation for continue being differentiation as competitive advantage.
Marketing Improvement to pursue changes in customer profiles.
WT Strategies More reasonable incentive payment to reduce health care and retirement expense, and reflect with the current situation.
Outsource unimportant product items to reduce cost.
1Legacy cost
2
Competitive Advantage
Strategic Formulation, Evaluation, and Recommendation
37
GENERAL
MOTORS
2005
SAFER Framework: Quantitative Strategic Planning Matrix
(QSPM) Alternatives for a reduction in health care and retirement expenses Quantitative Strategic Planning Matrix (QSPM): GM case
Weight Divestiture Bankruptcy Renegotiation
Rating Score Rating Score Rating Score
Key External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/Environmental Technological Competitive
0.200.100.10
-0.15
332-2
0.600.300.20
-0.30
211-1
0.400.100.10
-0.15
333-3
0.600.300.30
-0.45
Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Computer Information Systems
--
0.250.20
--
--32--
--
0.750.40
--
--21--
--
0.500.20
--
--23--
--
0.500.60
--
Attractiveness Score 1.00 2.55 1.45 2.75
Get loss from such expenses before the rebound.
Strategic Formulation, Evaluation, and Recommendation
38
GENERAL
MOTORS
2005
SAFER Framework: Quantitative Strategic Planning Matrix
(QSPM) Alternatives for a reduction in health care and retirement expenses (cont)
Why not “Divestiture”
The financial sectors still in profit. Selling them is not a right thing to do.
2003: $2.8 billion
2004: $2.9 billion
2002: $1.9 billion
Why not “Bankruptcy”
A ton of liquidity makes it unlikely Risky with employee strike
$19.8 billion $2 billion in 54 days
Strategic Formulation, Evaluation, and Recommendation
39
GENERAL
MOTORS
2005
SAFER Framework: Quantitative Strategic Planning Matrix
(QSPM) Alternatives for competitive advantage revival
Innovation for differentiation and Turnaround (plant) for better operations.
Quantitative Strategic Planning Matrix (QSPM): GM case
Weight Innovation Turnaround (plants)
Turnaround (product lines)
Rating Score Rating Score Rating Score
Key External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/Environmental Technological Competitive
0.05-
0.050.100.15
3-344
0.15-
0.150.400.60
2-322
0.10-
0.150.200.30
3-322
0.15-
0.150.200.30
Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Computer Information Systems
0.050.100.150.200.15
-
33244-
0.150.300.300.800.60
-
43333-
0.200.300.450.600.45
-
43223-
0.200.300.300.400.45
-
Attractiveness Score 1.00 3.45 2.75 2,45
Strategic Formulation, Evaluation, and Recommendation
40
GENERAL
MOTORS
2005
SAFER Framework: Quantitative Strategic Planning Matrix
(QSPM) Alternatives for competitive advantage revival (cont)
Why not “Turnaround” (product line)
High rate of compensation prices. To lose market penetration capability.
$3,000 / vehicle
Strategic Formulation, Evaluation, and Recommendation
41
GENERAL
MOTORS
2005
Recommended Strategies
Cost reduction at plants- Reduce overhead cost of over production- Better utilize R&D budget- More focus on core points
Turnaround
Maximize R&D, technologies and experience- Seek differentiation- Head to new technology emergences- Stay in product leader
Innovation
Pursue growth in China- Capture profit from the fastest growth market- Reduce risk in U.S. market dependency
Concentrated Growth
Apply to the mature U.S. market- Add on differentiation to existing products- Generate more demand from the market
Product Development
Strategic Formulation, Evaluation, and Recommendation
42
GENERAL
MOTORS
2005
Recommended Strategies (cont)
Apply to global markets (EU, ME, and AP)- Continue capturing profits- Identify new target markets
Market Development
Focus one core competencies of the brand- Reduce cost- Gain advantage from excellent suppliers- Have more focus on core competencies
Outsourcing
Renew marketing strategies and processes- Have more reliable customer profiles- Better collaborate with R&D, production- Increase customer demand and satisfaction
Marketing Improvement
Renegotiate with union and restructure it- Better control labor cost- Reduce operating cost- Reduce “legacy cost”
Restructure of Employee Benefit
Strategic Formulation, Evaluation, and Recommendation
43
GENERAL
MOTORS
2005
Comprehension of Recommended Strategies
Operate in multi-business: automotive and financial
Conglomerate
Continue operating in globalenvironment
Globalization
Pursue growth in bothbusiness lines
Growth
Drop out some less important plants aroundthe world
Turnaround
Outsource less importantparts to other suppliers
Outsourcing
A New Set of Corporate Strategies
Strategic Formulation, Evaluation, and Recommendation
44
GENERAL
MOTORS
2005
Comprehension of Recommended Strategies
- More and more effort and money to be put into new market, such as China- Fewer internal resources remains for capital-incentive production areas
Outsourcing and Turnaround
1. Define candidate blocks2. Define influence3. Outsource not core blocks
In-house develop
Need more consideration
To be outsourced
Source: Roland Berger Strategy Consultants cited by [Koch A, et al, 2007]
A New Set of Corporate Strategies (cont)
Strategic Formulation, Evaluation, and Recommendation
45
GENERAL
MOTORS
2005
Comprehension of Recommended Strategies
Continue with broad-differentiation to serve bigrange of markets
Broad-Differentiation
Glo
bal
Capitalize on R&D andtechnology advancementto accelerate differentiation
Innovation
GM
NA Modify existing products
to create more demandin the US.
Product Development
GM
AP Direct resources to
penetrate the fast growthChinese market
Concentrated Growth
The
Res
t
develop new markets toshift the global marketshare
Market Development
A New Set of Business Strategies
Strategic Formulation, Evaluation, and Recommendation
46
GENERAL
MOTORS
2005
Comprehension of Recommended Strategies
- To fight with a mature-start-declining stage in the U.S. market and North America- Focus on “Attribute-oriented” rather than “Component-oriented”
GMNA: Product Development
Source: Roland Berger Strategy Consultants cited by [Koch A, et al, 2007]
A New Set of Business Strategies (cont)
Strategic Formulation, Evaluation, and Recommendation
• Air-condition system• Heated rearview mirrors• Four-cylinder engine• ABS• 5-gear automatic transmission
• Comfort, ease of use• Overall vehicle design• Environmental friendliness• Safety• Driving dynamics/handling
Past/Present: Component-oriented Future: Attribute-oriented
47
GENERAL
MOTORS
2005
Comprehension of Recommended Strategies
Focus on engineering ratherthan capacity to be productleadership and follow thebusiness strategy ofinnovation
Engineering Focus
Pro
duct
ion
Design and produce basedon the “technology createsvalues” to serve real needsof consumers
Value Focus
R&
D Do research based on the “technology creates values”to tackle consumer’sbehavior change more properly
Value Focus
Track and monitor changesin customer’s behavior andlifestyle to build better internal customer profiles
Customer Orientation
Mar
ketin
g
Change marketing strategyfrom “push” to “pull” to respond to today’s situation
Demand Pull
HR
Restructure employee benefits to reduce overheadcost of health care and retirement plan.
Restructure Benefits
A New Set of Functional Strategies
Strategic Formulation, Evaluation, and Recommendation
48
GENERAL
MOTORS
2005
Comprehension of Recommended Strategies
- Require deep collaboration from Production, R&D, and Marketing departments
Production, R&D, and Marketing: Customer-Oriented Technology
Source: Roland Berger Strategy Consultants cited by [Koch A, et al, 2007]
R&D Production
Marketing R&D
Production
Marketing
Source: Roland Berger Strategy Consultants cited by [Koch A, et al, 2007]
A New Set of Functional Strategies (cont)
Strategic Formulation, Evaluation, and Recommendation
1. Brand fit2. Benefit customers3. Benefit manufacturer
R&D Production
Marketing
49
GENERAL
MOTORS
2005
Comprehension of Recommended Strategies
- A use of HMO, PPO and Blue Cross/Blue Shield
HR Department: Benefit Restructure and Human Development
- The most important for a company, who acts as innovator and product leader- Development of deep expertise in science and technology, culture, and skills
HR Department: Human Development
Co-pay and Deductibles ofHMOs and PPOs options
Salaried Workers
$600 million
Blue Cross and Blue Shield
UWA and Retirees
$500 million $1.1 billion
A New Set of Functional Strategies (cont)
Strategic Formulation, Evaluation, and Recommendation
50
GENERAL
MOTORS
2005
Strategic Implementation
Strategic Implementation, Evaluation, and Control
The Balanced Scorecard Strategic implementation: short-term objective, functional tactic, outsource, etc.
Balanced Scorecard as a tool for setting, achieving and measuring objectives
Source: Adopted from [Shawyun, T, 2006]
51
GENERAL
MOTORS
2005
Strategic Implementation
The Balanced Scorecard: Learning and Growth Perspective
Learning and Growth Perspective
Objectives Measure Target
Human Capital
Increase education and experience of employee Number of employee training in deep functional expertise
Employee participation in professional or trade associations
Percentage of employees with advanced degrees
Minimum five courses per staff per year.
Minimum twice per staff per year.
15% of employees getting advanced degrees within three years
Enhance team-working skill Number of employee training in soft skill Minimum five courses per staff per year
Emphasize a use of Personal Development Plan (PDP)
Percentage of employee who attend thePDP program
Percentage of employees who meet their PDP goals
90% within a year – about 25% quarterly
75% annually – about 20% quarterly
Strategic Implementation, Evaluation, and Control
52
GENERAL
MOTORS
2005
Strategic Implementation
The Balanced Scorecard: Learning and Growth Perspective (cont)
Learning and Growth Perspective
Objectives Measure Target
Information Capital
Enhance the communication of knowledge and project experience across function
Number of co-development projects
Number of regional and global conference
Internal communication rating
10% of overall projects per year
Regional conference quarterly and global conference semiannually
Reach 85% within three years
Increase information available for access Percentage of employees who has this information available to them
Reach 90% within three years
Increase information capital readiness Percentage of accomplishment of information technologies and systems versus needs
Minimum 75% in every area
Strategic Implementation, Evaluation, and Control
53
GENERAL
MOTORS
2005
Strategic Implementation
The Balanced Scorecard: Learning and Growth Perspective (cont)
Learning and Growth Perspective
Objectives Measure Target
Organizational Capital
Enhance teamwork productivity Number of completed (in time and budget) co-development projects
Number of internal cross-trained employees
Increase 10% per year
Increase 15% per year
Employee satisfaction Number of employee feedback
Turnover rate
Empowerment index (number of managers)
Minimum 75% of employee involve the survey
Maximum 7% per year globally
A ratio of manager to employee decreases 5% per year for five consecutive years
Encourage healthy lifestyle Lost-time accidents
Worker’s compensation claims
Injury frequency rates
Percentage of participants to healthy-promotion initiatives
Decrease 10% per year
Decrease 10% per year
Decrease 10% per year
Reach 70% within three years
Strategic Implementation, Evaluation, and Control
54
GENERAL
MOTORS
2005
Strategic Implementation
The Balanced Scorecard: Internal Processes Perspective
Internal Business Processes Perspective
Objectives Measure Target
Operational Management Processes
Decrease operating cost Inventory turnover
Planning accuracy
Outsourced parts cost
Labor cost
Decrease 5% per year
Maximum 15% of effort, cost and schedule deviations
Decrease to 15% comparing with a current expense within two years
Decrease 4% per year due to a restructure of employee benefits
Increase quality On-time delivery rate
Defect percentage
Warranty claims
Reach 90% within two years
Maximum 0.05 % per part/model
Maximum 0.05% per part/model
Strategic Implementation, Evaluation, and Control
55
GENERAL
MOTORS
2005
Strategic Implementation
The Balanced Scorecard: Internal Processes Perspective (cont)
Internal Business Processes Perspective
Objectives Measure Target
Innovation Processes
Increase a success in innovative projects Dollars spent on research and development
Employee hours on research and development
Number of new projects or services introduced
Number of new product joint ventures
New product or service cycle time
Revenue from new products or services
Increase the R&D/sales ratio to 6% in two years
Minimum 30 hours per week for R&D staff and minimum two hours per week for other Staff
At least two new innovative products or services introduced per years regionally(e.g. product safety, customer health and environmental impacts)
Minimum two new projects per year for each region
Maximum three years before replacement
Increase 10% each year
Strategic Implementation, Evaluation, and Control
56
GENERAL
MOTORS
2005
Strategic Implementation
The Balanced Scorecard: Internal Processes Perspective (cont)
Internal Business Processes Perspective
Objectives Measure Target
Innovation Processes
Accelerate innovative projects Number of new products or services in the pipeline
Time to market of new products and services
In each region, at least two new products or services being progress concurrently at all time (e.g.. hybrid and hydrogen car)
Faster by 10% each year
Regulatory and Social Processes
Emphasize Corporate Social Responsibility (CSR) activities
Dollars spent on CSR
Employee volunteer hours
Number of CSR activities
Increase 5% per year
Minimum two hours per employee per month
At least 12 activities per year per region
Strategic Implementation, Evaluation, and Control
57
GENERAL
MOTORS
2005
Strategic Implementation
The Balanced Scorecard: Internal Processes Perspective (cont)
Internal Business Processes Perspective
Objectives Measure Target
Customer Management Processes
Better understanding of customer needs Number of customer profile produced
Number of lead user utilization
Minimum five new customer profiles produced regionally
90% of overall projects conduct ‘lead user’ within three years
Enhance retaining customers rate Percentage of returned customers Grow 5% per year
Deepen customer relationship Revenue from cross-selling multiple products and services
Increase 10% per year
Strategic Implementation, Evaluation, and Control
58
GENERAL
MOTORS
2005
Strategic Implementation
The Balanced Scorecard: Customer Perspective
Customer Perspective
Objectives Measure Target
Create brand and technology awareness and recognition
Number of ads launched per region
Number of trade show attended
Increase 20% in three years, 8% annually
At least one per region semiannually
Increase customer satisfaction and loyalty level Number of customer complaint
Number of complaints resolved the first time
Customer response time
Number of proposals made
Reduce 25% each year
Increase 15% each year
Reduce 50% in three years, 20% annually
Minimum two proposals per year per region
Strategic Implementation, Evaluation, and Control
59
GENERAL
MOTORS
2005
Strategic Implementation
The Balanced Scorecard: Customer Perspective (cont)
Customer Perspective
Objectives Measure Target
Increase number of customers Total number of customers
Retention rate
New customer acquisition numbers
Global market share
U.S. market share
Chinese market share
Increase 15% in three years, 6% annually
Increase 10% in three years, 4% annually
Increase 10% in three years, 4% annually
Reach 18% in three years, increase 1.5% annually
Reach 27.5% in three years, increase 1.2% annually
Reach 15% in three years, increase 4% per year
Strategic Implementation, Evaluation, and Control
60
GENERAL
MOTORS
2005
Strategic Implementation
The Balanced Scorecard: Financial Perspective
Financial Perspective
Objectives Measure Target
Increase profitability Annual revenue
Annual revenue from new products
Gross profit margin from new product
Return on Investment (ROI)
Increase 10% each year
Increase 35% each year
Increase to 15% in three years
Increase 20% in three years, 10% annually
Increase shareholder satisfaction Share price
Dividend payout
Increase 75% in one year, then increase 7% annually
Increase 10% annually
Strategic Implementation, Evaluation, and Control
61
GENERAL
MOTORS
2005
Strategic Evaluation and Control
The Evaluation and Control Process Monthly progress review and quarterly comprehensive review
Review Underlying Bases of Strategies(Changes in each area)
Do significant differences occur?
Take Corrective
Action
Measure Organizational Performance(Compare planned to actual progress
toward meeting stated objectives)
Do significant differences occur?
Continue Present Course
Strategic Implementation, Evaluation, and Control
Yes
Yes
No
No
62
GENERAL
MOTORS
2005
Limitation
Limited Information Almost all information is for GM’s basic facts and current performances.
Strategic analysis is produced from “past performance comparison” only.
Generating more reliable and accuracy analysis results, and implementation and
measurement plans requires “Benchmarking” and “Industry comparison” too.
Limitation and Conclusion
A Lack of Financial Projections Financial figures is the most obvious indicator for management in decision making.
Create a budget plan
Collect financial informationInterest rate, inflation rate, exchange rate
Find appropriate sources ofcapital investment
Generate capital budgeting scenarios
Calculate capital budgetingindication (NPV, IRR)
Make decisions based onquantitative information
1
2
3
4
5
6
63
GENERAL
MOTORS
2005
Conclusion 97 years of experience, the 5th of Fortune Global 500 company to become a struggling one.
There is a list of problems to overcome before being acquired by investors
For health care and retirement expenses, GM to trade off of money for employee satisfaction
to keep the operation running
Fortunately, its strengths and potential opportunities would help GM to stabilize its status
and then strike back with better understanding in customers and technologies.
Limitation and Conclusion
64
GENERAL
MOTORS
2005
References
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