strategic management term paper
TRANSCRIPT
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General Motors (GM)
1.0 Company Profile
The company was founded on 16, September, 1908, in Flint, Michigan, USA as a holding
company for Buick, then controlled by William C. Durant. At the turn of the 20th century
there were fewer than 8,000 automobiles in America and Durant had become a leading
manufacturer of horse-drawn vehicles in Flint, MI, before making his foray into the
automotive industry. GM's co-founder was Charles Stewart Mott, whose carriage
company was merged into Buick prior to GM's creation. It acquired Oldsmobile later that
year. In 1909, Durant brought in Cadillac, Elmore, Oakland and several others. Also in
1909, GM acquired the Reliance Motor Truck Company of Owosso, Michigan, and the
Rapid Motor Vehicle Company of Pontiac, Michigan, the predecessors of GMC Truck.
Durant lost control of GM in 1910 to a bankers' trust, because of the large amount of debt
taken on in its acquisitions coupled with a collapse in new vehicle sales.
The next year, Durant started the Chevrolet Motor Car Company and through this he
secretly purchased a controlling interest in GM which helped him to take back control of
the company. Durant then reorganized General Motors Company into General Motors
Corporation in 1916. Shortly after, he again lost control, this time for good, after the new
vehicle market collapsed. Alfred P. Sloan was picked to take charge of the corporation
and led it to its post-war global dominance. In 2008 and 2009, GM has ranked as the
second largest global automaker by sales.
Today GM has headquarter in Detroit City, Michigan, USA and employs 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, and sell and service these
vehicles through the following brands: Buick, Cadillac, Chevrolet, GMC, Daewoo,
Holden, Isuzu, Jiefang, Opel, Vauxhall, and Wuling. GM’s largest national market is
China, followed by the United States, Brazil, the United Kingdom, Germany, Canada,
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and Russia. GM’s OnStar subsidiary is the industry leader in vehicle safety, security and
information services.
GM R&D was the world’s first automotive research center. It was organized in 1920 by
inventor Charles F. Kettering. Headquartered in Warren, Michigan, the GM Research
Lab is a network of six laboratories, six science offices and collaborative relationships in
over twelve countries including working relationships with universities, government
groups, suppliers and other partners from across the globe. Some of the noteworthy brain-
child of GM R&D are: Hybrid Electric Vehicles (HEV), All-Electric Vehicles (AEV),
Hydrogen powered vehicles and Flexible-Fuel Vehicles (FFV) all of which are
environment friendly cars.
GM is a leading company in making innovative vehicles; hence it has the following
competitors: Ford, Toyota, Honda etc.
Likewise GM, Ford is also an innovative company in making automobiles. It has also
introduced hybrid vehicles which provide 75% improvement in fuel economy in city
driving.
Once lightly regarded Japanese threat, Toyota is now poised to eclipse GM as the largest
car manufacturer in the world. Since its inception in 1937, Toyota has rapidly expanded
its global operation to its current state and sales of 6.7 million vehicles.
Honda is the largest seller of motorcycles in the world, yet it earns more than 80% of the
revenue from its automobile division. In contrast to its Japanese competitor Toyota,
Honda sales more than 50% of its cars in the United States.
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2.0 Mission and Vision Statement of GM
Vision statement:
"Over the past 100 years, GM has been a leader in the global automotive industry. And
the next 100 years will be no different. GM is committed to leading the industry in
alternative fuel propulsion. 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 statement:
"G.M. 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 stock-holders will receive a sustained superior return on
their investment."
Evaluation Matrix of Mission Statement:
Components of Mission Statement Yes No
1. Customer √
2. Products/ Services √
3. Markets √
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Components of Mission Statement Yes No
4. Technology √
5. Concern for survival, growth and profitability √
6. Philosophy √
7. Self-concept √
8. Concern for public image √
9. Concern for employees √
Revised mission statement:
“GM is a multinational corporation engaged in socially responsible operations,
worldwide. With its innovative R&D and state-of-art technology, it is dedicated to
provide high quality automobiles and services so that our customers will receive superior
value while our enthusiastic and diligent employees and business partners will share in
our success and our stock-holders will receive a sustained superior return on their
investment."
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3.0 The External Factor Evaluation (EFE) Matrix:
Key External Factors Weights Ratings Weighted Scores
Opportunities
1. Growth potential in India and China 0.25 3 0.75
2. Increased global truck market 0.20 3 0.60
3. Rising demand for hybrid vehicles 0.10 2 0.20
Threats
4. The continuing global recession
caused fuel price hike and reduction
of demand for cars
0.30 4 1.20
5. Intense competition among rivals 0.15 2 0.30
Total 1.00 3.05
From the above EFE matrix it can be deduced that GM is responding to the existing
threats and opportunities in a pro-active way.
* The summation of the weights must be equal to 1.00* The ratings must be ranged between 1 to 4, where 1= poor response, 2= average response, 3= above average response and 4= superior response
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4.0 The Internal Factor Evaluation (IFE) Matrix for GM
Key Internal Factors Weight Ratings Weighted scores
Strengths
1. Strong brand image in US and worldwide.0.15 4 0.60
2. Largest automotive manufacturer in the
world.
0.25 4 1.00
3. Powerful R&D with state-of-art technology0.10 3 0.30
Weaknesses
4. Diminishing dealer network 0.08 2 0.16
5. Insufficient liquidity due to lower sales and
reduced working capital
0.20 1 0.20
6. Inadequate performance in some business
segments.
0.12 1 0.12
7. Low credit ratings 0.10 2 0.20
Total 1.00 2.58
From the above IFE matrix it can be deduced that GM has strong internal position
slightly above the average weighted score 2.50
* The summation of the weights must be equal to 1.00* The ratings must be ranged between 1 to 4, where 1= major weakness, 2= minor weakness, 3= minor strength and 4= major strength
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5.0 Strategy Formulation by using SWOT Matrix:
In case of strategy formulation we use SWOT analysis.
Strengths – S
1. Strong brand image in US and
worldwide
2. Largest automotive
manufacturer in the world
3. Powerful R&D with state-of –
art technology
Weaknesses – W
1. Diminishing dealer network
2. Insufficient liquidity due to
reduction in working capital
3. Inadequate performance in some
business segments
4. Poor credit ratings.
Opportunities – O
1. Growth potential in India
and China
2. Increased global truck
market
3. Rising demand for hybrid
vehicles
SO Strategies
1. Introduce the cars in India and
China (S2, O1).
2. Introduce truck in India and
China (S1, S2, O2).
WO Strategies
1. Pursue merger with Indian and
Chinese dealers (W1, O1).
Threats – T
1. The continuing global
recession caused fuel price
hike and reduction in
demand for cars
2. Intense competition
among rivals
ST Strategies
1. Produce fuel efficient hybrid
cars (S3, T1).
WT Strategies
1. Reduce corporate overhead
(W2, T2).
2. Sell out the business segments
those are performing poor (W3,
T1)
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6.0 Strategy Choice:
After the SWOT analysis we have five alternatives available. They are:
1. Market development: Introduce cars in India and China.
2. Product development: Produce fuel efficient hybrid cars.
3. Forward integration: Pursue merger with Indian and Chinese dealers.
4. Relative diversification: Introduce truck in India and China.
5. Retrenchment: Reduce corporate overhead
6. Divestiture: Sell out the business segments those are performing poor.
Among these tentative strategies, we can choose better alternatives by using process of
elimination.
Market development GM has a highly competitive market in US. Whereas the
markets in India and China are unsaturated. So they can go
for market development. But as the weakness part says that it
is suffering from liquidity problem and hence for
implementing any strategy adequate amount of capital is
necessary, market development may not be a good option.
Product development GM has a strong R&D base; hence it developed fuel efficient
cars which are environment friendly as well. But developing
such cars is very expensive. The company is going through
liquidity problem. So, it might not be a good strategy to
follow.
Forward integration GM can obviously export cars by merging with a strong
dealer network in India and China as the market is
unsaturated there.
Relative diversification The demand of small commercial cars in India and China is
lessening and the demand of trucks, vans are increasing
worldwide. So, rather than producing expensive cars, GM
can go for production of trucks and vans. But hence for that
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it needs adequate skilled manpower and hence GM totally
focuses on manufacturing cars, it might not be possible for
them to just shift into another business so quickly.
Retrenchment As GM is facing liquidity problem and also its credit rating is
becoming poor, it should start cost cutting budget for
overhead expenses. Thus retrenchment can be a better
option.
Divestiture Some of GM’s business segments are not performing well.
GM can sell those segments and investment money from that
to improve its suffering liquidity problem and poor credit
rating.
7.0 Conclusion:
From the above analysis of strategy choice, we can come up to the conclusion that GM
can at best follow three strategies. They are namely:
1. Forward Integration (Integration Strategy)
2. Retrenchment (Defensive Strategy)
3. Divestiture (Defensive strategy)
It is a fact that GM has followed the massive retrenchment strategy in the year of 2008-
2010 while the world was experiencing severe global recession.
8.0 Reference and BibliographyPage | 9
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Bibliography
David, Fred R. – Strategic Management: Concepts and Cases (11e), Prentice Hall of India,
2007
Reference
www.gm.com/corporate
www.businessweek.com/bwdaily/dnflash/content/nov2009/db20091116_872906.htm
http://en.wikipedia.org/wiki/General_Motors
http://en.wikipedia.org/wiki/Automotive_industry_crisis_of_2008
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