General Motors Analysis

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Introduction

Commonly known with its GM as the company’s initials, General Motors incorporation is an American multinational company whose headquarters are located at Detroit Michigan. The corporation produces a total of over thirteen brands of vehicles namely Chevrolet, Holden, GMC, Opel, Vauxhall, Holden amongst others (Perry, 2004). Vehicles are produced in over 37 countries where the firm has opened operational factories. A total of 212,000 employees globally and carries out its commercial activities in over 160 countries (Michael, 2009). An estimated over 9 million vehicles are sold globally every year. The paper outlines a well analyzed background information of the corporation and pin pointing it strength, weaknesses, opportunities and threats (Michael, 2009). The porter five analysis focuses on evaluating the competitive muscle General Motors has when competing other automobile competitors. The analysis pinpoints circumstances where the profit margin can be reduced and how it happens.

Major setbacks facing the company are identified and recommendations outlined. The recommendations are based on ensuring that by the end of the paper a sound solution would be achieved to give General Motors a competitive advantage in the market (Dess, 2012). Trends in the past few years will be monitored to help draw a conclusion on the current commercial state of the company and also model the future expectations.

The corporation commenced its operations in 1908 in Flint, Michigan and key company figures at the time were William Durant and Stewart Mort. The corporation enjoyed a huge commercial success in the first seven decades until after 2008 that other automobile players rose to the scene (Perry, 2004). Conversely the decline in terms of commercial dominance was attributed to bankruptcy and for this reason, a large proportion of her major stakeholders withdrew their investment.

Though still among the highest automobile selling companies, her economic infiltration in foreign market is key in maintaining her commercial stability. The Far East market especially China, Korean republic and Japan are the countries that generate the most income for GM. This is attributed to the lower cost of car assembly in these countries especially China. Designing brands that marches the trending and stylish lifestyle of the people is the major reason why General Motors remains top in the game in terms of sales. Designing of brands and identifying them with names makes the company counter her opponents effectively. In China for instance, although general motors has an American origin, the automobiles mostly sold is China do not bear their American names instead they use the Chinese names such as Wuling, Baojun, Jie Fang and UzDaewoo and for this reason, these brands have achieved a huge commercial success (Perry, 2004).

Basing on the financial muscle of the society where each branch of the company is located, general motors analyses the purchasing power of the surrounding society before setting a benchmark in which certain units of cars have to be sold within a specific period of time. The company that surpasses its set benchmark and records good commercial sales is given an award. Performance contracts are also signed by the employees to ensure that only the best is churned out of them and those who cannot perform adequately are laid off.

The vision and target of selling only the world best vehicles works best for the competitive advantage over General Motors competitors. In fact, as the vision states, “designing, building and selling the world’s best vehicles,” is a huge milestone in convincing the consumers that general motors products are the world best and in fact the purpose of the company is to produce only the best (Dess, 2012). Consumers enjoy the privilege of getting high residual value together with low incentives and they are also are sold cars at a subsidized price.

Advertisements in key television channel is a platform being exploited by the firm to sell her products. Signing deals with movies production houses plays a role in advertising the GM merchandise when shooting movies (Dess, 2012). The use of celebrities to market the GM brand significantly increases the sales of the company’s diverse brands of vehicles because the fans of the celebrities would want to be associated with the brands their adored celebrity uses (Michael, 2009). For this reason, if the celebrity was using GM cars in her advertisement, his/ her fans will buy the brand. Such scenario also applies in the sporting industry where for instance GM runs a sponsorship deal with football clubs such as Manchester United and for this reason, the name Chevrolet is printed on the players’ jerseys to market the brand.

The corporation invests a lot in terms of design. The GM motor designers keenly monitor the market trends and consumer preferences and tastes. For this reason the cars produced not only do they look stylish, but also match with the current automobile market trends. The vehicles are built to optimize the global footprint of cost effectiveness (Dess, 2012). Operations efficiencies are maximized in the best environmentally friendly manner and a socially acceptable way possible. A portion of the profits obtained are used in technological prosperity where environmental friendly hybrids are designed to lower pollution. These hybrids are designed to use both gas and alcohol.

The Porter Five Forces analysis evaluates the competitive manner in which the GM operates. The analysis evaluates the entire automobile industry and carries out an evaluation of a variety of markets in the US, China, India and even Japan (Michael, 2009). An analysis of the threats is analyzed and the varied threats identified. A horizontal evaluation is done to point out threats arising from new entrants, threats that may likely arise from GMs substitute products and those from established General Motors rivals. Vertical competitors operate through the customer’s bargaining power and also suppliers bargaining power.

The horizontal analytical dimension outlines the new entrants in the automakers business and evaluates its competitive nature if it is low or high basing on barrier costs. When examining the bargaining power of the buyers of GM products the degree in which customers can force the price of new brands of vehicles is used to determine if the newly designed automobiles can be bought by customers. Threats emanating from substitutes products are high because in this case companies such as Toyota are exploring the markets once dominated by GM especially in the Asian and African Markets and for this reason, there is a necessity to timely counter the situation (Dess, 2012). New entrants in the market offer a big threat to the dominance of GM in the sense that Chinese, Korean and Indian automobiles can design low cost and cheaper cars that fits the financial muscle of most of her citizens and in due process, cause a sharp decline in terms of General Motors automobile sales in these respective countries (Michael, 2009).

In the analysis of the bargaining power of buyers which stands for sale of cars from dealers to the public, dealers offer unheard prices and discounts therefore enhancing bargaining power of the customers. Threats emanating from substitute products could cause a significant decrease in terms of sales of automobiles. Substituted could be people using bicycles, air or trains to travel instead of personal vehicles. Risks resulting from use of alternative products are high and use of substitutes could be because of lack of credit, increased environmental awareness, the unstable oil prices and the manner in which people move but car sales still struggle.

Bargain power of suppliers gets a moderate rating in the sense that, the manufacturers and suppliers need each other but the suppliers dependency on manufacturer in more than the vice versa. Suppliers sell vehicles to other motor manufacturers hence their bargaining power is not extremely low.

The degree of rivalry among competitors is rated high because in most cases, competitors are extremely offensive in acquiring market shares and for this reason, there is huge rivalry between automakers the same way General Motors holds a defensive position.

In a conclusive analysis of the porter five forces the threats of substitutes as well as bargaining ability of the customers combined with rivalry among competing firms, the threats are high thus rendering the unfavorable in terms of generating profits (Perry, 2004). The bargaining ability of suppliers as well as threats that may arise from new entrants are average which is unfavorable to GM’s profitability. The analysis therefore finds the automobile industry not being favorable in terms of profitability.

The shifting of fuel prices is a major setback in the sales of motor vehicles. The unstable prices of petroleum products diverts customers from buying personal cars and instead opt to use public means. But designing electric and hybrid cars would be critical because biofuel products have stable prices and in fact electric cars are not only cheap to maintain but also reduce the levels of global warming and climate change because the hybrid automobiles produce minimal greenhouse gases.

In the current world where the masses are more enlightened on matters concerning climate change, designing of hybrid and electric cars will not only show how GM I focused on matters concerning going green but also play a critical role in enhancing environmental sustainability.

Despite having a large number of products, only few vehicles bear the brand GM. Such step to some consumers reduce the purchasing power of these clients because it is hard to convince a client that Chevrolet is a General Motors brand because the vehicle does not have the Logo. Identifying of GMs vehicles with the official logo suits perfect in terms of expanding sales in the European market where the fascination of General Motors brands (Perry, 2004).

Conclusion

Despite the overall reduction in terms of purchases of automobiles over the last few years, General Motors still remains to be one of the automobile companies that widely sale their products. The recent increase in terms of automobile production would likely increase the prices of vehicles over the next few years. Diversification of products and production of hybrid and electric vehicles acts as an effective tool in countering rivals such as Toyota and the Korean competitors which act as a threat to GM’s expansion in the African and Asian markets.

References

Dess, G. G. (2012). Strategic management: text and cases (6th ed.). New York: McGraw-Hill/Irwin.

Michael, B. (2009, December 14). Comparing motor technologies.(technology). Air Conditioning, Heating & Refrigeration News , 2, 2.

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Perry, T. (2004). General Motors on the HY-wire. IEEE Spectrum, 41(1), 64-65.

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