General Motors Global Competitive Strategy - Case Study Example

? Global competitive advantage Introduction Globalization has fundamentally changed the way business operations are carried out. Thus, the strategic framework directed towards the analysis of the feasibility of the business in the domestic circuit in the international business arena. Global competitive strategy demonstrates how a company can combine unique sets of strategic tools to analyse their effectiveness in order to gain advantage in the global business environment. One such strategic tool is the ‘Star Analysis’ framework which takes into consideration a company’s strategy in its home country, customer country, supplier country and also, partner country in order to explain how an organization manages to achieve global competitive advantage (Spulbar, 2007). This essay will involve a thorough analysis of General Motor’s (GM) global competitive strategy which will be explained on the basis of the ‘Star analysis.’ GM is a US based multinational car manufacturing company which has a significant worldwide presence operating in 157 countries (Yahoo finance, 2013). Its global competitive strategy can be best explained through the following perspectives as highlighted by the Star framework. Home Country After the company was bailed out during the 2007-08 financial crises, GM has experienced drastic changes in the way it conducts its business and implements its strategies. New and influential members were hired in order to form a highly efficient management team which included Daniel Akerson as the CEO. He took control into his own hands and shook the company’s bureaucratic organizational culture thereby inducing new strategies and visions to the business. The company’s strategy in its home country has been smaller but leaner in order to be cost competitive. GM currently manufactures and sells 18 different automobile brands in order to satisfy the needs of the customers. The company has been able to achieve a significant market share in its home country because of its extensive knowledge regarding the US market and its consumers (Jurevicius, 2013). GM’s strategy in its home country has been to focus on fewer brands. Their idea is to leverage global resources in order to create the most gripping vehicles and technologies. They plan to reinvest cash and profits into their vehicle and technology division on a consistent basis, regardless of the business cycle. This plan has been formulated with a view to maximize revenues for the company thereby focusing on limited brands and delivering world class vehicles to their consumers (GM, 2013a). The regulatory climate that prevails within the home country is a crucial factor that affects the performance of a company of the stature of GM. Regulations may limit the company’s capability to finance its operations through debts which might reduce the revenues compared to what it would have earned otherwise. Supplier Country GM’s primary strategy for its supplier country has been to recognize the efforts made by their suppliers belonging from those countries in order to motivate them into consistently supplying the best quality products and services. While formulating the strategy for business with their supplier countries, they consider factors such as work wages and productivity, the political, legal and regulatory climate that prevails in those countries and the risks associated with doing business in those countries. Assessment of these factors helps the company to device an appropriate strategy in order to maintain their feasibility with their suppliers and henceforth, maintain goodwill with the supplier country. As far as GM’s major supplier country is concerned, the first name that comes to mind is South Korea (Reliable Plant, 2013). Mr. Bo Andersson, the Executive-in-Charge of GM Worldwide Purchasing had said that the company desires to develop a positive relationship with their supplier country in order to ensure smooth flow of business activity (Winter and Priddle, 2001). The US automaker has decided to shift its production of newer models away from South Korea because of the rapidly increasing wage costs in the world's seventh-largest exporting nation (Reuters, 2011). GM’s strategy in terms of its supplier country is to be highly cost competitive. Considering the above strategy and the recent surge in the labour cost, GM management had to pull its production division out of the country. In addition to that, the company also assesses the political environment that prevails in the supplier country as political regulations drives up different variable costs which are detrimental to the financial performance of a company. GM also takes adequate measures in order to shield the company from any possibility of being exposed to foreign exchange risk while trading in foreign currencies with the supplier country (Saunders and Cornett, 2011). This is done by entering into derivative contracts such as, swaps in order to mitigate those risks (Chrisholm, 2010). Customer Country General Motor’s global strategy is absolutely customer centric. They believe in providing their customers with superior quality products and services in order to uphold their trust. Unlike Ford Motor, that restructures its global business around its flagship brand in order to divest itself of names like Jaguar, Aston Martin and Land Rover, GM implements a completely different international marketing strategy. Instead of focusing on one, it has diversified its operations into producing multiple brands of cars. The underlying idea behind this approach is to enable its customers to choose from a range of vehicles according to their requirements. GM’s brand Chevrolets are being marketed in order to attract entry level car buyers who have a limited accessibility to funds. They follow this strategy particularly in the Central and Eastern Europe. Cars such as, Opel and Vauxhall are being marketed in order to influence the buying decisions of middle market consumers who have a progressive view towards technology. According to the New York Times (2008), a steady increase in the international sales had helped GM beat the competition in the market, narrowly winning over a steep challenge from Toyota Motors. Although GM has struggled to perform well in the domestic market in the recent past, in the European and the Asian market, its sales rose to new highs thereby compensating for the struggling performance. GM’s global strategy involves a rigorous monitoring of consumer consumption and behaviour style which gives them a good indication of the tastes of their potential customers in general. They conduct surveys in different countries which help them to target a particular segment and enable them to formulate an effective strategy that will give them a competitive advantage over its peer organizations. GM does an effective monitoring of factors such as elasticity of demand, income per capita as well as the society and culture that prevails in their customer country in order to manufacture, produce and distribute vehicles that appeals to the mass. Partner Country According to Lee, Madanoglu and Ko (2013), multinational organizations have adopted international joint ventures as a dominant scheme in their global strategy framework in order to enter foreign markets. However, Kalnins (2005) explains that the success rate of international joint ventures has been less that 50% because of the participating company’s failure to develop international services strategy that aligns with local consumers and culture. Even after that, international joint ventures became a favourite foreign entry mode among multinational firms such as GM. To mitigate the risks associated with global expansion, GM have opted for joint venture business operations by buying stakes in Fuji Heavy Industries (manufactures Subaru brand cars). This gives them the accessibility to a huge network of factories and dealerships in Asian countries thereby helping them to realize economies of scale and scope and also gives the company a lesser risky way of expanding into the world’s fastest-growing automotive market (Twarowska and Kakol, 2013). GM’s first and foremost strategy in terms of doing business with its partner country, is based on their core values such as transparency, customer-focus, respect for people and integrity. With the ongoing wave of globalization, the main objective of GM is to understand the culture that prevails in their partner country as well as the organizational culture that prevails in the organization of the partner country. The company focuses on training their employees in order to have a strong grasp over the language that is spoken in their partner country. In this way, the company can gain better knowledge about the culture, political, legal and regulatory climate that prevails in the country (GM, 2013b). This will help GM to assess the pros and cons of their expansion in those countries and will make them capable to negotiate with their partners and their countries as a whole. This will help them to conduct business operations effectively and stay ahead in the race with their potential competitors. Conclusion To conclude, it can be said that GM follows an effective global competitive strategy in order to gain competitive advantage against their competitors in their home country, supplier country, customer country and partner country. Their strategies are directed towards providing optimum quality products and services to their consumers and in return, earning their trust and satisfaction. They also emphasize heavily on maintaining a positive relationship with both their home country and host country governments in order to ensure a smooth flow of business operations. GM’s focus lies in understanding the culture and consumption style that prevails in their customer as well as their partner countries in order to design the products according to the requirements of their end users. GM being a world class organization follows a simple and sound global competitive strategy which has kept it ahead of other car manufacturing companies operating all around the world. Reference List Chrisholm, A. M., 2010. Derivatives demystified: A step-by-step guide to forwards, futures, swaps and options. United Kingdom: John Wiley & Sons. GM., 2013a. Investors: Corporate Strategy. [online] Available at: http://www.gm.com/company/investors/corporate-strategy.html [Accessed: 4 November 2013]. GM., 2013b. About GM: Our Company. [online] Available at: [Accessed: 5 November 2013]. Jurevicius, O., 2013. SWOT analysis of General Motors. [online] Available at: [Accessed: 4 November 2013]. Kalnins, A., 2005. Overestimation and venture survival: an empirical analysis of development commitments in international master franchising ventures. Journal of Economics & Management Strategy, 14(4), pp. 933-953. Lee, K., Madanoglu, M. and Ko, F. Y., 2013. Developing a competitive international service strategy: a case of international joint venture in the global service industry. Journal of Services Marketing, 27(3), pp. 245-255. Reliable Plant., (2013). General Motors recognizes its top suppliers. [online] Available at: [Accessed: 5 November 2013]. Reuters., 2011. GM plans gradual pullout of South Korea as labor costs surge. [online] Available at: [Accessed: 5 November 2013]. Saunders, A. and Cornett, M. M., 2011. Financial institutions management: a risk management approach. 7th edn. New York: McGraw-Hill Education. Spulbar, D. F., 2007. Global strategic analysis. UK: Cambridge University Press. The New York Times., 2008. G.M.’s Global Strategy: A Brand for Every Place. [online] Available at: [Accessed: 4 November 2013]. Twarowska, K. and Kakol, M., 2013. International business strategy reasons and forms of expansion into foreign markets. In: International Conference, Active Citizenship by Management, Knowledge Management and Innovation, Knowledge and Learning. Zadar, Croatia, 19-21June 2013. Croatia: Toknowpress. Winter, D. and Priddle, A., 2001. GM Revamping Purchasing Strategy. [online] Available at: [Accessed: 5 November 2013]. Yahoo finance., 2013. General Motors Company (GM). [online] Available at: [Accessed: 4 November 2013]. Read More