General Motors Internal and External Environment - Case Study Example

Name: Institution: Topic: General Motors’ Report Date: Introduction General Motors is a US-based manufacturing company with over a hundred years of operation. On the general scale, the company has produced over 450 million vehicles universally. The company operates internationally and therefore has covered a wider global market in terms automobiles. Although the company has had a remarkable improvement in its market scale globally, the United States of America remains the largest market for this corporation. The company’s strategic power lies in the fact that it supports a large community of the US in terms of employment (Kang, N., et al. 2001, p. 69). The company is the backbone of the US economy through employment of 1 out of 10 people employed in the country as well as being the chief purchaser of the country’s steel, aluminium, iron, copper, and plastic among other materials used in the manufacture of automobiles. Despite the fact that the corporation has gained reputation over a number of years, it is not an exception when it comes to struggle resulting from increased universal competition. This competition basically emanates from foreign manufacturers in the sector of lower wages, healthcare and compensation costs. These costs have cost the company over 100 billion dollars over the past 15 years. As a result, the costs have constrained investment in more complex manufacturing and vehicle technology. In addition, the company’s balance sheet has been weakened over time (Hill, C. & Jones, G., 2009, p. 112). However, the current annual report indicates that the company has made remarkable progress in reducing the gap with competitors in form of automobile quality, productivity and fuel efficiency. For the purpose of long term investment, the company has put in place plans to go international in countries like China, Latin America, and Russia. On the general scale, this company has never failed in meeting a congressional mandate in significant sections of fuel effectiveness and vehicle emission. This has set the company into the green manufacturing industry based on its environmentally friendly operations and social responsibility. Internal and External Environment In any business undertaking, it is imperative to take the environmental analysis of a company for purposes of profitability. This helps in the establishment of the corporation in terms of its current position and how strategic management can be transformed to sustain the company within the market. This may involve the establishment of competition from other key players in the business. This analysis will consider industry analysis, economic analysis, competitive analysis and social analysis of General Motors Industry Analysis Threat of new entrants: considering the level of maturity for general Motors, it can be said that the company has little vulnerability of threat from new entrants. In most cases, incidences of threats as a result of new entrants emanate from start-up capital, strain in accessing dissemination channels, unavailability of good leadership styles, and extensive research and development costs necessary for product innovation (Kang, N., et al. 2001, p. 69). Power of suppliers: The entire automobile industry has a lower level of the bargaining power of suppliers as a result of the saturated market. It is clear for the General Motors Corporation that there are other automotive part suppliers for vehicle manufacturers. This causes manufacturers a chance to change suppliers if needed. Power of Buyers: General Motors Company has a significantly high bargaining power of buyers since particular clients buy the bulk of the industry’s output, which forms the largest source of income. As a result, the company should consider client satisfaction as a priority. This will increase the purchasing power of returning customer and increase the company’s sales. Availability of substitutes: according to the previous reports of the company, it is noted that availability of substitutes is relatively low. However, this does not entirely rule out the fact that there are more substitutes like walking, bikes, or public transport. This however is affected by the geographical location of consumers. Competitive Rivalry: due to the rise of other companies dealing in automobiles, it is deduced that General Motors Corporation has a high competition. This requires that the company seeks for other means to sustain its competitive power in the market. This may include rebranding as well as cutting down on the costs. The company should also study client preferences so that it concentrates on increasing sales. Competitive Analysis Looking at the company’s performance for the last five years, it is noted that the corporation is highly competitive. It is among the first three automobile industries that cover the market scale in the Northern part of America. This implies that for the company to remain competitive, it must study the performance of both Toyota and Honda on the international scale. These two top companies focused on manufacturing environmentally friendly automobiles. Cost efficiency in terms of fuel consumption should therefore, be a priority for General Motors. This has proven too be a challenge for General Motors and that is why it lags behind in market sales. Economic Analysis The attack on the US in September 2001 resulted into the country experiencing economic recession. The government put in place strategies to get the country back on its feet and this was through automobile companies like General Motors. Ever since, the income for each person in the US has risen by 9.8% resulting into a general growth trend of up to 2.9%. In addition, productivity for companies like General Motors has risen by 3%, which explains why employment rate has gone up annually (Cervone, T., 2006, p. 17). On the other hand, this has led to the decline in gas prices by 80 cents for the last quarter. This implies that the profit margin so far experienced is attributed to the economic boom of the entire company. Social Analysis For many years, the baby boomer generation has been the primary target market for automobile manufacturers. However, as this generation nears retirement, and is spending less money, automakers are shifting their focus to younger generations. This generation is reaching a point of greater financial stability; thus, contributing greatly to the amount of consumer spending on luxury products such as automobiles. Consumer trends are also shifting from oversized passenger vehicles, such as trucks and SUV’s, to smaller more economic, fuel efficient automobiles. Therefore, marketing efforts must shift to meet changing consumer demands. Such marketing efforts, however, depend heavily on geographic location of the consumer. For example, marketing a convertible in a cold climate is not as economical as marketing it in a warmer climate; therefore, the company’s marketing mix must be adjusted accordingly to geographic conditions. Strategy to go International For the next couple of years, General Motors is focused on making its business operations global (Baki, Matt, 2004, p. 103). However, as a result of increased competition on the international automobile market, it is imperative that the company makes a number of changes to enable it effectively fit in the wider market. The first move that the corporation has focused upon is restructuring of its brands as it concentrates on core businesses. As a way of moving international, the company has decided to maintain Chevrolet, Cadillac and Buick as the main brands to compete in the universal automobile market. Such a decision was reached upon following statistics in the sales made for the past five years. On the other hand, fuel efficiency is the key focus for GM to go international successfully. This follows research done on the effects of global warming and green technology. This forces the company to be more sustainable as well as environmentally friendly. Most industries across the world are required to focus on fuel efficiency to reduce chances of harmful gas emission and ultimately reduce on global warming (Hill, C.W., 2005, p. 86). The company has carried out a widespread research on consumer preferences so that it reduces the gap between clientele perception and satisfaction. It is noted that even customers have opted for more effective automobiles in terms of fuel. To cut on the increased competition realized in the automobile industry, GM has considered cutting down of its prices. The company therefore prefers to manufacture brands that are more affordable to all types of clients to increase sales. Bibliography: Automotive Industry. United States Department of Labor. (2005, July 18). Retrieved October 28, 2006 from www.doleta.gov. Baki, Matt, 2004, Automotive Industry Analysis – GM, DaimlerChrysler, Toyota, Ford, Honda. Academic Mind: Kansas State University. (2004, November). Retrieved October 28, 2006 from www.academicmind.com. Cervone, T., 2006, General Motors Statement Regarding the Resignation of Jerome B. York From the GM Board Of Directors. General Motors Company Release. (2006, October). Retrieved October 28, 2006 from www.gm.com "Fence Post." Daily Herald (Arlington Heights, IL) 5 Apr. 2006: 16. Questia. 1 Nov. 2006 http://www.questia.com/PM.qst?a=o&d=5014547299 "Fuel Economy Guide." www.fueleconomy.gov. 5 Nov. 2006 www.questia.com General Motors Corporation. Annual Report: Financial Highlights. (2005). Retrieved November 2, 2006 from www.gm.com. "Growing Demand for Hybrid Vehicles - Implications for Motor Manufacturers." http://www.industrialautomation.frost.com 14 Sept. 2006. 5 Nov. 2006 "Growing Together to Fuel Solutions." Daily Herald (Arlington Heights, IL) 12 Feb. 2006: 1. Questia. 1 Nov. 2006 http://www.questia.com/PM Jobs and Economic Growth. The White House Online. (2006). Retrieved November 2, 2006 from www.whitehouse.gov Maynard, Micheline. G.M. Set to Drop 5,000 More Jobs and Shut Plants. New York Times (2005, November 25). Retrieved October 28, 2006 from www.lexisnexis.com/academic. Motavalli, Jim. "Getting There: a Guide to Planet-Friendly Cars." E. July-Aug. 2004. 5 Nov. 2006 www.questia.com Schneider, Greg. "Industry Giant Falling Behind: GM Reports $1.1 Billion Loss." Washington Post 20 Apr. 2005. 25 Oct. 2006 www.washingtonpost.com "Slim Fast: Toyota Aims to Take Size and Weight Out of Its Hybrid System." 5 Nov. 2006 http://www.edmunds.com/insideline/do/News/articleId=117008 Hill, C.W., 2005, International business: competing in the global marketplace, New York, McGraw-Hill/Irwin. Hill, C. & Jones, G., 2009, Strategic Management Theory: An Integrated Approach, Chicago, Cengage Learning. Kang, N., et al. 2001, New patterns of industrial globalization: cross-border mergers and acquisitions and strategic alliances, New York, OECD Publishing. Read More