The Effects of the Government Laws and Regulations on the Business - Case Study Example

NUMMI Case Study External Environment Introduction In this paper that illustrates our group conclusion on the internal and external issues that led to the general failure of the General Motors Company, it is clear that several factors led to the failure of the General Motors Company that was located in the United States of America. Therefore the discussion below will provide comprehensive information mainly based on my personal opinion in relation to the hypothesis which exposes the possible reasons that resulted to the failures of the General Motors Company in California and other parts of the United States. Discussion The effects of the government`s laws and regulations to the business. The aspect of a government`s involvement in the operations of a given business is an external factor that can either have a positive or negative impact on the business. In this case, the government of the United States has stipulated various regulations to guide various aspects in the production of motor vehicles; the main role of the set benchmark was to govern the construction of motor vehicle engines in a manner that emits limited quantities of exhaust whose final impact on the business became negative. These regulations forced the company to increase their production cost since the production of the required engines was very expensive thus leading to a negative influence on the General Motors Company which at that time focused on production of large vehicles with bigger engines that emitted large quantities of exhaust since the production cost was favorable. This presented the Company with a major challenge that involved seeking for better ways that that could not agree with the financial status of the company since the customers started demanding for high quality vehicles thus leading to a left shift in the demand curve of the vehicles manufactured before the new regulations came were enforced. Despite the fact that the General Motors struggled to produce vehicles that met the government and customer standards, they experienced frequent losses as their products were of low quality since they could not meet the required standards of both the customers and the government. The management of the NUMMI had to modify their strategies used in terms of production so as to face the challenge. As a result, the above challenge created the need to seek external assistance in order to improve their productivity hence profits; a solution was formulated which could see the Company form a partnership with the Toyota Company in Japan. The agreement was that Toyota could assist General Motors Company to produce smaller cars with higher operational qualities. The merger led to the formation of the New United Motor Manufacturing Incorporated (NUMMI). However, General Motors Company did not implement most of the modes of car production systems employed by Toyota Company hence leading to the closure and failure of some of its branches such as the Van Nuys in the year 1992 (Glass 9). Economic Recession The second aspect of external environment that led to the failure of the General Motors Company is the economic recession experienced in the United States of America that resulted to the loss of the Company’s market share from forty seven percent to thirty five percent from the late 1907’s to the early 1980’s (Glass 10). At that time, the recession was characterized by excessive car production that led to deflation in the markets. The reduction of the market share of the General Motors Company enabled many of the customers to develop a negative perception towards the products produced by the company due to the fact that they were of low quality. The media and the consumer report magazine also played a big role in the failure of the company since they portrayed a negative perception of the company towards the consumers thus enabling them to ignore the NNUMIS`s products (Glass 12). By the year 1992, the Company had made a loss of approximately twenty billion US dollars propagated by the recession and the utilization of some of the Company’s funds to purchase other forms of machines such as: Purchasing shares at the Ross Perot’s Company and the Electronic Data Systems (Glass 16. The Marx’s theory of economic crisis describes the economic recession as: An economic sector characterized by various forms of instability, anarchy and destructive forces making it unfavorable for business prosperity. This theory is directly related to the economic recession that deteriorated the productivity of the General Motors Company (Easterling 20). The greenhouse effect The greenhouse effect is the third aspect of failure to the company that enabled the company to record a number of loses; due to the fact that excessive production of the exhausted gases to the environment led to a green house effect, a law was formulated to enable all the companies to produce engines that produce less exhaust thus becoming a great challenge to NNUMIS. As the technology was advancing on the daily basis, more ideas were generated as the population also continued to grow thus increasing the number of automobile owners. However, the amount of crude oil at the mines continued reducing each day hence creating the need for developing more sustainable vehicles that could consume less fuel. The government on the other hand had increased concerns over environmental impacts of excessive greenhouse gas emissions (This American Life n.d). As a result, all the motor vehicle production companies were required to produce engines that emit limited amounts of exhaust. The result of this rule was that the General Motors Company was faced with a challenge to produce smaller engine capacities that consumed less fuel and emit limited amounts of exhaust thus becoming a failure. The classical economic theory recognizes such scenarios as circumstances that may bring the economy below the expected GDP. However, the classical economical theory also acknowledges the fact that such circumstances adjust themselves through various systems within the economy. Behavioral Issues Since the General Motors Company experienced cases of insubordination, this contributed to its failures on a great deal whereby most of the employees were characterized with behaviors of absenteeism especially on Monday mornings as well as damaging the company`s property. Most employees had the habit of not reporting to the company on time as required thus enabling the company to waste the man power. Some of the workers conducted intentional damages or poor productivity on some of the products at the Company after being punished by the management for taking alcohol during their working sessions for instance, at one point; the management found out that some of the car parts were improperly fixed (This American Life n.d). This also contributed to the overall poor productivity of the Company hence leading to huge economic losses in the early 1990’s. The Insubordination was also propagated by the fact that the UAW union had set some strict stipulations that protected the workers from losing their jobs (This American Life n.d). Therefore, more workers intentionally conducted illegal activities at the Company knowing that they were safe from losing their jobs. Through the Union, workers were provided with a loop hole to express their grievance and hold the management accountable. Serious fines were levied on the management if a worker presented such grievances, hence limiting the capacity of the General motors Company management to control its workers’ behaviors (This American Life n.d). As a result of the negative behaviors of workers at the General Motors Company, the Fremont branch in California was closed thus resulting to the lay down of approximately 2600 workers. The overall profits of the general motor company also decreased tremendously due to reduced market share and productivity The Maslow’s Hierarchical Theory indicates that various employees needs such as love, self-esteem, safety and self actualization have to be satisfied in a specific order. Due to the fact that the failures of the General Motors Company also occurred because some of the employees were not given a platform to expression their ideologies, therefore the application of this theory may assist the management to provide a solution to this problem (Get Homework Help with Cliffs). . Failure to investigate other Companies’ policies The failure of the General Motors Company was also boosted by its failure to investigate the policies that other companies used (This American Life n.d). Even though the company formed a partnership with the Toyota Company, it did not successfully investigate modes of operation of the Toyota Company so as to implement them if they were much better compared to their own policies (This American Life n.d). The new policies could have enabled the company to improve its productivity. The Company also sent a team of its workers to Japan in order to learn their modus operandi, but when they came back to the United States of America, they were not deployed to other branches of the company. The original plan of the General Motors Company was that these workers would be deployed to other branches of this Company like Fremont and Van Nuys (Glass 6). In addition to that, there is no evidence provided to show that the General Motors Company made efforts to study other policies from other vehicle manufacturing companies within the country. This was also a major weakness in the management hence leading to their failures; moreover, the management was full of pride and never took time to study the policies of other successful companies to which they perceived as small companies (This American Life n.d). Managerial and Leadership Issues Some of the challenges faced by the General Motors Company were as a result of the managerial and leadership issues that were frequently experienced in the company. One of them being the pride among the leaders which made them adamant to study other successful Companies of which they perceived as minor (This American Life n.d). Apart from that, there was also the issue of conflicting ideas among the leaders on how to manage the General Motors Company. Frank Langfitt says that there were frequent conflicts between the UAW union leaders and the management team of the General Motors Company over the issues of firing workers (This American Life n.d). This led to more attention focused towards providing solution to such issues instead of focusing on proper management that could improve the Company’ overall productivity (This American Life n.d). There was also the aspect of conflict which arose over the partnership that was formed between the General Motors and the Toyota Company. Some of the managers were for the idea while others were driven by pride and were against forming a partnership with the Company they viewed as minor (This American Life n.d). This also led to increased challenges that led to more focus being directed towards provision of solutions instead of focusing on the methods that could lead to higher productivity (Glass 5). According to the behavioral management theory, it depicts that a better comprehension of human interaction at the work places assists in reduction of issues like conflicts, expectations, human motivation hence leading to improved productivity. The management of the GMC failed the company by not placing such imperative theories in to use. Conclusion In conclusion, it is apparent that most of the challenges that led to the failures of the General Motors Company were as emerged from both internally and externally. The internal issues could be solved through proper management system. The external issues can also be faced by the company through forming proper plans and strategies. Managers are also encouraged to put the theories in to proper use so as to record high production. Therefore, I would like to recommend other Companies that seeking to be successful to devise proper leadership programs and systems that would act as their pathway to success. Works cited “Get Homework Help with Cliffs. (n.d.).” Notes Study Guides. 2012. Web, November 22, 2012, from “Southern Illinois University Edwardsville.” Southern Illinois University Edwardsville. 2012. Web November 19, 2012, from Easterling. Marx's Theory of Economic Crisis. International Socialist Review, 2003, 37(32), 23-29. This American Life. 2012. Web, November 19, 2012, from . This American Life. California: Chicago Public Media and Ira Glass, 2010. Print. Read More