Development of a Competitive Product Mix along with a Balanced Cost Structure - Essay Example

? Organizing Introduction Reorganization is considered to be an option by any business sector, when bankruptcy takes place. It is a process governed by chapter 11 of the Bankruptcy Code. With rapid increase in competitors within the automobiles industry, General Motors Company (GM) has faced rapid challenges in the global platform from brands like Volkswagen and Toyota resulting in decreasing sales since 2000, which ultimately resulted in the company’s bankruptcy in June, 2009. Additionally, poor quality products and pricing strategy of the company were also considered to be the major cause behind company’s bankruptcy (Eisenstein, 2013; Isidore, 2009). This paper intends to identify the key challenges associated with the reorganization plan that has been proposed by the company. Furthermore, the paper entails valued suggestions, which will assist the company in mitigating the key challenges. Discussion Reorganization is considered to be a major part of any business who files for bankruptcy, as it is considered that reorganization can either dissolve a firm or help the business to attain a leading position in the global platform (United States Court, n.d.). The plan that has been designed with respect to the reorganization proposed by GM is stated here under: Development of a Competitive Product Mix along with a Balanced Cost Structure It is measured that GM is listed among those automobile organization that owes many well reputed automobile brands like Chevrolet, GMC, Cadillac, and Isuzu among others. The first reorganizational plan of the company inculcate to rationalize its vehicle brands by discontinuing well-known automobile brands like Hummer and many others and focusing on its core brands. The company then planned to reduce its name plates by 25% which is estimated to increase around 80% by 2014. GM is considered to be one of the oldest automobile companies in the world, which also implies the same for their dealers. However, it has been found that the dealers of the company are comparatively outdated in comparison to the other competitors resulting in decreased marginal sales of their products. In this regard the company planned to reshape its dealer and expand it dealership in all major part of its operating area. Additionally, the company merged its four product development organization, which was located in diversified part of the globe to foster effectiveness of reorganizational plan and to maximize the cost. Furthermore, these strategies will assist the company to develop better vehicles for its customers. It has also been identified that though the company has reduced its total labor cost by 28% from 2004 till 2008. However, there was no significant outcome of the implemented policies. It is also estimated that the company spends about $100 billion on retiree benefits irrespective of its losses (General Motors Corporation, 2009). The main issue that can act as a barrier for the company is the increasing cost of raw materials. The plan that has been made by the company has been estimated with the current prevailing cost of raw materials which are likely to increase in the future. Additionally the plan of refurnishing the existing dealers may be a challenging task which would require adequate amount of time (Kunze, 2012). Compliance with the Federal Environmental Regulation The second plan that has been proposed by the company i.e. GM is to develop vehicles to meet up the environmental regulation passed by the government of the United States of America. The company also developed plans to manufacture alternative fuel vehicles, adapting the company’s technological aspects in countries like Brazil. The increasing pollution has forced the government of different countries to pass laws that set guidelines for automobile industry to manufacture vehicle accordingly. In this aspect the company has planned to replace some of its higher authorities to maintain an effective structural management in Brazil, as it accounts about 60% of the vehicle sale in the South American region (Higgins, 2013; General Motors Corporation, 2009). In recent scenario, it has been viewed that today’s generation are more conscious about growing environmental issues. This aspect has created awareness within the automobile industries to implement new policies for developing an eco-friendly vehicle to mitigate the accelerated environmental issues. According to a research conducted by Edmunds.com, an industry researcher showed that only less than 4% of the registered car within the United States runs on battery power, and 15.5% runs on hybrid version (Trop, 2013). Thus, it might stand up to be a challenge, if the company invests more on developing Eco-friendly vehicles, as it may incur heavy losses. To Rationalize Cost, Capital and Capacity of the Organization to Meet up the Growing Customers Demand With the growing competitors in the market the company faces a rapid challenge in selling their manufactures products. Furthermore, it has been revealed that the company has adequate manufacturing plant in comparison to their selling rate. Therefore, the company has planned to shut down its existing manufacturing plant and reduce it to 14. Additionally, the company also planned to develop new range of products for sale in developing countries in order to capture the competitive market (General Motors Corporation, 2009). As accessed above, it can be observed that companies, which enjoys s high sales volume in developing countries as compared to that of the developed countries, as people have an perception that the products are not accessorized with high tech features, which may results in decrease of sales within the higher-income group of the developed countries like U.S and United Kingdom (U.K) (Vlasic, 2013). Conclusion To sum up reorganization is considered to be an important aspect for every organization that has filed for Chapter 11Furthermore, reorganization as a strategy during bankruptcy assist the organization to either dissolve or emerge as a leading brand on global context. GM is considered to be one of the oldest and reputed automobile brands worldwide. Although, under recent observations, the sale of automobiles manufactured by the company i.e. GM has decreased with the rising competitors in the global market. The company has implemented certain reorganizing plans to mitigate the concerned issues prevailing within the organization. But, applying the measures planned, the company might face certain major challenges related to its sales margin and positioning within the competitive market scenario. References Eisenstein, P.A. (2013). GM readying another major reorganization. Retrieved from http://www.thedetroitbureau.com/2012/08/gm-readying-another-major-reorganization/ General Motors Corporation. (2009). 2009 – 2014 restructuring plan. The New York Times Company, pp. 1-102. Higgins, T. (2013). GM considers Brazil options with Akerson’s global reorganization. Retrieved from http://www.bloomberg.com/news/2013-01-25/gm-considers-brazil-options-with-akerson-s-global-reorganization.html Isidore, C. (2009). GM bankruptcy: End of an era. Retrieved from http://money.cnn.com/2009/06/01/news/companies/gm_bankruptcy/ Kunze, P. (2012). Raw materials - challenges and solutions for the future? Retrieved from http://ec.europa.eu/enterprise/policies/raw-materials/files/docs/eu-us-kunze_en.pdf Trop, J. (2013). Santa Monica bets on electric cars, but consumers are slow to switch. Retrieved from http://www.nytimes.com/2013/09/21/business/santa-monica-bets-on-electric-cars-but-consumers-are-slow-to-switch.html?pagewanted=all United States Court. (n.d.). Reorganization under the bankruptcy code. Retrieved from http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter11.aspx Vlasic, B. (2013). G.M.’s profit rises despite weakness in Europe. Retrieved from http://www.nytimes.com/2013/02/15/business/gm-hurt-by-europe-still-increases-profit.html?_r=0 Read More