Marketing Strategy of General Motors - Term Paper Example

Marketing Strategy report on General Motors Any organized human activity, which is done in-group, will be most times constituted into an organization. So, Organization is a structure with a ‘collage’ of humans doing their allocated work under the supervision of a leader, for the benefit of the organization as well as them. These workers will normally be apportioned into different departments for better arrangement or streamlining of work. Among the many departments, which constitute an organization, the marketing department’s role is omnipresent and crucial, as it can only boost an organization through various strategies. With every organization wanting to expand their reach and make an imprint in various markets, there will be enough opportunities for it, to initiate that expansion drive. So, when the organization has enough opportunities, it can set targets and formulate various strategies to achieve those targets and thereby beat off the competitors. Every organization’s survival and success in the light of stiff competition hinges on the success of its main or flagship product. It is the ‘key’ that opens the door of success or profit. So, for an organization to survive in a competitive market, and to increase its profits in an optimum manner, its products have to be marketed optimally. Toeing that line, this report will determine the current marketing strategy of General Motors. Then, the report will evaluate the strategies in view of its existing business environment, recommended improvements that would enable them to compete more effectively. Business General Motors Corporation (GM), a multinational corporation, was founded in 1908 as a holding company for a firm called Buick, then controlled by William C. Durant. Now, it functions as a conglomerate manufacturing and selling, cars and trucks under the brands of Buick, Cadillac, Chevrolet, GM Daewoo, GMC, Holden, Hummer, Opel, Pontiac, Saab, Saturn and Vauxhall. Each of these brands has a number of cars and trucks under its division or arm. Even though, they are manufactured in one unit, vehicles coming under each brand are most times marketed differentially and some times in unison. Headquartered in Detroit, Michigan (USA), GM manufactures automobiles in 35 countries, capturing a sizeable portion of the world market share. GM was thus acknowledged as the worlds largest automaker, based on global industry sales. GM was able to hold on to this top position for the last 77 calendar years. But, its reign as the top automaker was threatened in the last few years. Apart from the intense competition put on by the fellow automakers, GM’s position was threatened by the prevailing political, economical and social factors. In recent years, GM suffered because of acute financial turmoil, which includes a loss of 38 billion dollars in 2007. One of the important factors, which is causing these loses is the raising fuel costs. So, the inflated fuel costs are affecting or shaping or influencing the current position of GM’s business as well as its current marketing strategy. The current marketing strategy adopted by GM in tune with the current scenario focuses more on the fuel economy and hybrid vehicles. That is, to entice the customers, who are concerned with the raising fuel costs, GM wants to market its range of fuel efficient cars in a more effective manner, than the heavy trucks and SUVs. Mike DiGiovanni, executive director of global market analysis at General Motors, told an audience of bankers and insurance executives in suburban Detroit that the company will shift its marketing to "fuel economy and hybrids," instead of promoting trucks as the company has done in the past” (insidebrandedentertainment.com, 2008). So, the current marketing plan of GM is to focus more on its fuel efficient vehicles and importantly on hybrid vehicles, as its hybrid vehicles are supposed to have gas-mileage improvements of 25%. Even though, GM’s marketing strategy to focus on fuel efficient vehicles could show positive results, its decision to cut on certain marketing avenues could turn out to be a major marketing challenge. That is, any organization wanting to market its product or services optimally, will normally use the popular media of Television to reach the intended as well as the maximum customers. GM motors on the other hand have decided to cut down its ad spending and marketing costs by deciding not to feature its advertisements during the Academy Awards ceremony and Emmys. “General Motors said today (Aug. 18) it has dropped the curtain on advertising during the Academy Awards ceremony, and also confirmed it would pull out of the Emmys in September, as part of the companys efforts to slash its ad spending and marketing costs” (Miller, 2008). So, due to current developments in the political, economical and social sphere, brought on by the raising fuel costs, GM has reoriented its strategy. That is, GM’s business is proceeding in a new path with the focus more on fuel efficient and hybrid vehicles. The bottom line is, strategies and proceedings of any business will be based on the customer’s preference and GM is proceeding based on that aspect only. Market Geographically, GM has presence in more than 100 countries. That is, it manufactures and assembles vehicles in 35 countries, and sells its brand of cars in more than 100 countries. Currently, it has divided its geographic market into 4 regional units. General Motors North America (GMNA), General Motors Latin America, Africa & Middle East region (GMLAAM), General Motors Asia-Pacific (GMAP) and finally General Motors Europe (GME). Among these units, GM North America (GMNA) is the significant contributor to its overall market size. Employing more than 173,000 people, GMNA manufactures most of the GM’s automotive brands. General Motors Latin America, Africa & Middle East region (GM LAAM) is one of the most promising markets for GM. GM enjoys a longstanding leadership position in African key automotive markets, such as Egypt, South Africa, Kenya, etc, and in prosperous Middle East key automotive markets, such as Saudi Arabia, United Arab Emirates, etc. (gm.com). In these two markets, GM markets its entire range of vehicles, but in South American countries, GM markets cars and trucks primarily under the Chevrolet brand. “GM’s strength comes from the heritage and brand equity the Chevrolet brand has earned over more than seven decades” (gm.com). GM’s Asia-Pacific unit covers all the prominent countries in that region, with most of its brands making a good impression in those countries. GM AF also oversees the operations of the South Korean automaker, Daewoo in which GM holds the majority stake. GM Europe operates 11 manufacturing and assembly units in 8 European countries. So, the market size of GM extends all over the world, with certain or all brands building a strong customer base. With GM reorienting its strategies according to the changing scenario (particularly due to fuel prices), it has optimum growth potential. As GM has long worked on alternative-technology vehicles, and has also come up with clean burning Flexfuel vehicles, it can entice more fuel Economy (FE) conscious customers. Also, due to its good range of vehicles and brand image, GM motors started grabbing an optimum market share since its inception. But, since 1980’s, its market share started to slide down as it lost over 22 big points of market share during the last 26 years (1982 to 2008). Following this negative trend, GM market share for the first time since 1925, has declined below 25% during the first half of 2008. “GM was precariously hovering at a 24% level heading into its centennial year of 2008, now just seven months later, the companys market share has plummeted well below this point” (carofthecentury.com). As mentioned above, GM sells cars and trucks under the brands of Chevrolet, GM Daewoo, GMC, Holden, Hummer, Opel, Pontiac, Saab, Saturn and Vauxhall. Under the Chevrolet brand, 5 cars are sold - Aveo, Cobalt, Corvette, Impala, Malbu. Also under the Chevrolet brand, 10 Trucks or SUVs are sold - Avalanche, Colorado, Equinox, HHR, Silverado, Suburban, Tahoe, Trailblazer and Uplander. Pointac brand of cars are G5, G6, G8, Solstice, Torrent and Vibe. Saturn range of cars includes Astra, Aura, Outlook, Aura hybrid, Sky, Vue, Vue Hybrid. Hummer range of trucks includes H2 and H3. Under the SAAB brand, cars like 9-3, 9-5 and 9-7 are sold. Finally, Cadillac range of cars includes CTS, DTS, Escalade, SRX Crossover, STS and XLR. Customer Even though there is no ‘definite’ description of the current customers of GM, the common description is people in their mid-ages normally buy GM vehicles. As there is no norm that people of particular age should only buy GM vehicles, the vehicles are purchased by people from different age groups. But, the most common purchasers of GM vehicles are the people above the age of 30 or 35. As GM’s customer base mainly constitute of older people, its competitors garner the young customer base. “…the competitors have a U.S. customer base that is generally younger and more affluent than that of GM” (secinfo.com/). This demographics characteristic of GM is more applicable to its Buick brand of cars. That is, Buick brand of cars are viewed by many as old cars mainly driven by older people. Because of this perception, many older people buy these cars. But on the negative side, the young and the affluent section of the customer base view this car as outdated. “The “brand resonance” that Buick has with the majority of the population is that of a “stodgy Grandma car”” (Lee, 2008). So, the customer base of GM vehicles appears to be uneven. To correct this situation, customers from different age groups, particularly from young age group of 15-30 should become ideal customers. So, the ideal customer profile that will be favorable to GM motors should be that of people from both the young age group as well as old age group. That is, even while focusing on the younger age group, GM should not ignore or take for granted the older age group customers. Also, the full nest families match the ideal customer profile of GM. A full nest family refers to any family which has at least one or more children and GM with its range of sedans and SUVs can cater to this customer base. So, even though, GM with its range of cars and trucks caters to all segments of the population, the common perception is, their main customer base are the older people. Competition General Motors face both homegrown competitors as well as foreign competitors. The American automakers who form the major competition for GM are Ford and Chrysler. Toyota, Nissan and Honda are the well known Asian automakers, who are the major competitors for GM motors both in its American as well as worldwide operations. Both these group of competitors pose a stiff challenge for GM in different car and truck segments, thereby declining its market share. Apart from these existing competitors, GM motors could face new competitors from India and China. As both these developing nations’ automobile industry is proliferating, GM is facing competitions in its home turf as well as in those countries. Chevrolet is the GM brand which is most visible in these two countries, but their range of cars and trucks are ‘countered’ by local brands like Maruti and Tata in India, and Geely and Cherry in China. Each of these competitors has various strengths and weakness, which determines their position viz GM motors. Starting with Chrysler, its strengths are its dependable V8 Hemi engines, good brand name and also three reputable marques - Dodge, Jeep, and Chrysler- which have a worldwide presence. It weakness is, it too much reliant on light van and trucks and so in 2008, Chrysler is facing continuous pressure from its rapidly decline sales of trucks, pick ups and minivans as consumers tend to buy more fuel-efficient vehicles given the soaring oil prices. Because of this weakness, Chrysler is planning to make some strategic moves. That is, it is exploring the option of tying up with Asian and European partners who specialize in fuel efficient vehicles, thereby directly challenging GM. “It makes sense for Chrysler to explore the possibility of foreign partnerships as it lacks resources to convert its production to smaller, more fuel-efficient cars” (Espinoza, 2008). GM’s other competitor, Ford has good strengths. It is has reputable brands like Mercury, Mazda, Ashton Martin, Volvo, etc in its ‘stable’. Its other strength is quality, with its vehicles receiving more quality survey awards than any other automaker. Like other American automakers, Ford’s weakness is its several big, gas-guzzling models. Ford announced that it will launch its more fuel-efficient European models to the U.S. in July 2008, but the cars did not arrive in time to stem the companys slide in customer satisfaction (wikipedia.org, 2008). Ford has initiated certain moves to make it less ‘baggy’ and more profitable, thereby fighting for the same market of GM. That is, Ford announced that it has reached agreement to sell its Jaguar and Land Rover operations to Tata Motors for $2.3 billion. The sale is expected to be completed by the end of the second quarter of 2008. This decision was made because Ford was finding it difficult to manage these two brands profitably. The Asian automaker and GM’s main competitor, Toyota’s strengths are good spending on R & D for future products and a strong commitment to continuous improvement. On the other hand, Toyota’s lack of brands is its weakness. “Apart from (luxury brand) Lexus. It’s only got one real bite of the cherry. History shows that leadership needs more than one bite; GM has Chevrolet and Buick etcetera, VW has got Audi, Seat etcetera. Toyota would be the biggest in the world with one major brand. That could be an Achilles heel, a fatal flaw,” (Rhys qtd by Winton, 2003). The current moves of Toyota, which could also have a direct impact on GM, is its initiatives in direction of hybrid cars. Toyota was able to challenge as well as overtake GM mainly because of its success with hybrid technology. Pricing General Motors Corp to boost its sagging sales has introduced a new pricing strategy termed "Employee Discount for Everyone". According to this new pricing structure, all the customers will get employee-level discounts on almost all the Chevrolet cars and trucks. “GM will offer employee discounts on all 2008 model year Chevrolets… The offer also will include employee pricing on some 2009 model-year vehicles, including the Cobalt sedan and HHR compact wagon.” (Kim and Krolicki, 2008). Tried in 2006, this pricing plus marketing strategy was re-introduced now to entice customers, who are already putting off their car buying plans because of the raising fuel prices. So, the basis and the factor that is responsible for this current pricing, is the downturn in US auto sales, caused by high fuel prices. GM hopes that with slightly reduced vehicle prices, it can entice the customers to buy the vehicles, and at the same time avoid affecting its profits. With its competitors also following the same low pricing strategy, GM want to reach a bigger customer base with this incentive offer. “The boost from that incentive offer was enough to allow GM to keep its top spot in the US market, heading off a threat from Toyota Motor Corp” (Kim and Krolicki, 2008) Strategy As the raising fuel prices started affecting the revenue of GM, with the customers avoiding its low fuel efficient and gas guzzling vehicles, it reoriented its marketing strategy. It started marketing and selling its fuel efficient cars, even reducing its prices as part of marketing strategy. With the global fuel prices showing minimal signs of subsiding, all the industries based on fuel are facing a lot of difficulties, and automobile industry is one of the worst affected. In this scenario, people wanting to buy cars and other vehicles, prefer buying the ones which are more fuel efficient. But, GM’s large and high gas consuming vehicles does not fit this criteria and this affects its profits. So, GM as discussed earlier has decided to optimally market its fuel efficient cars (particularly its fuel efficient small cars) and hybrids, instead of large trucks and SUVs. The main strength of this marketing strategy is, the customers’ interests and their concerns are taken into account. Customers are the ‘kings’ of any business, in the sense that the companies’ marketing strategies will be fully focused on them. In the case of GM, its current customer base is concerned about the raising fuel costs and the low fuel efficiency of GM vehicles. So, as this marketing strategy addresses these concerns and gives the customers optimal options, this strategy has bright chances of achieving favorable results. But, the weakness of this marketing strategy is, GM is well behind its competitors in fuel efficient and hybrid technologies. That is, its competitors like Toyota and Honda have developed and launched hybrid vehicles 5 years earlier than GM, while it did not develop a hybrid vehicle until 2004. So its competitors have a good head start, with Toyota being the leader in hybrid vehicles. Oscars is considered as one of the most prominent and best-watched events, so GM’s decision to cut Ads during that event could turn out to be a weakness. It could be a major flaw in its marketing strategy. “Pulling out of something with such esteem and exposure is not a sound move, said Peter DeLorenzo, a former Detroit auto ad exec and publisher of the blog autoextremist.com” (Miller, 2008). So, even though GM has good opportunities, it has certain challenges, which can be countered by making certain improvements to its marketing strategy. An important improvement that can be made to the GM’s marketing strategy is to reduce the sheer number of brands and focus on few fuel efficient brands. Realistically, it is hard for GM or any other company to manage and market more than two brand of same product, let alone market as many as eight brands. So, GM can drop off (or sell) some of its brands, so it can maximally manage 3 or 4 brands. Among the brands, GM can drop Buick, Hummer, Saab, either Pontiac or Saturn, all consisting of heavy, less fuel efficient vehicles. If GM can take this step, it can market the other fuel efficient brands like Cadillac, Chevy, and GMC in a more effective way. Also, some of its brands particularly Buick is being viewed as cars of old generation. So, it would be better and profitable, if GM concentrates on younger and hipper brands, instead of following the current strategy of selling the old products using young celebrities. The young celebrity endorsers like Tiger Woods can be optimally used to promote younger brands. Also, like countering the weakness, GM should feature its advertisements during the well watched events like Oscars. If GM can implement these improvements, the projected impacts will be mostly on the positive side. The fact uttered by GM R&D chief, Larry Burns which can aid the implementation step is, “The industry has tremendous growth potential since only about 13 percent of the people in the world today are vehicle owners. Wherever we go, we find people aspiring to the freedom that comes from owning an automobile, and I am confident the technology exists to enable sustainable growth”. So, if GM’s management with the help of its employees optimizes its current marketing strategy of focusing more on fuel efficient vehicles, then GM would have a successful and ubiquitous presence not only in USA, but all over the world. Reference: Burns, L. (2008). General Motors R&D Chief Larry Burns Sees Electric Drive across Product Line. Retrieved September 11, 2008 from http://www.designnews.com/article/47485-General_Motors_R_D_Chief_Larry _Burns_Sees_Electric_Drive_across_Product_Line.php carofthecentury.com. Answer to GMs Market Share Plunge. Retrieved September 13, 2008 from http://www.carofthecentury.com/answer_to_gms_market_share_plunge.htm Espinoza, J. (2008). Can Chrysler Woo Fiat? Retrieved September 13, 2008 from http://www.forbes.com/2008/08/14/chrysler-fiat-tieup-markets-equity-cx_je_0814markets23.html insidebrandedentertainment.com. (2008). Q&A: GMs Future Looks Greener With Fuel Efficiency and Hybrids. Retrieved September 13, 2008 from http://www.insidebrandedentertainment.com/bep/article_display.jsp?JSESSIONID=bQYPLPqJfpTbl31dLKWytWbMft2hZYc1K6jHJ20ZhZw3NM3nGWGH!405476046&vnu_content_id=1003811163L Lee, M. (2008).The Future of General Motors’ Brands. Retrieved September 13, 2008 from http://www.gracecheng.com/stocks/2008/07/07/the-future-of-general-motors-brands Kim, S and Krolicki, K. (2008).GM returns to employee pricing promotion to lift sales. Retrieved September 13, 2008 from http://www.usatoday.com/money/autos/2008-08-18-gm-employee-prices-incentive_N.htm Miller, S. (2008).General Motors Drives Away From Oscar Stage. Retrieved September 13, 2008 from http://www.mediaweek.com/mw/content_display/news/national-broadcast/ e3ie2e24571645310cba674a8120f0f1ef0 secinfo.com. GENERAL MOTORS CORPORATION. Retrieved September 12, 2008 from http://www.secinfo.com/d17xw.4f8dv.htm wikipedia.org. (2008). Ford Motor Company. Retrieved September 13, 2008 from http://en.wikipedia.org/wiki/Ford_Motor_Company Winton, N. (2003). Toyota threaten GM, Ford longterm world hegemony. Retrieved September 13, 2008 from http://www.wintonsworld.com/cars/carnews/carnewstext/toyota-threaten.html Read More