General Electric, General Motors, and Ford's Market Level Strategy - Case Study Example

Market Level Strategy

General Electric

General Electric is massive, highly profitable and diversified multinational that has many very good but much-unrelated businesses. Commercial financing and airplane engines carry numerous opportunities for economies of scale and cost reduction. General Electric’s business also include household appliances, nuclear reactors and fuel, medical devices, steam turbines, nuclear support services, gas extraction and mining, motors and power generation. The company has an astonishing range of products and any of these products serve as a large as well as viable business in and of itself (Barron, 2011). Nonetheless, the company has all products rolled up under its commercial umbrella. The market level strategy at General Electric is highly differentiated. The company has based its operations on product and service differentiation as it seeks to spread its dominance in numerous different industries. The marketing level strategy goes way back when Jack Welch established a corporate culture at the company, and Jeff Immelt realized that consumer-facing businesses were highly competitive and volatile.

The company decided to settle on a strategy that concentrated on two primary areas. One was to provide the aging and developed world with power and technology to maintain its standards of living and the second is to provide the young and developing a world with the power as well as infrastructure to develop. Consequently, the diversified and started providing differentiated products and services. Because of its market level strategy, General Electric has been able to maintain constant growth as a whole as well as its different segments. In the first quarter of 2016, the company experienced a revenue growth of 4% (Samaha, 2016). In addition, it experienced a growth in service orders of 3%.

The company has a wider range of products and services that cut across different industries. Through Porter’s Five Forces model, it is easy to see whether General Electric has a sustainable future in all of the industries that it covers (Grundy, 2006). Looking at competitive rivalry force, the eleven different segments under its umbrella and it has a strong hold on the different markets. Its main competitor is Siemens, which is a leading diversified company that offers products and services in automation and control, information and communications, medical, real estate, financing, water and waste water treatment, financing and home appliances. In addition, it holds the largest market in the world.

The company faces further competition from companies in its different segments. In regards to the threat of new entrants, the force is low because of its vast size. The scale of economy that the company operates in establishes hardships and barriers to new entrants especially in its three major segments. In the industries, it has established its dominance; they require enormous amounts of start-up and operation costs and capital making it hard for small companies to enter into these markets and compete with General Electric. The threat of substitute products is relatively high because almost every product that the company creates and produces has a threat of substitute products. For example, its financial segment is not vulnerable to threats of substitutes as compared to other units of the company. Nonetheless, NBC segment is highly susceptible to substitute because it is easy for customers to switch a channel and advertisers to change to other networks.

In regards to the bargaining power of the buyers, the force is high because consumers have significant bargaining power for most of its products because of its size. Nonetheless, the magnitude of the bargaining power of the buyers varies from one segment of the company to another. For example, General Electric Consumer, the bargaining power is high because the cost of switching to another different product is low. Lastly, the bargaining power of suppliers is relatively low at General Electric because of the sheer volume of products that the company purchases from its suppliers thus the suppliers lacks the ability to bargain with General Electric. Many of General Electric’s suppliers would survive if they lost the company’s business. Moreover, the company is very flexible on who it chooses to be its supplier; this gives General Electric the benefit of having the suppliers fighting for its business.

General Motors

General Motors has an unrelated diversification that occurs when a company operates in an industry that does not have any important similarities with the companies that are inexistence in the industry. In the early 1930s and 1940s, the company diversified into electric tram transits system in over 45 major cities in America. To specialists and observers, financial operation at General Motors Acceptance Corporation represents an unrelated diversification. General Motors uses a combination of low-cost production and differentiations as it seeks to retain its impact on the automobile industry. Consequently, the company has maintained a constant growth of the years (Rosevear, 2016). As of January 2016, the company had experienced a 9% growth in its retail sales.

Porter’s Five Forces Model is an important tool that General Motors can use to evaluate its attractiveness and make decisions on the best fit between the company and the industry. Looking at the bargaining power of the buyers, they have been known to be powerful since state and federal laws make it hard to be side tracked support them. The company has five times as many buyers than Toyota. The economies of scale are important to the industry, and it acts as barriers for new entrants who until they achieve a certain volume of production, they will incur high costs. In addition, the capital industry is very high creating more barriers for new entrants.

Nonetheless, legal and government barriers are low because of the increase in free trade policies and globalization. However, with the growth of liberalization, the threat of new entrant will be high because most of the legal and logistic barriers will be eliminated. Looking at the bargaining power of the suppliers, it is low because the suppliers are many. However, the labor unions that are the major suppliers of human labor have constantly posed a potential threat to the financial survival and viability of the company. Liability of pension, as well as healthcare expenses that the company incurs, are very high as compared to the cost of the vehicles produced by the company contrasted to its rival products. General Motors must come up with strategies to minimize the liability. The threat of competitors is moderate because there are few competitors in the industry such as Nissan, Toyota, Ford, and Chrysler. These competitors are gradually taking over General Motor’s market share. The threat of substitute is high because of the lack of new entrants as well as low buying power.

Ford

Ford Motor Company is related because it diversified into various related business units from auto body manufacturing to rubber plantations to upholstery material factories. The strategy has assisted the company to become an almost fully integrated company where it can be able to produce vehicles that are process and assembly line manufactured. Ford owns the value chain where it controls the specification of manufacture, quality, and delivery of parts and timing of manufacturing. Consequently, Ford can produce affordable automobiles.

Ford Motor Company’s market level strategy is cost leadership. The company focuses on operating at the lowest costs, but this does not necessarily mean offering the automobiles at the lowest prices in the market. It uses this strategy to put it in a position where it reduces it prices to increase its market share. Ford deploys strategies to reduce its operational costs significantly, which has been a crucial success factor for its business. Furthermore, this means that the company has to maximize the use of its resources as compared to its competitors. Accordingly, the company is trying to retain its brand name in the perspective of American automobiles without losing its value because of lower economic costs. Despite its the market level strategy of cost leadership, the company is not growing, and it has recently reported a decline on in its sales (Rankin, 2012). In January 2016, its sales declined by 2.6% (Research, 2016). The company has been busy strengthening its financial capabilities as well as implementing companywide labor and cost reduction plan.

Ford maintains its position as one of the biggest vehicle manufacturer in the world by reforming and reconstituting its strategies to focus on the issues identified in the following Five Forces analysis developed by Michael Porter. Competitive rivalry is the first force, and it is a strong force. The company faces stiff competition from other companies in the automobile industry such as General Motors. The company competes against top players such as Toyota that innovate and market their products aggressively. There are high exit barriers thus, Ford would rather keep competing than close its business. From the analysis, the company should make the most of its competitive advantages to address all the external factors that are associated with competition.

The bargaining power of the Fords buyers is a moderate force because the customers have a significant influence on its business. Its customers face moderate switching costs as a result of moving from one company to another thus customers can easily move to other firms but is not frequently because vehicles are big ticket items. Changes in the demand of customers have significant impacts on Ford. The availability of substitutes offer customers to choice to move away from Ford thus the company must ensure customer satisfaction. Bargaining power of Ford’s supplier is a moderate force because they exert a moderate effect on the company.

The moderate supply and population of suppliers offer significant but limited bargaining power on Ford. In addition, the suppliers have minimum forward integration; this means that they do not control or own the sale and distribution of their products to Ford. In addition, the backward integration through the Ford River Complex further weakens the force because the company produces the materials it uses. Threats of substitutes are a strong force. There is the considerable availability of substitutes such as public transport and bicycle but their movements to substitutes are reduced by factors such as car loans. Threats of new entry are a weak force because the company invests heavily in establishing and maintaining its facilities and business. These high costs are barriers to entry, which reduces the threat of new entrants.