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GM - Essay Example

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The multibusiness model that GM was practicing before was 'Unrelated Diversification'. The various divisions were not integrated and were given considerable autonomy and control. Each division was taking care of its own business and therefore the bureaucratic costs were also low…
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GM Searches for the Right Global Structure GM's Global Multibusiness Model: The multibusiness model that GM was practicing before was 'Unrelated Diversification'. The various divisions were not integrated and were given considerable autonomy and control. Each division was taking care of its own business and therefore the bureaucratic costs were also low. But the autonomy given to the various divisions was resulting in the duplication of resources and increase in costs. Therefore, GM shifted to the multibusiness model 'Related Diversification'. Although the implementation of such a multibusiness model calls for a high integration among the departments but the sharing of resources like the car design and production decisions resulted in benefits. Through this structure the car design process speed up as the decision making of the global engineering and design groups was recentralized.
GM had employed a 'Localization Strategy' in the beginning. With this strategy, although there was local responsiveness and the products were designed according to the demands of the various global divisions but due to this decentralized control in each country it operated, there was a duplication of the various activities like the design, component parts, manufacturing and sales functions in the various divisions which resulted in an increase in the costs of GM and therefore effected GM's revenues and profits. The company later implemented a 'Global Standardization Strategy'. This strategy was based on the product-group structure and aimed at coordinating the activities of home and overseas operations. Through this strategy by sharing expertise, the various divisions work together to design cars which can be sold anywhere across the globe.
GM's Change in Global Structure for Effective Coordination of Activities:
GM has been changing its global structure to allow it to coordinate the production and sale of its products most effectively around the world by the implementation of a "Global Standardization Strategy".
GM has firstly centralized the car design and production decisions. Through this strategy, the company practices to keep costs down by deciding on the global suppliers. The central U.S headquarters of GM decide which global component suppliers to buy from. Through this approach the company is able to cut down around 40% of its costs globally and also able to achieve a centralized control.
Secondly, GM recentralized control of decision making in the global engineering and design groups in order to allow it to coordinate these activities more effectively around the globe. GM must have been making full use of the information technology and internet to leverage knowledge across the various divisions. The various divisions share their expertise and design cars that are accepted worldwide i.e. a standardized model should be built. This has speeded up the development of new car models as GM takes 5 years to design a car against a 3 year for Toyota.
Although the implementation of such a global structure had huge implementation costs of $7 billion but the benefit that outweighed these costs was the centralized control that GM gained over its various divisions. GM has still more to go in order to further establish its new product-group structure. It needs to compete with the Japanese market through bringing in differentiation in its products through the combined expertise of the various divisions. Read More
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