Strategic Analysis of General Motors - Essay Example

Strategic Analysis of General Motors Table of content Introduction General Motors is one of the renowned s in the automobile manufacturing industry with its global business operations. This report is an effort to have a critical analysis of the company and its external environment in consideration to the decision taken up by the management of the company to withdrawal of its operations from European market. Various strategic frameworks have been used to have the critical analysis of the external and internal environment of the company. To share the personal experience of the team members of the group activity a reflective report has also been provided at the end. Task A: Strategic Analysis 1. Internal and external analysis of General Motors position in 2009 1.1 External Analysis – frameworks PESTEL Political – The political environment of the location insisted on selling off the German Subsidiary of GM, Opel to the other investors formed by the coalition of Canadian-Austrian Brand Magna and Russian bank Sberbank but the company did not agree to that. The German government tried to secure the domestic job opportunity by molding the GM’s subsidiary Opel along with the Canadian-Austrian enterprise and the Russian bank (Bartsch, 2009). Economical – Economist expected a slower rate of economic growth of 0.1% in the European nations by 2009. Many locations recorded an unemployment rate of 8.4% with some of them scoring more than 10% rate of unemployment in European nations. The GDP of France was also observed to keep on shrinking over the time (cmpind, 2009). The interest rates of European nations have declined and the mortgage market has strengthened during the time. The complacency of the investors contributed significantly in the worsening of economic condition of the European market (IMF, 2008). Social – The social environment of the location faced several movements in context of the actions taken up by GM towards cutting down of jobs at the European operations under Opel. Funding were being offered by government business regulating agencies to the company to remain in the European market with an assurance of providing 5,500 jobs to the people in the Vauxhall unit of the company (Boston, 2009). The job cuttings done by the company was demanded to be socially responsible by the authorities of German operations of Opel (DW-World, 2009). Major burden came upon the recruitment of young professionals who faced significant scarcity of jobs in the industry (Brunello, 2009). Technological – Technological advancements during the economic downturn focused more on the issues such as global warming and its control mechanisms (UNU, 2006). New technologies swiped away the older ones with an intention to improve the overall condition of the region influenced by the economic downturn. More emphasis given on the restructuring of the system in order to resist the effect of the economic crisis and form an entirely new system to provided emergence of new opportunities for business and the employment activities (Brunello, 2009). Environmental – GM required displaying its concern for the environment as Automobiles served as a major contributor to the global warming process (GM-website1, n.d.). Legal – The company faced excessive legal pressures created by the European government to restore the German operations of GM under Opel and Vauxhall. The initiatives taken up for restoration of German operations proceeded with formal documentations and agreements but the company took its step backward. Porter’s Five Forces framework Supplier Bargaining Power – Due to severe economic crisis the suppliers faced trouble in supply of the resources hindering the normal production of the GM. Buyer Bargaining Power – The complications between GM and German authorities including the other involved companies influenced the buyers’ decision over GM products. It indicated the strengthening of the bargaining power of buyers. Competitive Rivalry – The competitive rivalry between GM and other European brands have increased because of the controversial situation of Opel in European market. To perform in such kind of highly competitive environment GM adopted approaches of product differentiation as it supported the company to develop its unique image in its customer group. Threat of New Entrants – The economic condition of the location does not have potential capability which allows any new organization to enter the market as the economic condition gradually became worse. GM remained out of such kind of pressure as due to several big brands it becomes tough for any company to start its own business in the automobile sector. Threat of Substitutes - In context of GM it is very much obvious that the company might have to face such kind of pressure though it has a wide range of products to offer to the market. 1.2 Internal Analysis Resources – The Company possess a strong resource backing for both tangible as well as intangible resources. Forming strategic partnership has also benefited the organization in generating resources for its production process. To confirm the availability of its resources the company also possesses a huge network of suppliers of diverse nature (GM-website2, n.d.) Products –The Company has a strong presence in manufacturing cars and trucks. It also provides with additional spare parts used in automobiles. To keep its pace up it has also introduced its eco-friendly vehicles in concern to the environmental condition (GM-website3, n.d.). Finance – The financial evidences sows that the company has performed well in European nations despite of the adverse economic condition. The company’s sales volume recorded to be of 2.04 million during 2008 with a market share of 9.3%. The company recorded an increase of 32% in its sales volume of Eastern European nations (See Appendix 1). Sales performance of GM in European market in 2008 (Source: GM website4) Activities – Several programs and campaigns initiated by the company are being done focusing on the opportunities arising from the recovery of the market. Reducing the inventory level got the maximum benefit from these activities (See Appendix 2). Competitive Advantage – In context of European market the company has a competitive strength of presence as a market leader in automobile industry. Apart from that the company also provides numerous economic benefits of the nations in terms of employment, revenue, and communication (Boston, 2009). Core Competency –GM has a strong command over the knowledge, experience, and expertise as it has its presence as a leader of automobile manufacturer with global presence. 2. SWOT analysis of GM 2.1 Strengths Due to its global presence and strong background the company has always dominated the industry. A major strength of the company is also sourced from the fact of having a strong team of skilled and experienced employee base who have contributed significantly to the success of GM. The company has a wide range of products to offer for its geographically varied customers since the company has a strong research and development team to provide innovative approaches for product development. It has remained the 3rd largest market share holder in European nations (9.3%) during their tough times (See Appendix 1). 2.2 Weaknesses In European locations the company recorded a significant loss of $2 billion during its first quarter of financial year 2009. Continuous increase in the debt with lower asset level of the company proved to be a major contributor to the bankruptcy of the GM. 2.3 Opportunities As per the industry people potential opportunities for the company are very much possible after the scarce phase of economic condition gets over completely by 2011. Offering customers with eco-friendly vehicles has been pioneered by GM which could also contribute to the success of GM in near future. Improving market condition could lead to provide GM with an opportunity to excel in its industry once again. 2.4 Threats Political and legal hindrances have emerged as major threat for the company which it has experienced in last two years. Pathetic economic condition has also posed threats on automobile industry as a whole since people have reduced their expenses level and changed their buying behavior. 2.5 Conclusion from SWOT The SWOT analysis of GM in context of the tough time faced by the company resulted into identification of factors relevant to the financial, technological, and suppliers of the company. The financial condition of the company is not considered as suitable because of high debts with low assets which also resulted into the bankruptcy of GM. In context of technological factors it has proved its presence by introducing the concept of hybrid and innovative vehicles which are eco-friendly in nature. From suppliers perspective the company has initiated several activities which emphasizes on reducing the cultural differences and include the minority groups of suppliers (GM-website2, n.d.). 3. Strategic framework of Ansoff’s Matrix The framework provides comparative analysis of the SBUs of the corporation and identifies those which are potential and one which requires attention (See Appendix3). The company has its first option of market penetration under which it should emphasize on promoting its current products in the present market. The saturation level of the market due to high competition level and disappointed views of people could influence the operations of the company. From this interpretation it can be guessed that this option might not suit GM considering its present circumstances. The option of product development indicates the company to adopt strategy focusing more on providing new and innovative products to meet the customers’ requirements at the most optimal prices. The company has its dedicated research and development team which supports the company in adopting this alternative and provides the company with more advanced and innovative ideas and products. Considering the present situation of the European market where the company is experiencing continuous fall in sales (BBC-1, 2004). This option of developing new market area at various locations such as Asian market, and several other developing economies could be very effective. These locations have better opportunities because at these locations people are gaining more purchasing power and improving their standard of leaving. GM should try to explore more business locations which fit into the expectations of the company. Not only GM but other brands also faced problems in operating their business in European nations (BBC-2, 2004). For its diversification the company could adopt strategy which focuses on selling some of its brands such as Opel and Vauxhall which are facing problems in running their operations. GM should take support from other organizations of the same industry in terms of financial support. Forming strategic alliances and partnership with companies having strong financial and market background could also prove to be useful for the company. 3.1 Strategic approach of selling European operations The major decision taken up by the GM of withdrawing its European operations by selling off the operations to Magna International Inc. is advocated to be wise because of the present financial condition of the GM. The decision supported the European unit of Opel in financial terms by the investments of €500 million and €4.5 billion made by Magna International and the German government (STOLL, FUHRMANS, & WALKER; 2009). Looking at the financial condition of the company and economic slowdown it was becoming very tough for GM to bear the losses generated by the European operations of GM. So the company decided to sell of its German unit Opel to the consortium formed by Magna- Sberbank coalition. 3.2 Evaluating strategy through BCG Portfolio Matrix Evaluating the corporate level strategy of GM through BCG matrix results into four different situations which are named as high and low growth rate of business with high and low market share. The matrix also has four different characters as Stars, Cash Cows, Dogs, and Question mark, each of which represents different organizational states (See Appendix 4). The company should focus more on its declining market share which has reduced by 1% since 2001 to 9.2%. To capture maximum market share GM could have provided its customers with more low cost products which also promise for high quality service (BBC-2, 2004). The company has low growth rate and low market share in the European regions. The situation demands for liquidation and the company followed the same by selling off its European operations. The other two categories Cash Cows and Question marks do not matched to the business condition of the company. 3.3 Evaluating Business level strategy – Porter’s Generic Strategy The generic strategies of Michael porter provide assistance in evaluating the strategies of organization on the basis of cost and differentiation considering competitive advantage and scope at the center (See Appendix 5). In the context of GM it should focus on both cost and differentiation strategy to improve its market position and profitability. The company is required to follow the underlying notion of the Porter’s generic strategies of business which supports organization in becoming unique in its segment by offering great service and product at lowest possible price. 3.4 Evaluating the alternatives The alternatives to focus on the cost and differentiation strategy are very much suitable for the company since it has already faced a huge loss in past consecutive years and it needs to control the expenses to stabilize its financial position. Focusing on low cost strategy could be of use but scarcity of fund restricts the company from adopting the strategy. Strategy of focusing on the cost and product differentiation could be accepted as an effective strategy because of the price war among the companies. Another reason is differentiation which attracts more number and types of customers of different classes of social system. The alternative focusing on the cost and differentiation strategy are very much feasible because of the financial condition of the company which demands for restructuring. Focusing on cost will provide the company with more savings and being focused on differentiation of products will support the organization with grabbing more customer segments. 4. Analyzing Stakeholders of GM The selling off decision of GM’s European unit to Magna & its supporting bank organization has also influenced the stakeholders of the company. Stakeholders of any organization bear the impact of business environment over the organization. The selling off of the German unit of GM to Magna could have maximum impact on the stakeholders of GM and also the unemployment rate will hike at a rapid rate and would have created10, 000 jobless people (Dade, 2009). The handing over the Opel and Vauxhall units of GM to Magna International-Sberbank consortium could have benefited some of its stakeholders which are the employees of the company. If some how the company would have sold its European units to other organizations the stakeholders could be benefited from that also after the declaration of 10% share of the employees. Selling off the divisions such as Opel and Vauxhall could have negative impact on the stakeholders because these two units were among the most productive units of GM and recorded more than 1million sale in every year. Moreover the German location of GM contained the most advanced technological investments made by the GM which served as another major reason for the affinity towards the German operations of GM. 4.1 Change Management The company needs to have a proper involvement of change management through which it could be able to identify its strong areas through critical analysis. The requirement of change management is brought by the uncertain incidents such as the global economic downturn which influenced the GM’s business operations across the globe and in European market (Cipd, 2009). The complications raised between the GM management and German government officials and Magna International indicated the essentiality of the change management applications into the organization. 4.2 Type and context of Change The company required change management in the context of its restructuring the business operations in the European market. The type of change required for the attainment of the purpose is several radical changes which are needed to be done with a strategic approach. These changes such as changes brought in the plans and goals of the organizations. The core business operation is required to be changed which will impact the entire organization. 4.3 Lewin’s Force Field Analysis Applying the Lewin’s force field analysis for GM’s analysis the current condition of GM is suffering through the recovery phase after the numerous losses faced by the company in its European business operations (See Appendix 6). The company suffered the situation of crisis and was almost at the verge of bankruptcy and decides to have restructuring of its entire business operations. The company decided to get back its lost position as a market leader in the automobile industry. To achieve the goal the company will require adopting strategic approach towards the change and its management within the organization. Forces such as the political and legal pressures will be acting upon the company due to its controversial episode of European operations with the German authorities. Other business forces identified under the five forces analysis are also actively contributed to the forces. 4.6 Areas needed to be changed for the implementation The company is required to look after to its certain aspects such as cost reducing strategy and proper structuring of the organizations into its various units with uniform concern towards all of them. GM should also emphasize on the products range and include more numbers of products into its segment. Conclusion The strategic analysis of GM with respect to its European operations involved some other organizations and government agencies. The decision of not selling its German unit Opel and Britain unit of Vauxhall proved to be better since these two units were considered to be the prime locations in European market and the brands collected better sales revenues too. During its tough time also the GM has proved to be the market leader by showing a profit in scarce economic condition. The final conclusion of the entire analysis indicates the excellent capabilities of GM which are not getting proper scope to prove themselves but the company has strong combination of knowledge and expertise with experience and strong network of suppliers and customer base. After suffer several unfortunate incidents during the economic downturn the company has again started its operations to recover at the earliest and reclaim its position back in near future. Task B: Reflective Report on Strategic Analysis of General Motors Introduction In this section I shall be discussing all of the experiences which I gained during the completion of the task and preparation of the report on the strategic analysis of General Motors in context of its decision to abandon its business in European nations. Simultaneously we attended a seminar which was also conducted in this context. To utilize our leadership and management skills we were provided with a potential opportunity to have a practical experience of implementing theoretical knowledge and studies of leadership into the real world group activity and lead the group as a team with high team spirit. Reflections of the study During the seminar I was assigned to look after the arrangement of security measures which was one of the most crucial tasks which were required to be done for the success of the seminar. I utilized my knowledge of leadership which I learned during this course of study. Leadership skills are very important aspects of a good management. Handling security management activities requires handling human resources only because they are only deployed as security personnel which are the key resource of the security activities. To have better control over the security people involved in my team I utilized both the types of models of leadership, i.e. transactional and transformational models of leadership. Some of the team members required to be motivated through fulfilling their need of recognition and handling of authoritative positions. So these kinds of people present in my team required to be controlled and influenced through the transactional model of leadership. Some more team members were needed to be handled through the transformational model of leadership. As mentioned by the transactional model I tried to understand the motives of those team members and approached them accordingly to follow my instruction and support me in executing the assigned job in the best possible way. In contrast to this model another approach of transformational model following which I utilized my motivational skills to bring out the best performance out of my team members. This also required identification and manipulation of various needs and expectations of the team members. During the performance of the group activity another major challenge emerged which was to keep the team members in a well coordinated way and control the level of conflicts among them. To complete the task in the most effective way we all needed to contribute at our best. Most of our team members were very much cooperative with high level of team spirit except some of the them who had certain complications among them though we all tried to keep those affairs out of the task. Conclusion Overall we all experienced the proper real life applications of the theories and studies related to the leadership approaches. Some way or the other we all got an opportunity to enhance our managerial and leadership skills which we have gained during this course. The benefits which we will obtain from these kinds of activities will support us in performing in a better way in our professional career. 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Appendix Appendix 1 Total Sales of GM in European market (Source: GM-website4) Appendix 2 Reducing level of inventory of GM after recession (May – Dec, 2009): (Source: GM-website5) Appendix 3 Framework of Ansoff’s Matrix (Source: wordpress) Appendix 4 Structure of BCG Matrix (Source: valuebasedmanagement.net) Appendix 5 Porter’s Generic Strategies (Source: learnmarketing.net) Appendix 6 Kurt Lewin’s Force Field Analysis (Source: valuebasedmanagement.net) Read More