US Operations of General Motors - Essay Example

This marketing plan starts with a formal introduction to General Motors followed by its business vision and marketing objective. The paper will then throw light over GM’s industry analysis using relevant frameworks and will throw light over strengths, weaknesses, opportunities and threats. The plan will focus on GM’s US operations and will take into consideration its target market, marketing mix, financial projections and implementation timetable for both new arrivals and existing products. The plan will demonstrate details about recent moves in GM in the light of available information. Chapter# 1- Company Description: General Motors (GM) is a USA based organization that started its business 100 years back in 1908. It is 18th largest business corporate entity in the world having assembly plants in more than 30 countries across the globe. It has sales network of cars and trucks in around 140 countries. It provides direct employment to over 200,000 personnel. Whereas, a majority of people are indirectly associated with its dealers and GMAC, which provides insurance and financial services to the suppliers, distributors, private and commercial customers of General Motors. It is operational in North America, Asia-Pacific, Europe, Latin America, Africa and Middle East. The major European countries where General Motors has strong sales network are Britain, Germany, Italy, Belgium, Luxembourg, Netherlands, Poland, Russia, Turkey, France, Spain and Ukraine. Chevrolet, Cadillac, GM Daewoo, Buick, “Opel, Vauxhall and Saab (Europe), Saturn, Hummer, Pontiac, Wuling and Holden are among the major brands that Company is offering to its clients. In Europe, GM has been offering Saab in Sweden, whereas it offers Opel and Vauxhall brands in France, Germany, Italy, Great Britain and others. As far as GM’s strategic situation is concerned, it must be highlighted that GM previously planned to sell its European Operations in 2009 after huge losses it incurred due to uncertain business conditions but then rejected the offers of some buyers or corporations such as ‘Magna’ that were interested in purchasing General Motors majority stake. Since then the company has performed relatively better (Company’s report, 2009) Chapter# 2- Business Mission As revealed by the managers at General Motors, the automobile manufacturer has a vision to produce top quality premium products for its different market segments all across the world. The company has a mission to sustain its market share by constant innovation and development and to get the most out of available business opportunities in home (USA) and host nations (European, Asian, Middle East etc). Chapter# 3- Marketing Objective General Motors has been operating in an extremely challenging business environment, which is highly unexpected, unclear, unpredictable and unstructured. Unequivocally, the company has been facing tough competition with its Japanese competitors (Toyota, Honda, Daihatsu and Nissan) and Korean competitors (Kia and Hyundai) that have ability to produce hybrid and alternative fuel vehicles from their flexible assembly lines. In the light of above situation, the marketers at GM has focused on producing top quality vehicles (with additional features and characteristics) for their buyers at affordable prices and market them through its market penetration, product and market development strategies. GM marketers focus on designing and selling vehicles that are genuinely safe, reliable, durable, comfortable and secure and that give a sense of hassle-free driving experience to buyers. In 2010 the company managers are focusing to increase their market and cover their mammoth losses in 2009 after unexpected Toyota recall of over 8 million faulty vehicles worldwide. Marketers are inclined to reduce their inventory levels and extra costs by selling previous models at relatively lower prices. Chapter# 4- Situational Analysis 4.1- Industry Analysis (500) Market Trends: The increase in international oil prices, inflation financial crises and economic meltdown has aggravated the employment prospects and resulted in closures of many industries, services sector companies and enterprises. In short, unemployment has increased in past 2 years coupled with inflation thereby reducing purchasing power and savings of consumers while simultaneously forcing them to tighten their belts. Although demand for automobiles has reduced substantially, however, it can never come to Zero because they are among the needs of consumers (excluding consumer vehicles). Considering the above mentioned factors, consumers are now demanding more cost effective hybrid and alternative fuel vehicles because of affordability factor. Competitors: There are various competitors of General Motors as mentioned in the introduction section with capability to produce high quality products and to manage effectively their global operations. However, the most important aspect is that the US auto manufacturers have highly inflexible (though economies of large scale production units) that can not be converted to produce alternative vehicles in large quantities unlike their Japanese competitors, which can produce both Hybrid and alternative fuel vehicles from their existing plants besides production of traditional gasoline vehicles. Moreover, a major competitor namely ‘Toyota’ has lost its market reputation after recall of millions of defective units that in turn has reduced competition in the industry. It is worthwhile to mention that all auto producers and assemblers have organized Research and Development departments that enable them to produce innovated products to cater consumer demand. Technological: General Motors is operating in an environment in which it faces stiff competition with manufacturers such as Ford Group, Renault, Fiat, Nissan, Hyundai, BMW, Toyota, Daimler Chrysler, Kia and others that all have advanced technology and production facilities that enable them to produce fuel-efficient automobiles. In this scenario, General Motors has also opted to invest and produce fuel-efficient environment friendly vehicles to remain competitive in the industry. However, the late decision of company’s management to produce and market such vehicles in Europe finally resulted in lesser global sales in comparison to its competitors. In turn, the net margins of GM were reduced in 2008 and 2009 besides other external factors. PORTER’S FIVE FORCES Analysis: Bargaining Power of Buyers: The bargaining power of customers is improved in the wake of current economic conditions since General Motors and its competitors are offering new and existing models at lower prices to increase their sales and clear off their inventories. Threats of Substitute Products: As I mentioned above that it is an oligopolistic industry, the dominants have mammoth financial resources (since all of them have their business networks in majority countries). They allocate a significant amount of their funds to “Research and Development” to introduce new products. Therefore, General Motors would face the threat of substitute products. However, this has reduced after recent Toyota recall. Bargaining Power of Suppliers: The bargaining power of suppliers (raw material providers, machinery, spare parts, steel and other inputs) reduced considerably in 2009 because of shrinking world economy and constantly decreasing demand of vehicles produced by General Motors and other competitors in the industry. However, signs of global economic recovery in 2010 to date have improved their business outlook. It is expected that they will be in far better position since 2011. Potential New Entrants: In the wake of dismal economic scenario, investors who have willingness, ability and expertise to produce and sell vehicles are not inclined to take risks. Moreover, it is an oligopolistic industry dominated by well-established giants with mammoth resources. This is itself a biggest barrier that blocks the entrance of new companies in the industry. These companies can also be said as price-setters. Also, there are other major barriers such as licensing, registration and colossal investment. Rivalry among Competitors: Since, it is an oligopolistic industry as revealed from this research, it can be concluded that chances of rivalry among competitors, in the form of price-wars, new products, incentives and after-sales services are high in present economic scenario, since every firm has to ensure its survival, growth and sustainability. General Motors and other firms would focus more on product differentiation to obtain a clear, unique and distinguished image of their products in the mind of their customers. 4.2- SWOT Some of the major strengths and weaknesses of General Motors followed by the opportunities and threats are as under. Strengths: 1) GM is a supranational organization with business operations in around 140 countries. It, therefore, enjoys financial strength and mammoth resources. 2) Has an experienced and professional management including big names Ed Whitacre, Mark Reuss and Joel Ewanick to control and run its global operations. (Welch, 2010) 3) An organized Research and Development Department 4) 3rd largest share (9% as estimated) in Europe after VW and PSA group. 5) Cordial relations with partners and distribution channel members who often Push Strategy for sales. 6) Sales and Marketing group restructuring besides withdrawal of loss-making small brands such as Pontiac, Saturn, Hummer, and Saab to improve inter-organizational efficiency. (Weber, 2009) and (Welch, 2010) Weaknesses: 1) Although the plants are capable of producing quality automobiles yet some of its units are not running on 100% capacity. 2) Lack of control over structural costs that further reduced the profitability of GM. 3) Huge debts than the current assets or working capital that greatly affected their financial position 4) High inventory carrying costs. 5) Cumulative loss of $4.3 billion in 2009. Opportunities: 1) Global economy is coming out of recession that will improve consumer demand. 2) The expected new and innovated products as announced by GM in 2010 can also provide a better opportunity to improve its financial statements. 3) Toyota recall will increase market share in the short run (more specifically for 1-2 years) 4) Economic Growth in Central Europe and Asian emerging economies as expected may increase aggregate global sales. Threats: 1) Prevailing economic meltdown has forced consumers to reduce their spending and cut down their expenses. 2) Soaring international oil and food commodity prices in 2010. 3) Environment protection laws in Europe and America to reduce fossil fuel consumption and grapple with global warming issue. 4) Substitute products and price wars among rivals to attract Toyota’s customers. Chapter# 5- Marketing Strategy 5.1- Target Market Strategy General Motors targets people mainly from social classes including elites, upper middle and middle – middle segments. It has been producing various top quality brands such as Buick, Cadillac, Chevrolet and GMC to entice its potential customers. It must be highlighted that GM offers different models under the name of above mentioned automobile brands. It is worthwhile to mention that General Motors enjoys glib expertise and proficiency in producing highly comfortable, large and convenient luxury vehicles (mostly gasoline) to meet the tastes of upper classes. Similarly, it does not neglect a large pool of potential customers from middle classes, thus produces and offers small to medium sized fuel-efficient traditional (gasoline or petrol), alternative fuel and electric charge automobiles with excellent features and affordable prices. The company divides its market geographically to develop products with distinguishing features and characteristics to cater customers from diverse backgrounds in different geographic locations. It must be pinpointed that quality is relatively higher for quality-conscious Americans and Europeans compared to what GM offers in emerging markets in Asia, Africa and Middle East. 5.2- Marketing Mix Product General Motors has reduced its number of brands and automobile products as part of its restructuring strategy initially developed in 2009 when company announced to retain its European operations. GM will now specifically focus on its four major brands namely Buick, Cadillac, Chevrolet and GMC and will continue its production of models under these brand names. Chevrolet models include 2010 Malibu LS, 2010 Tahoe 2WD LS, 2010 HHR SUV LS, 2010 Suburban and many others. Cadillac models include 2010 CTS Sedan, 2010 SRX Luxury, 2010 Escalade SUV, 2010 DTS Luxury, 2010 Escalade EXT and many others etc. Buick models 2010 LaCrosse CX, Enclave CX, Lucerne and others. GMC models include Sierra 1500 Crew and Extended club, Acadia FWD, Terrain 2WD, Yukon, Canyon Extended club and others. New arrivals in 2010 - 2011 include Buick Regal, Chevrolet Cruze compact and Chevy Volt electric car. 2010 Chevrolet Malibu LS 2010 Chevrolet Tahoe 2WD LS 2010 Chevrolet Malibu LSPrice As far as pricing strategy is concerned, GM will use ‘market penetration’ (low prices for old existing models) strategy to clear of its inventory levels. Old but unused models of Cadillac are available in a range of $10,000 – 25000 whereas of Chevrolet are available for $5000-12,000. Similar is the case with other models of other brands. These prices are 20-30% lower than the new models of same brands. It is worthwhile to mention that all 2010 brands of Cadillac are in the range of $15000 – 30,000. The prices of GM’s automobiles differ in various areas depending upon the total cost of production, shipments / freights, other administrative expenses, dealers’ commission, additional features and quality. The prices are different for one-time cash payment consumers since they bring immediate cash to GM. The auto manufacturer / assembler keeps its price relatively low in case of any price wars to maintain its current share. Place / Distribution GM markets its products through its organized dealers’, wholesalers’ and retailers’ network. General Motors has always focused on maintaining healthy and cordial business relationships with its distribution channel members. However, the company will reduce its dealership network from over 6,000 dealers to fewer than 3700 dealers after worst economic recession in 2008 - 2009. In the mean time, the company also withdrew some of its loss making brands such as Hummer, Pontiac, Saturn and Saab that would have impaired the relations with partners; however, the strategic planners of the company consolidated the dealers with its profit making Buick and GMC brands. (Weber, 2009) Promotion General Motors has recently hired Joel Ewanick (as a substitute of Susan Docherty) who was a marketing head of Nissan Motor Co. and Hyundai Motor Co. in 2009. Indeed, Joel has been hired to improve marketing, sales and advertising program of GM so that it could attract potential buyers towards its four major brands. Although, Joel has not officially started his career in GM as marketing Vice President, yet he has been famous for introducing innovative marketing tactics to improve sales and market share. GM’s top management will expect similar past performances from Joel such as introduction of Insurance scheme namely “Hyundai Assurance” in which buyers who lost jobs were offered to give back their automobiles and terminate any financial lease agreements. This improved market reputation of Hyundai and sales increased in the short run. Similarly, he will come up with new aggressive advertising techniques to polish the impression of GM brands and boost sales. (Welch, 2010) Chapter# 6- Implementation, Evaluation and Control 6.1- Marketing Research General Motors has an organized Research & Development plus Sales and Marketing Departments each responsible for designing new / innovating existing models and for selling and marketing respectively. The marketing executives are solely responsible to gain insight about company’s internal and external environment and to develop feasibility reports for certain products. The marketers have already concluded that there is enormous scope for GM’s four core brands and their sub models. In addition, these models are technically sound unlike Toyota’s Prius that had gas accelerator pedals defect which led to road accidents. Moreover, most of the technology issues with Chevrolet Volt plug-in electric sedan have already been resolved and it is expected that company will be launch this latest electric car in early 2011 against its planned schedule of November 2010. The progress on this issue is mainly attributable to perceived threats of alternative and more viable technologies by competitors for their hybrid cars, which forced the strategic planners to accelerate their research. (Merx and Ortolani, 2009) 6.2- Organizational Structure and Plan As revealed from the research, the General Motors has a well balanced managerial hierarchy. The company has a President and Chief Executive Officer under whom directors and executive directors work. The directors and executive directors are solely responsible to assist the owners in formulation and implementation of organizational strategies. The GM’s global operations are managed by regional heads that are accountable to Detroit managers. The organization is divided into various departments of which most important are Research & Development, Production, Marketing and Finance. Indeed, marketing and finance personnel depend heavily on contributions in product prototypes and designing from R&D personnel since development of outstanding models lead to higher sales and business transactions. Any technical faults by R&D personnel may lead to a Toyota recall like situation and put career of thousands at stake. The top management is solely responsible for performance appraisal, evaluation and control. 6.3- Financial Projections GM’s first priority is to reduce its loss in 2010 or to end up with some profit against cumulative loss of $4.3 billion in 2009. The expectations about demand pick by marketers may lead to the following projections: 2010: loss under $0.5 billion / Break even / profit under $0.5 billion 2011: profit of $1.5 - 2 billions 2012: profit of $2.5 – 3.25 billions 2013: profit of $4 - 4.5 billions 2014: profit of $6 billions 6.4- Implementation Timetable 2010: General Motors will introduce new products such as Buick Regal and Chevrolet Cruze in United States of America in late 2010. The company marketers are expecting that these new products will entice existing GM buyers who are waiting for new arrivals as well as Toyota fans who suffered from defective automobiles. The number of buyers is not estimated, yet there is enormous scope for these products. 2011: General Motors has an intention to introduce Chevrolet Volt in early 2011 against its initial decision of November 2011 mainly attributed to volt technology issues. The work on this model is still in progress and R&D personnel are striving to meet official timelines. 6.5- Executive Summary General Motors is a US based Multinational Corporation involved in production, assembling and marketing of top quality automobiles all across the world. The company went through tough times and an extremely challenging business environment in 2009 when it first announced to withdraw from its European Operations but then backed up its decision. Finally, the auto-maker also averted bankruptcy. GM since then has focused on restructuring of its marketing and sales operations by withdrawing some of its loss making brands and production sites. The company has also curtailed its dealership network amid economic turmoil and global meltdown. The company aims to make the most of an unexpected opportunity that has arisen have recent Toyota Recall of around 8 million vehicles worldwide. GM is penchant to cap this opportunity through introduction of new automobiles such as Buick Regal, Chevrolet Cruze compact and Chevy Volt electric car in 2010 and 2011 under its four major brands namely Buick, Cadillac, GMC and Chevrolet. The company hopes that it will become profitable once again if it attracts both existing GM buyers and Toyota customers towards its market offerings. Secondary Sources David Welch “Gm Replaces Marketing Chief Docherty After Two Months” Bloomberg.com May 5, 2010 Automative News “New Chevy chiefs top to-dos: Key launches, marketing plan” Reviews.cnet.com December 15, 2009 Katie Merx and Alex Ortolani “GM Targets Stock Sale by July 2010, Year After Bankruptcy Exit” Bloomberg.com August 8, 2009 No author “The Year Ahead for General Motors” Entrepreneur.com January 14, 2010 Katie Merx “GM Said to Plan to Wind Down Hummer as Sale Falls Through” Businessweek.com February 24, 2010 Susan Docherty and Joel Ewanick “GM replaces marketing chief in latest shake-up” Cleaveland.com May 05, 2010 Kevin Krolicki and Bernie Woodall “GM Vice Chairman Lutz to retire on May 1” Reuters.com Mar 3, 2010 Jeremy Weber “GM to drop Pontiac by 2010, trade majority stake to U.S. Treasury” Motorauhtority.com April 27th, 2009 Dan Strumpf “GM hires marketing whiz who helped Hyundai” Msnbc.com May 5, 2010 No author “GM Annual Report 2008” Available at Gm.com No author “GM Annual Report 2009” Available at Gm.com Read More