General Motors (GM)

1.0 Company Profile

The company was founded on 16, September, 1908, in Flint, Michigan, USA as a holding

company for Buick, then controlled by William C. Durant. At the turn of the 20th century

there were fewer than 8,000 automobiles in America and Durant had become a leading

manufacturer of horse-drawn vehicles in Flint, MI, before making his foray into the

automotive industry. GM's co-founder was Charles Stewart Mott, whose carriage

company was merged into Buick prior to GM's creation. It acquired Oldsmobile later that

year. In 1909, Durant brought in Cadillac, Elmore, Oakland and several others. Also in

1909, GM acquired the Reliance Motor Truck Company of Owosso, Michigan, and the

Rapid Motor Vehicle Company of Pontiac, Michigan, the predecessors of GMC Truck.

Durant lost control of GM in 1910 to a bankers' trust, because of the large amount of debt

taken on in its acquisitions coupled with a collapse in new vehicle sales.

The next year, Durant started the Chevrolet Motor Car Company and through this he

secretly purchased a controlling interest in GM which helped him to take back control of

the company. Durant then reorganized General Motors Company into General Motors

Corporation in 1916. Shortly after, he again lost control, this time for good, after the new

vehicle market collapsed. Alfred P. Sloan was picked to take charge of the corporation

and led it to its post-war global dominance. In 2008 and 2009, GM has ranked as the

second largest global automaker by sales.

Today GM has headquarter in Detroit City, Michigan, USA and employs 209,000 people

in every major region of the world and does business in more than 120 countries. GM and

its strategic partners produce cars and trucks in 31 countries, and sell and service these

vehicles through the following brands: Buick, Cadillac, Chevrolet, GMC, Daewoo,

Holden, Isuzu, Jiefang, Opel, Vauxhall, and Wuling. GM’s largest national market is

China, followed by the United States, Brazil, the United Kingdom, Germany, Canada,

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and Russia. GM’s OnStar subsidiary is the industry leader in vehicle safety, security and

information services.

GM R&D was the world’s first automotive research center. It was organized in 1920 by

inventor Charles F. Kettering. Headquartered in Warren, Michigan, the GM Research

Lab is a network of six laboratories, six science offices and collaborative relationships in

over twelve countries including working relationships with universities, government

groups, suppliers and other partners from across the globe. Some of the noteworthy brain-

child of GM R&D are: Hybrid Electric Vehicles (HEV), All-Electric Vehicles (AEV),

Hydrogen powered vehicles and Flexible-Fuel Vehicles (FFV) all of which are

environment friendly cars.

GM is a leading company in making innovative vehicles; hence it has the following

competitors: Ford, Toyota, Honda etc.

Likewise GM, Ford is also an innovative company in making automobiles. It has also

introduced hybrid vehicles which provide 75% improvement in fuel economy in city

driving.

Once lightly regarded Japanese threat, Toyota is now poised to eclipse GM as the largest

car manufacturer in the world. Since its inception in 1937, Toyota has rapidly expanded

its global operation to its current state and sales of 6.7 million vehicles.

Honda is the largest seller of motorcycles in the world, yet it earns more than 80% of the

revenue from its automobile division. In contrast to its Japanese competitor Toyota,

Honda sales more than 50% of its cars in the United States.

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2.0 Mission and Vision Statement of GM

Vision statement:

"Over the past 100 years, GM has been a leader in the global automotive industry. And

the next 100 years will be no different. GM is committed to leading the industry in

alternative fuel propulsion. GM’s vision is to be the world leader in transportation

products and related services. We will earn our customers’ enthusiasm through

continuous improvement driven by the integrity, teamwork and innovation of GM

people”.

Mission statement:

"G.M. is a multinational corporation engaged in socially responsible operations,

worldwide. It is dedicated to provide products and services of such quality that our

customers will receive superior value while our employees and business partners will

share in our success and our stock-holders will receive a sustained superior return on

their investment."

Evaluation Matrix of Mission Statement:

Components of Mission Statement Yes No

1. Customer √

2. Products/ Services √

3. Markets √

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Components of Mission Statement Yes No

4. Technology √

5. Concern for survival, growth and profitability √

6. Philosophy √

7. Self-concept √

8. Concern for public image √

9. Concern for employees √

Revised mission statement:

“GM is a multinational corporation engaged in socially responsible operations,

worldwide. With its innovative R&D and state-of-art technology, it is dedicated to

provide high quality automobiles and services so that our customers will receive superior

value while our enthusiastic and diligent employees and business partners will share in

our success and our stock-holders will receive a sustained superior return on their

investment."

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3.0 The External Factor Evaluation (EFE) Matrix:

Key External Factors Weights Ratings Weighted Scores

Opportunities

1. Growth potential in India and China 0.25 3 0.75

2. Increased global truck market 0.20 3 0.60

3. Rising demand for hybrid vehicles 0.10 2 0.20

Threats

4. The continuing global recession

caused fuel price hike and reduction

of demand for cars

0.30 4 1.20

5. Intense competition among rivals 0.15 2 0.30

Total 1.00 3.05

From the above EFE matrix it can be deduced that GM is responding to the existing

threats and opportunities in a pro-active way.

* The summation of the weights must be equal to 1.00* The ratings must be ranged between 1 to 4, where 1= poor response, 2= average response, 3= above average response and 4= superior response

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4.0 The Internal Factor Evaluation (IFE) Matrix for GM

Key Internal Factors Weight Ratings Weighted scores

Strengths

1. Strong brand image in US and worldwide.0.15 4 0.60

2. Largest automotive manufacturer in the

world.

0.25 4 1.00

3. Powerful R&D with state-of-art technology0.10 3 0.30

Weaknesses

4. Diminishing dealer network 0.08 2 0.16

5. Insufficient liquidity due to lower sales and

reduced working capital

0.20 1 0.20

6. Inadequate performance in some business

segments.

0.12 1 0.12

7. Low credit ratings 0.10 2 0.20

Total 1.00 2.58

From the above IFE matrix it can be deduced that GM has strong internal position

slightly above the average weighted score 2.50

* The summation of the weights must be equal to 1.00* The ratings must be ranged between 1 to 4, where 1= major weakness, 2= minor weakness, 3= minor strength and 4= major strength

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5.0 Strategy Formulation by using SWOT Matrix:

In case of strategy formulation we use SWOT analysis.

Strengths – S

1. Strong brand image in US and

worldwide

2. Largest automotive

manufacturer in the world

3. Powerful R&D with state-of –

art technology

Weaknesses – W

1. Diminishing dealer network

2. Insufficient liquidity due to

reduction in working capital

3. Inadequate performance in some

business segments

4. Poor credit ratings.

Opportunities – O

1. Growth potential in India

and China

2. Increased global truck

market

3. Rising demand for hybrid

vehicles

SO Strategies

1. Introduce the cars in India and

China (S2, O1).

2. Introduce truck in India and

China (S1, S2, O2).

WO Strategies

1. Pursue merger with Indian and

Chinese dealers (W1, O1).

Threats – T

1. The continuing global

recession caused fuel price

hike and reduction in

demand for cars

2. Intense competition

among rivals

ST Strategies

1. Produce fuel efficient hybrid

cars (S3, T1).

WT Strategies

1. Reduce corporate overhead

(W2, T2).

2. Sell out the business segments

those are performing poor (W3,

T1)

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6.0 Strategy Choice:

After the SWOT analysis we have five alternatives available. They are:

1. Market development: Introduce cars in India and China.

2. Product development: Produce fuel efficient hybrid cars.

3. Forward integration: Pursue merger with Indian and Chinese dealers.

4. Relative diversification: Introduce truck in India and China.

5. Retrenchment: Reduce corporate overhead

6. Divestiture: Sell out the business segments those are performing poor.

Among these tentative strategies, we can choose better alternatives by using process of

elimination.

Market development GM has a highly competitive market in US. Whereas the

markets in India and China are unsaturated. So they can go

for market development. But as the weakness part says that it

is suffering from liquidity problem and hence for

implementing any strategy adequate amount of capital is

necessary, market development may not be a good option.

Product development GM has a strong R&D base; hence it developed fuel efficient

cars which are environment friendly as well. But developing

such cars is very expensive. The company is going through

liquidity problem. So, it might not be a good strategy to

follow.

Forward integration GM can obviously export cars by merging with a strong

dealer network in India and China as the market is

unsaturated there.

Relative diversification The demand of small commercial cars in India and China is

lessening and the demand of trucks, vans are increasing

worldwide. So, rather than producing expensive cars, GM

can go for production of trucks and vans. But hence for that

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it needs adequate skilled manpower and hence GM totally

focuses on manufacturing cars, it might not be possible for

them to just shift into another business so quickly.

Retrenchment As GM is facing liquidity problem and also its credit rating is

becoming poor, it should start cost cutting budget for

overhead expenses. Thus retrenchment can be a better

option.

Divestiture Some of GM’s business segments are not performing well.

GM can sell those segments and investment money from that

to improve its suffering liquidity problem and poor credit

rating.

7.0 Conclusion:

From the above analysis of strategy choice, we can come up to the conclusion that GM

can at best follow three strategies. They are namely:

1. Forward Integration (Integration Strategy)

2. Retrenchment (Defensive Strategy)

3. Divestiture (Defensive strategy)

It is a fact that GM has followed the massive retrenchment strategy in the year of 2008-

2010 while the world was experiencing severe global recession.

8.0 Reference and BibliographyPage | 9

Bibliography

David, Fred R. – Strategic Management: Concepts and Cases (11e), Prentice Hall of India,

2007

Reference

www.gm.com/corporate

www.businessweek.com/bwdaily/dnflash/content/nov2009/db20091116_872906.htm

http://en.wikipedia.org/wiki/General_Motors

http://en.wikipedia.org/wiki/Automotive_industry_crisis_of_2008

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