Analysis of General Motors Company

Analysis of General Motors Company

Introduction

General Motors Company, or simply General Motors, is one of the most popular car manufacturers across the world. Based in Detroit, the multinational corporation is one of the major companies that are more than 100 years old, and rich with tradition and unique policy. Being the largest automobile manufacturer in the United States, a fortune 500 company, and a high revenue company does not mean that the company has had it easy. The company has experienced years of challenging internal and external environments. From early management problems and conflicts to heavy competition from European and Asian car manufacturers and new technology companies, the company has struggled to maintain a positive image, maintain a significant share of the market. This analysis focusses on the company’s objectives, the design of mechanisms for meeting objectives, strategy implementation and evaluation. To this end, the paper a review of strengths, weaknesses, opportunities and threats, and the structural, cultural, and resource environment. General Motors has succeeded mainly because of timely and accurate responses to its challenges and opportunities, but the company struggles to respond to some internal and external issues because of strong structural challenges and competition.

External industry analysis

General Motors has often encountered challenges in terms of expanding to developing nations and encountering the competition of Asian companies. The company has been too slow to expand its market presence to developing nations. It has, for a long time focused on North American and European markets. Yet, there are many competitors even in its backyard and its target markets, including Ford Motor Corporation, an American company. Around 1950s, the two companies almost shared equally the automobile market. Toyota Corporation, the largest car manufacturer by volume, also sells a significant number of cars in the United States. It is ironic that Toyota, which was introduced in the 1930s, has the strongest global presence. There are many opportunities that these Japanese, German, South Korean and Chinese car companies have exploited, especially in Africa, Asia, Europe, Latin America and Australia. They sell cheaper cars and support second-hand car sales to other nations. Thus, their brand recognition increases all the time. European car manufacturers, including Daimler AG, and the Rover Company have established their presence in developing nations as VIP, middle-class cars and rough-road cars. The General Motors has been slow to target many continents and segments, and at least produce affordable cars developing regions.

General Motors has encountered innovation challenges in the second half of its existence. The company has often struggled with putting advanced computing technologies in products and trying new energy-conservation technologies. To this end, companies such as Tesla are acquiring many customers who purchase car models before they are manufactured. The preference for chargeable cars is well-informed, and customers seek to avoid fuel costs, polluting energy sources, and unstable fuel prices.

Internal organizational analysis

General Motors has faced management challenges immediately after establishment and quickly responded to them. It was established in 1908 by William C. Durant who had been manufacturing horse-drawn vehicles even before 1900. Durant’s partner at the time of formation of General Motors Company was Charles Stewart Mott. In 1909, Durant acquired many companies including Cadillac, Oakland, Elmore, Reliance Motor Truck Company, Rapid Motor Vehicle Company. Thus, he exposed himself to loans to stay in business and bankers used their influence to remove him from the Company Board. Durant re-entered the business and established General Motors Corporation in 1916 and partnered with Louis Chevrolet, who is famous for the Chevrolet cars. Durant became successful and reacquired a controlling stake in GM although he was helped by some businessmen who later removed him and replaced him with Alfred P. Sloan. Sloan is largely known for the current pricing strategy that saw the cheapest cars become the most expensive, and vice versa. He made significant changes including introducing styling changes. Thus, the company’s top management team responded quickly to initial challenges that threatened the company’s stability and policy.

General Motors Corporation wrongly responded to its expansionist ideals by trying to increase the market share and revenues. This move has been inappropriate because the company essentially wanted to maintain a positive net cash flow that would help the company sustain itself. Many other car manufacturers, including Honda and Toyota, respond by increasing divisions, brands, models, and segments. Consequently, they serve many customers, who could vary extremely in terms of incomes and social class. It is possible that a pyramid of car sales for such companies has many layers but significant numbers of customers within those layers. Inability to have a positive cash flow can translate into limited research and funding for daily as well as expansionist operations.

One of the major weaknesses for General Motors has been extensive bureaucracy. Extensive bureaucracy can prevent organizations from achieving their objectives by making the process of communication and consensus-building longer, while consuming monies in routine overheads. A large bureaucracy requires a high standard of leadership; this is one of the challenges that General Motors has faced, and it is more related to perpetuation of a high standard of leadership and unusual success (Sloan, 2015, 15). Bureaucracy and a lack of coordination of management characterized by haphazard acquisitions led to many failures between 1908 and 1920, because many acquisitions did not lead to a financial return (36). General Motors Corporation’s management problems appear to be a century old.

General Motors Company responded too late to a 2019 strike and ended the losses it was making. About 50,000 workers from G.M’s 12 vehicle assembly factories and 22 parts plants had gone on strike and they demand better wages, reopening of idled plants, addition of jobs, and narrowing of the pay difference between new employees and old workers (Noudette, 2019). Union workers and company managers eventually agreed on terms of work. The company has been making substantial profits recently, but the economic recession had affected it so badly that workers had agree to take concessions so the company could survive. The company took to long to show gratitude to workers. The company’s employees had gone to strikes several times before, the company negotiate contracts with workers’ union in 2011 and 2015 (Noudette, 2019). It appears that the company takes too long to appreciate its numerous workers.

The company has responded to tough economic conditions by taking many aggressive and desperate strategies. One helping strategy was appealing to the U.S. government for a bailout, while a desperate strategy is taking some manufacturing capacity to China. Some of these strategies help raise it from risky financial situations; some subject it to production risk, such as when sanctions against China curtail production plants in China.

Strategy formulation

General Motors Company sought to change the entire transportation industry. The company sought consolidation and extension of product lines through integration. The founder and the Board of Directors realized that the company needed many resources to compete with very competitive automobile manufacturers such as the Ford Motor Company.

Changing how General Motors Corporation operated to meet its needs became policy at the company. Indeed, the formation of the Corporation in 1916 reflected a movement from a holding company to an operating company (Sloan, 2015, 30). The company had operating divisions, such as Cadillac and Buick. The frequent changes reveal the intention to respond quickly to challenges.

Strategy implementation

General Motors Company has always invested heavily in the transportation industry. The company was associated with the developing the internal-combustion engine (Sloan, 2015), and it acquired about two dozen companies soon after establishment so it could consolidate technology and know-how. Soon, it developed parts of airplanes and locomotives. Its enormous resources, including more than 600,000 employees in 1962 (Sloan, 2015), reflect a tradition of heavy investment for achievement of goals. In the early years of GM’s existence, the company almost matched every car that Ford produced. It purchases the Chevrolet in 1918 as a competitive strategy against Ford (35). Thus, the company sought to succeed through many methods.

The large size of the General Motors Company is a strategic move. One of the company’s most notable CEOs, Alfred P. Sloan, argued that the large size befitted an organization that was looking to be competitive, and to making automobiles and locomotives in large numbers (Sloan, 2015, 15). Besides, doing things in a big way was a tradition in the United States (15). The need to be big made the original founder of Genera Motors, Durant, dream about making a million cars annually in 1908, a period in which about 60,000 vehicles were being made (Sloan, 2015, 21). Expansionist ideals have motivated general Motors, and some initial funding strategies included obtaining loans on stiff terms, issuing notes, and extending bonusses on notes by lenders (21). Therefore, the company aggressively sought to fund its operations. Its financial challenges led to internal conflict. However, the company was in a good financial situation a few years after founding, and it paid good dividends to shareholders. Thus, the company has had a culture of rewarding shareholders.

Evaluation of performance

As noted above, General Motors has always been quick to address some of its challenges, including leadership challenges, after careful evaluation of its activities and performance. Such quick measures are ideal, especially when done with caution. General Motors was cautious in its decisions. Indeed, the removal of the founder, Durant, twice from General Motors was not a quick move and a response to power politics. Mr. Durant had many ingenious production ideas, and his removal mostly reflected a realization that his management ideas were not good for the company, or made the company engage in expensive commitments.

The need to caution the company and perhaps lessons from history have made General Motors adopt a system for evaluating the Board of Directors. The company, through its guidelines, established the Committee on Director Affairs (Lam, 83). Many companies or company leaders do not let the Board of Directors to be assessed, at least not internally. Evaluation of corporate governance is necessary even for assessing risk appetite and risk involvement. However, there is a Chief Risk Officer position, and the holder’s mandate is risk assessment and identifying resources needed to optimize risk, and developing data management and analytical systems that support risk management (Lam 50). Thus,

Evaluation of performance of cars happens through many fronts at General Motors. Besides examining quality of features through a variety of before-rollout activities, the company examines how the car can cause or support driver behaviors. The company also conducts usability evaluation through excellent In-Vehicle Information Systems and other standard technology and assessment models (Harvey & Stanton, 2016, 20). General Motors takes advantage of many usability assessment systems produced by renowned technologists and researchers.

Recommendations

The company could define its market share, become market focused, and determine the size of market segments that can help sustain a good net cash flow. That way, it can fund research and operations, and avoid bankruptcies. The company can offer variety and expand to developing nations. It can set up manufacturing operations in the most ideal nations with competitive advantages, as opposed to taking its U.S.- manufactured cars in the region.

Conclusion

General Motors Company has enormous financial capital, human resources and access to technology necessary to launch major operations, make many car brand and models, and target many segments. The company’s corporate structure reflects learning from history, and the company’s culture of innovation and aggressiveness can make it compete alongside major automobile giants, including Toyota and Nissan. However, the company’s bureaucracy, reluctance to reward workers, and a lack of focus on market segments in developing nations curtail operations and global growth. An increase of revenues alone is not sufficient to create sustainable net cash flows necessary for surmounting challenges such as economic recessions, bilateral conflict, electric cars, and fluctuating oil prices.