suitable strategy for General Motors

Executive Summary

The study is about the identification of a suitable strategy for General Motors to improve its market share. Analysis of the current company situation shows the company has faced an increased decline in market share over the past two decades.  The case study of the external environment of General Motors uses of PESTEL framework and Porter’s 5 Forces. The analysis establishes that the main drivers for the company to consider in implementing a proper strategic direction are competition and technology. General Motors faces increased competition from regional and local firms.

Similarly, improved technology offers both opportunities and threats to the success of the company. In this case, a suitable choice to facilitate the regaining of the largest global market share in the auto industry is cost leadership strategy. The company obtains this strategy from the analysis of Porter’s Generic model. The suggested approach is applicable because the company deals with a large number of vehicles that have little differentiation. The strategic implementation of the cost leadership would apply the McKinsey 7s framework.

Company Background

General Motors and American corporation in the automobile industry. The company is in Detroit. The company was the most significant manufacturer of vehicles during the 20^th and 21^st centuries. General Motors’ focus deals with manufacturing and assembly plants and its distribution of vehicles in various parts of the world, including Canada, the United States, and other countries in the world. The primary product of the company includes automotive components, trucks, automobiles, and engines. Despite having offices globally, the company has faced increased challenges in the recent past because of increased competition in the auto industry. The company has partnered with different vehicle brands. Also, the company allows partners to supply vehicle parts for assembling. Some of the competitors of General Motors include Tesla, Honda, and Toyota.

Section 1

1.1 The Current Situation

Increased dynamism in the auto industry is significantly determining the direction of General Motors. Over the past decade, General Motors has experienced stagnation holding approximately 28% of the market share in the United States auto market. As of 2018, the market share of General Motors declined to 17 percent of the United States auto market. Even though the company continues with operations, the current trends are a show of increased challenges that the company faces now and possible difficulties in the future. Shifting market trends is a significant factor that contributes to the declining market share of General Motors. The increasing trend of declining market share is a threat to the future of the company. There is a need for the company management to establish strategic direction leading to help the company improve its current market share. Adopting s strategic direction is critical for general motors because it contributes to the managing of the challenges leading to increased changing trends in the auto market.

Two critical factors influence the current situation of the company. First, increased technology is shaping the auto industry. Firms in the auto industries are increasingly adopting advanced technology to improve assembly and gain strategic move in meeting emerging demands. Lagging in to utilize advanced technology is a significant contributor to General Motors in meeting market demands. Second, the increase in competition influences the stagnation of General Motors. Currently, various players, including Toyota Motors, Honda Motors, and Ford Motors, among others, dominate the auto industry in the United States. The dominance of Asian automakers in the U.S. presents an increased competition to operations of General Motors hence causing further stagnation of the company market share. However, the current market of the United States and other parts of the world present opportunities for General Motors to leverage to increase its market share.

1.2 External Environment Analysis

1.2.1 General Motors PESTEL Analysis

General Motors needs to focus on addressing macro-environmental issues raised by PESTEL analysis to maintain global growth. PESTEL is a tool the company management can use to identify external factors impacting the operations of General Motors. A critical review of the macro-environment is crucial because it leads to the realization of opportunities and threats in the automotive industry. PESTEL analysis is vital for General Motors because it helps in identifying strategies for growth. The macro-environment factors explored in this area include political, economic, social, technological, environmental, and legal considerations.

The political factors are concerned with political conditions and trends that impact the business performance of General Motors. In essence, governmental programs and policies affect the company in pursuing its strategic goals. For instance, government efforts to promote public transport and aggressive taxation policies consuming automobile emission is a threat to the operations of General Motors (Islam et al., 2016). However, political stability in the United States and other global markets offers an opportunity for General Motors to continue with its operations.

Importantly, the business performance of General Motors significantly depends on the economic conditions of the markets in which it operates. In essence, an increasing growth rate of developing markets present opportunities for the company to expand its global market share. Also, General Motors can leverage on the economic stability of the developing markets. Due to minimal economic issues. However, despite the opportunities, General Motors should need to focus on competence to address the challenges of increasing competition from local and regional automotive companies (Uchil & Yazdanifard, 2014). In this context, General Motors can quickly expand by achieving a competitive advantage over its competitors.

Social factors, including the purchasing patterns and behaviors of employees of General Motors, also influence the business performance of General Motors. The current trend of increasing demand for self-driving cars can support the business expansion of General Motors. The company has an opportunity to increase its market share by increasing sales of self-driving cars. Similarly, the increasing demand for electric vehicles opens a window for General Motors to develop by increasing is the sales line to include electric vehicles (Cooper, Doody & Allwood, 2017). However, social aspects such as ride-hailing and vehicle sharing is also a threat to the market of General Motors. The two social issues reduce the likelihood of customers to purchase vehicles from General Motors.

Technology is an important external factor that companies can leverage to gain a competitive advantage. Technology presents three critical opportunities that General Motors can leverage to increase its market share. The current increased adoption of technology for electric vehicles offers an opportunity for General Motors to gain a competitive advantage over local markets. The rising technology leading to fuel-efficient automobiles also presents an opportunity for General Motors to gain competitive advantage by selling most fuel-efficient vehicles (Cooper, Doody & Allwood, 2017). Even more, the technology supporting the increased development of electric vehicles is also critical in enhancing the market expansion for General Motors.

Environmental factors can impact the supply chain, availability of resources, and product usage of the automobile industry. General Motors has an opportunity of developing solutions to the transportation challenges that individuals experience because of climate change (Bharadwaj, 2015). Similarly, General Motors has a chance to increase global growth by focusing on selling electric vehicles. It is a result of an increased need for cars that produce fewer emissions that pollute the environment. Importantly, General Motors also has an opportunity to enhance its sustainability that improves the corporate image. Leveraging on environmental opportunities is critical because it helps the company to increase its market share.

The final aspect of PESTEL analysis is a legal aspect that impacts the business operations of General Motors. The increased need for automobile safety is an opportunity for General Motors to expand its product development. Even more, strict regulations and policies concerning automobile emissions offer an opportunity for General Motors to expand its market through the selling of electric vehicles. For instance, integrating the emission compliance needs and safety requirements can help General Motors gain a competitive advantage over its competitors (Vaz, Rauen, & Lezana, 2017). Based on social factors, General Motors can improve business operations through the supply chain and business sustainability.

1.2.2 General Motors Porter’s 5 Forces

According to Porter, there is a need for companies to identify external forces that impacts business operations. Porter’s Five Forces is an essential tool used to analyze the competitive rivalry in the market of General Motors (Gerald, 2018); (Porter, 1985). This section presents a discussion on five significant forces that impacts the operations of General Motors. General Motors need to align its strategic goals with competitive troops as a way to improve business process efficiencies for business growth and development.

First, General Motors exhibits healthy competitive rivalry through aggressive campaigns and high rates of innovation. The intense competitive competition presents an exit barrier for the company to leave the market. General Motors need to focus on practical strategies that enable the company to remain competitive. Even more, General Motors faces increased competition from both the local and regional automobile firms. Second, General Motors experiences moderate bargaining power from customers. The average bargaining power through the appears reasonable switching cost. Customers can hardly move to competitors of General Motors because of the company’s fair price of its vehicles (Mushtaq & Sarwar, 2012). Importantly, there is moderate substitute availability hence making it suitable to maintain its existing customers. However, it is critical to realize that average bargaining power weakens by a small number of purchases that customers make. Third, General Motors faces weak suppliers’ Control. Thin suppliers’ power implies the ready availability of resources and materials required for completing the company products. The elements of vehicle assembly are readily available and hence make it less costly for General Motors to switch between suppliers. Low cost of switching between suppliers makes it possible for the company to focus rely on suppliers offering the needed materials at a lower price (Omsa, Abdullah, & Jamali, 2017) Fourth, General Motors experience a moderate threat of substitutes. The consumer can easily switch to other dealers of automobiles hence reducing the market share of General Motors. There are various companies, local and regional companies that offer similar products as General Motors. Finally, there is a moderate threat of new entrants. General Motors has not diversified its operation to all parts of the world. As such, new entrants may have access to some unexplored markets hence reducing the market share of the company. The entrant of new firms harms the growth of General Motors because it diminishes the profits and market share of General Motors.

1.3 Critical Analysis

From PESTEL and Porter’s Five Forces analysis, three critical drivers for General Motors’ strategies establish. From the PESTEL analysis, three essential drivers for General Motors to pursue its strategic objectives. The first driver for General Motors is competition. The company operates a dynamic and competitive environment because of the increased firm’s presence of automobile firms in local and global markets. The strategic approach of General Motors needs to focus on addressing the challenge of increased completion. The competitive environment is a significant threat to the success of General Motors. PESTEL framework and Porter’s Five Forces indicate that General Motors faces increased end from other players in the industry. The second factor that drives the strategic approach for General Motor is technology. Technology offers an opportunity for General Motors to improve its sales. The focus of technology is based on the chance of General Motors to include electric vehicles and self-driving cars. Leveraging on technology will help the company improve its line of products. In this, the company will also gain a competitive advantage by diversifying the product line. The third drive dictating the strategic process for General Motors is the consumers’ needs. General Motors need to focus on meeting the needs of consumers. Focusing on the needs of consumers is critical because it allows the company to understand the best strategies to meet the emerging needs. It is essential to realize meeting the needs of customers is vital because it makes it prevents customers from purchasing from competitors.

Section 2

2.1 Evaluation of Findings

The following table shows opportunities and threats for General Motors. Realizing treats some opportunities is critical because it contributes to the formulation of strategies for the company to address strategic issues impacting the positive development of the company.

Table 1

From the analysis of the opportunities and threats to the company operations, it derives three drivers included in the strategic process of the company. The crucial first driver is technology. Technology offers both opportunities and threats. It implies that General Motors should focus on addressing both sides of technology. It is important to note that the strategic strategy of the company should focus leveraging on technology to achieve higher sales and also invest in the best technique to avoid competition. The second driver from the analysis of threats and opportunities is competition. General Motors faces steep competition from local and regional automobile firms. The strategic direction of General Motors should focus on addressing the strategic way to address the challenge of increased competition from other players. Focusing on competition and technology is critical because it contributes to developing strategies that will help the company achieve its goal of expanding business operations.

Section 3

3.1 Porter’s Generic Model

Porter developed a model that organizations can use to leverage to attain a competitive advantage. Porter’s generic model is seeking to explain the broader versus narrow extent to which a company can differentiate its products to achieve a competitive advantage. Adopting the best strategy for competitive advantage contributes to providing higher value to customers by providing appropriate prices and suitable product combinations. Porter’s generic model includes; cost leadership, cost focus, differentiation leadership, and focus differentiation. Cost leadership is about delivering products at relatively low prices as compared to competitors (Power & Hahn, 2004). Cost focus is about lowering the cost of operations while differentiation focus is about offering diversified products within a small market segment. Differentiation leadership is a strategy where a company focuses on the broader target market, and the center of product differentiation is the whole market. Differentiation leadership is achieved through improved branding and offering superior products as compared to a competitor.

The most suitable strategy for General Motors to achieve a competitive advantage is through cost leadership. General Motors can gain increased market development lowering the cost of its products. The cost leadership strategy can establish through large scale production that benefits the company from a large scale of economies. General Motors can benefit from higher profits as a result of making higher sales compared to competitors. Cost leadership is an effective strategy because General Motors deal with many car models with little differentiation. Increasing sales translates to an increased market share of the company. It is important to note that cost leadership strategy can be achieved through high levels of productivity, lowering the bargaining power for consumers, and also using lean production approaches (Pearce & Robinson, 2009). Importantly, cost leadership can increase the use of technology in assembling vehicles.  Cost leadership strategy is suitable for operations of General Motors because it deals with the larger scale of selling cars. The company also sales its products to the global market hence taking advantage of large scale production and selling its products to a worldwide level. It is imperative to cost leadership leads to an increased focus on strategies that enable the company to meet the demands of consumers on the global market.

3.2 Evaluation

The success and effectiveness of the cost leadership strategy succeed by applying a balanced scorecard. A balanced scorecard is a tool for management that was developed by Robert Kaplan and David Norton. The balanced scorecard measures the level of success that the company has attained after implementing a strategic approach to organizational problems. When considering the balanced scorecard, four critical phases are necessary. These phases include financial perspectives, internal business processes, customer perspective, and learning and growth. The economic view focuses on the financial well-being of the company after implementing a strategic direction. It is imperative to realize that the business perspective is about the adequate management of company finances while pursuing s strategic direction. The customer perspective is about appealing to the current and emerging needs of customers. It is a critical cost leadership strategy through which technology can help General Motors address the increased demand among customers. Internal business processes imply the focus of the company in minimizing on processes that increase the cost as well as utilizing the necessary resources to achieve maximum outcome. Finally, learning and growth are about acceptance of the business strategy by the human capital within General Motors. Employee support is critical for driving the strategy of cost leadership. The balanced scorecard is an essential strategic management tool that General Motors can employ to implement the cost leadership strategy successfully.

Section 4

4.1 McKinsey 7S

The goal to pursue cost leadership can be supported by focusing on two essential drivers, including technology and competitions. To successfully manage and implement the drivers for strategic direction, the McKinsey 7S model will be applied. McKinsey 7s model is a management tool that helps a firm to handle a strategy by focusing on seven key elements of an organization. McKinsey consultants developed the model in the 1980s, and it has gained significance in the area of project management. The model provides emphasis on human resources, also known as soft S, as the key factors that support strategic organizational performance (Ravanfar, 2015). The elements of an organization presented on McKinsey 7s include shared values, staff, styles, skills, system, structure, and strategy. The argument put forth in the model is that the interconnection between the seven elements impacts the organization when a single element changes. The tool is suitable when an organization implements a new strategic direction.

A strategy refers to the organizational plan that an organization puts in place to achieve an intended strategic objective. A suitable strategic plan needs to align with the overall long term goal of an organization. General Motors can develop a healthy plan by considering the mission, vision, and values of the company. The structure is about the coordination between different units of the company. There is a need for General Motors to utilize suitable communication channels to establish links between different operational areas in the world. A proper system for implementing the strategy to attain cost leadership to implement the proposed plan on a regional basis (Pothiyadath & Wesley, 2014). Effectiveness of General Motors will also depend on the skills of employees, competence, and capabilities to support the implementation of a cost leadership strategy. Staff is about the number of employees that General Motors need to utilize to achieve the objective of cost leadership. In essence, the company needs to focus on training managers at different locations to implement strategic cost leadership. A suitable style for the top manager to employ during the strategic implementation is through a focus on increased delegation of duties to lower managers (Singh, 2013). Finally, shared values are norms and costs for General Motors to follow during the strategy implementation. In essence, General Motors need to encourage employees to rely on company values as guidance to successful implementation.

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