General Motors Case Study
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This is a case study where I will analyze General Motors and its competitors in the automobile industry. I will be discussing on different factors such as the driving force of the industry, overall attractiveness of the industry, current position of GM, SWOT analysis of the company, value chain analysis and current market position. I will also be using a group map to show the position of different companies in the industry. Using the SMART format I plan to provide few strategic recommendations that will generate success for the Corporation for the next three years. Finally, I will also explain how to implement these strategies in the next three years while remaining competitive in the industry.
The purpose of this paper is to show the current situation of General Motors in the automobile industry. I will be analyzing the companys current market situation, financial situation and competitive situation. I will also analyze the current position of GMC in the automobile industry and where it is projected to go. Finally, I will suggest some ideas for GMC by using the SMART format to achieve key strategic and financial objectives.
Industry Situational Analysis
Dominant Economic Characteristics of the Industry Environment
Automobile industry in the United States contributes a lot to the economy. There are numerous companies within the industry big and small ones such as GM, Ford, Volkswagen, Honda Tata motors etc. The market for automobile is growing rapidly inside and even more outside the US. A recent survey stated that 18 million cars were sold in China in 2010 only with a growth rate of 32% compared to previous years sale (“Robust auto sales,” 2011). The international market for automobiles is doing very good. It is therefore important for these companies to have a presence in the foreign market in order to gain international market share and sustain the economy in the future. The emerging markets are paving the way to the future because thats where mot of the growth is (“Global auto industry,” 2010). The products between the rivals in the industry are less differentiated which gives the buyer an option to choose the best price. Due to increased similarity and competitiveness the industry the companies have to sell their cars at a lower price. In order to maintain market share and profitability, R&D is vital to the industry. The automobile industries in the United States spend 15 percent of its investment in R&D, 19 percent in European Union and 13 percent in Japan. R&D is the only way to produce cars of the future to compete in the global market. (“R&D activities crucial,” 2010). The large companies in the industry have greater cost advantage by being in the market for longer. Those companies know what the customers want next and also they have greater economies of scale than those companies that have recently entered the market.
Industry Key Success Factors
Automobile industry has several key success factors that make the customers extremely mindful of their purchases. Car is a necessity for all people around the world. People need cars in their daily life and some parts of America, life come to a halt without a car. Some people prefer to change cars frequently. There is very less chances of failure in the automobile industry until the company is able to provide cars according to the need of the customers. Product innovation, new technology and quality are some of the things that can help the industry succeed.
Driving Forces shaping the industry
One of the major driving forces shaping the automobile industry is globalization. Most automobile companies are now targeting international markets mainly China to upsurge its sale. Also, these companies are shifting its production units in other countries in order to lower production cost. Another driving force that is changing the industry significantly is competition among the rivals. In order for a company to defend themselves from market competition in should be able to stand in its position with differentiated and high quality products.
Industry Competitive Landscape Analysis
Intensity of Rivals is moderate. Threat of Substitutes is moderate. Bargaining power of buyers is low and bargaining power of supplier is moderate. The threat of new entrants is low. There are not many rivals for a automobile industry. Automobile is the most popular means of transportation inside and outside the US. Many people prefer driving than flying because of. In some countries, motorbikes could be a substitute for cars but the threat is very low. Buyers have fewer options among the alternative for transportation. I have thus concluded that automobile industry is likely to be a profitable industry with very less threat of rivals and substitutions.
Competitive Position of Major Companies
The above chart shows the competitive position of each rival in the industry. As we can see, Toyota is on the top of the list for expensive cars, whereas, GMC is in the bottom for lower priced cars. As of March 01 2011, the Ford Company had the maximum market share. Ford Companys market share increased by 1.3%. In contrast, market share for Toyota and GMC reduced by 1.9% and 0.8% respectively (“Auto sales overview,” 2011).
The major competitors of General Motors are Toyota,