General Motors Business Strategy
Matthew Norton
Background
General Motors Corporation has been in business for 100 years, has
produced nearly 450 million vehicles globally, and operates in virtually every country
in the world. While GM has recently enjoyed rapidly growing sales and revenues
outside the United States, the U.S. remains the company‘s largest single market.
The auto industry today remains one of America's top employers with 1 in 10
Americans working in the industry. GM is also one of the largest purchasers of U.S.
steel, aluminum, iron, copper, plastics, rubber, and electronic and computer chips.
U.S. auto sales across all manufacturers, foreign and domestic have declined by
more than 30% which is the steepest decline in 50 years. These major economic
shifts demand a fundamental change in the way we do business at General Motors.
Vision
Recent economic conditions have reminded us at GM that the status quo is
no longer enough to remain America's top automobile brand. This recent crisis has
forced us to look into the future of the auto industry and contemplate what place
General Motor's will have in this rapidly evolving automobile market. Our vision is a
streamlined brand that represents quality and fuel efficiency through innovative
design with the utmost respect for quality. GM must appeal to the modern day
environmentally friendly and economical American citizen in order to regain the trust
and confidence we once enjoyed. Through the rebuilding and strengthening of our
core business then we can successfully expand not only domestically but multi
nationally, then we can share our vision of the new and improved General Motors
not only with America but throughout the world.
Strategy
Brand Re-Structuring
Over the next five years GM will be focusing on restructuring of our brand
while focusing on our core business. Chevrolet, Cadillac and Buick will remain at the
core of our business. Other brands such as Saab, Saturn and Hummer will either be
sold or closed. This decision is based on sales statistics that are lagging in our
domestic market. Saab and Saturn sales lag behind throughout the board and
introducing new models and re branding of these franchises this late in the game will
only push our break even point further rather than having a positive impact on the
bottom line. Hummer doesn't fit with GM's strategy of fuel efficiency and
sustainability but accentuates a lifestyle of excess that doesn't promote the green
initiative. Although the brand is still profitable today it's viability for the future is in
question.
The youth demographic is increasing rapidly, over 3 Billion People will be
Between 15 and 44 In 2020. This statistic emphasizes the need to recognize the
needs of todays youth and cater that need through vehicles with options and
features that appeal to that market. Pontiac will fill this market niche and
will cater to the increasing youth demographic offering entry to mid level vehicles
such as the G5, G6, Grand Prix and Grand Am. This will effectively reduce the
number of SKU's thereby reducing manufacturing and overhead costs. With this
brand restructuring will also come a significant number of GM dealer closings to
further reflect cost cutting initiatives.
2000
2004
2008
Plan
2013
Total Nameplates
51
63
48
40
GM Dealer Count
8,138
7,497
6,450
4,500
Fuel Efficiency
Scientific research on the effects of global warming and green technology
have pushed
industries across the board to become more sustainable and
environmentally friendly in their practices. This new environmental initiative isn't only
forcing industry to evolve but the consumer as well. This is reflected throughout the
automobile industry with new product lines that offer fuel efficient choices to
consumers including electric, hybrid and FLEX fueled automobiles. Coupled with the
average price of oil spiking over recent years fuel efficiency and environmentally
conscious automobiles have been top priority for consumers. Many foreign brands
have been industry leaders in fuel efficiency and General Motors has been forced to
play catch up. But over the past five years we have more than doubled our models
that can average 30mpg or more. And in the next five years we plan to increase our
fuel efficiency capabilities through our Flex-Fueled cars, according to our projections
about 50% of the GM cars on the road will be Flex-Fueled.
2000
2004
2008
Plan
2013
Car Fleet Average (MPG)
27.7
29
31.6
38
Truck Fleet Average (MPG)
21.0
21.8
24.6
28
Models >30 mpg (Highway)
8
8
20
25
Flex-Fuel (% of U.S. Sales)
2%
6%
17%
50%
0
2
6
18
61%
52%
Hybrid Models
Car/Crossover Nameplates
65%
75%
Cost Cutting
Through the reduction of GM brands and models we can gain significant cost
savings. With the sale of these brands will bring about many dealership closings that
will be another cost reduction opportunity. But this is not enough to offset the lack
liquidity and self sufficiency that General Motors currently faces. There needs to a
reduction in salary expense here at GM.
Just as many consumers have had to tighten their wallets due to lay offs, pay
cuts and bankruptcies GM executives will be asked to do the same. Upper level
executive pay in the tens of millions of dollars plus stock options and bonuses
should be a thing of the past. A more modest compensation model needs to be
adopted. A maximum salary cap of $500,000 plus incentives should be implemented
with the opportunity for increases based on key performance indicators.
Emerging Markets
Emerging markets such as China, India and Eastern Europe are increasing
their buying power per capita therefore increasing their demand for automobiles.
The Indian government supports a comprehensive system that will rapidly increase
growth in the industry with the creation of the Automotive Mission Plan (AMP) and
the Automotive Testing and R&D infrastructure project (NATRIP). Meanwhile the
Chinese government is loosening financing restrictions in the automotive industry
and allowing automotive dealers to create their own financing structures.
These rapidly expanding countries present an opportunity for GM to expand
their global brand and become the center of these new markets. In order to
capitalize on this global effort GM must establish manufacturing facilities which will
not only create jobs in these countries but also establish favorable relationships with
their governments.
Marketing and Promotion
GM
must
reestablish
itself
as America's
brand.
Commercials
and
advertisements in the US must promote this sentiment while also emphasizing the
developments in sustainability and fuel efficiency. Throughout this marketing effort
GM should be forthcoming with the American people about its plans for change
perhaps even sharing specific strategies in restructuring and expanding its business.
In our current economic condition the taxpayers are bearing much of the financial
burden and a reassuring effort on the part of GM may go a long way in regaining its
market share and consumer trust in the United States.