The subject company of this essay is General Motors Company. GM is a multinational corporation in America, which makes, designs, distributes, and markets automobiles ("General Motors," n.d.). Apart from designing automotive products, GM also offers financing services in the automotive industry through GM financing company (Pratap, 2018). It's the mother producer of Chevrolet, Buick, GMC, Cadillac, among others. This essay will discuss the competitive position and current business model of the company, business metrics associated with the current financial position, and internal and external strategic factors affecting the company and the automobile industry. Lastly, the essay will analyze long and short-term strategic goals intended for the future growth of GM.
Competition Position and Business Model
The automotive industry is highly competitive. This industry has several players in the global market, including Volkswagen, Toyota, and Ford, which are the major competitors for GM. Currently, Toyota is the leader in the market, followed by GM. In second, Volkswagen comes third, while Ford holds the fourth position. So, the most significant competitor for GM is Toyota. According to GM's chief executive officer Mary Barra, driving the company to an "all-electric future" would position the company as a leader in the new era of automobile manufacturing (Doiron & Higgins, 2020). This is because electric vehicles would change how profit would be made in the automotive industry.
However, to withstand this competition, GM has developed business models such as cost leadership and product differentiation (Kissinger, 2017). Through product differentiation, GM has been offering unique features and characteristics to its products. This strategy has enabled the company to retain and attract customers, so it does not have to rely on prices to gain a competitive advantage. The company has focused on advancing technological features, rapid product innovation, high customer service, and high-quality features. GM has effectively implemented the cost leadership. It has managed to deliver its products at lower prices compared to its major competitors. It has enhanced its operational efficiencies by effectively utilizing and allocating its limited resources in the production and development of each automotive product. As a result, the company has been able to achieve and sustain above-average returns, hence effective low of products at a minimal cost.
Business metrics refers to the quantifiable means that business use to evaluate and monitor the success and failure of business processes. The main objective of quantifying business metrics is to track cost management. Business metrics show how a business is progressing towards its long- and short-term goals. The General motors company (GM) long term goal is to have a new era of automobile manufacturing while the short-term goal is to have 20 new models of electric vehicles manufactured by 2023 (Rouse, 2015). During the 2019 fiscal year, automotive revenues in GM generated $137 billion, which was a 6.7% drop year-on-year. There was an 8% decrease in revenue from GM's automotive segments and 16% in markets outside North America.
The overhead cost is one of the critical business metrics that indicates the current GMs financial position. These costs are not dependent on the number of cars that the company manufactures. In 2009, GM had been declared bankrupt. At this time, an average of 493000 retired employees was enjoying pensions and health benefits that had been negotiated during the less competitive era. This increased the pressure for the company to increase its sales (Doiron & Higgins, 2020).
The cost of GM acquiring new customers and the cost of retaining their customer's loyalty has been going up. At the beginning of the century, GM offered its customers 0% financing on vehicle loans for five years. The company started offering rebates after the no-interest incentive stopped attracting customers. The discounts increased up to $8000 with a more extended financial period. However, even with these incentives lost customers due to the high price reputation. The company had only focused on marketing the prices of the cars and the incentives that they offered. The failure of the company to emphasize the quality of the cars manufactured led to a drop in the number of cars sold. This led to the company having low returns (Doiron & Higgins, 2020).
The size of the gross margin of GM is expected to continue declining. The price of an Internal combustion engine (ICE) vehicle in 2017 was $33,464, and its production cost was $29,175. The production cost continued to drop approximately up to $20,000. This drop was associated with modern designs, growing competition, and lower battery costs. This new trend poses a new threat, which would see to the decline of GM's gross margins, whose cost structure depended on higher stock turnovers.
The profits of GM are still on the negative side. Although the electric vehicle business is emerging and has a promising future, its profitability is still very low. Low profits are attributed to the high cost of developing economies of scale in manufacturing, construction of showrooms, and high cost of batteries. The law that banned motor vehicle manufacturers from selling cars directly to the consumers is being practiced in most of the US states. As a result, GM has been constructing stores around the world (Doiron & Higgins, 2020). The company has also been trying to produce batteries in large quantities to enjoy economies of scale. These investments have resulted in the GM company having negative profits, even with increased sales.
Strategic Factors Affecting GM and Automobile Industry
There are several internal and external strategic factors that influence the choices made by an organization to build on its strategic positioning and competitive advantage (Pratap, 2018). Some of the internal strategic factors include strengths and weaknesses, while external factors include opportunities and threats. Strengths are the factors that enable GM to thrive in the marketplace. Some of the numerous strengths of GM include product innovation, strong distribution network, reliable suppliers, strong brand portfolio, high customer satisfaction, among others (Pratap, 2018). On the other hand, weakness represents areas where GM should improve upon. For example, technological investments are not as per the company's vision, so this is an area that will need focus. Additionally, the company's investment in Research and Development is below that of its competitors. Even though the company is investing above the industry average on R&D, it cannot outdo competitors regarding innovation.
There are several opportunities for GM and the general automobile industry. The new trends in consumer behavior would open up new markets, thus provide an opportunity for the automobile industry to diversify into new product categories and build new revenue streams (Pratap, 2018). Additionally, development in markets would lead to dilution of the competitor's advantage, hence enable GM to increase its competitiveness compared to key market players. Some of the threats to GM would be an intense competition that results from an increased number of players in the industry. Additionally, low quality and imitation of the counterfeit products would also be a threat to GM products primarily in the emerging markets.
GM's Short and Long-Term Strategic Goals
GM aims to be a debt-free company in five-years ("GM Outlines Strategic Plan," 2014). The company has a high cost of production, especially in Europe; thus, it is vital to reduce the expense and transfer it to the lower-cost countries to meet the high demand for production and providing services. Another goal of the company is to innovate company in peers. The company aims to create its opportunities by ensuring the growth of Cadillac. The company has established business headquarters in New York City to pursue growth opportunities that will be catered for by new Cadillac vehicles introduced in North America. Another long-term goal for the company is to continue growing in China. From 2014 through 2018, GM's Chinese ventures planned to invest in over four million US dollars to open new manufacturing plants for vehicles and support sales of cars annually.
Some of the short-term goals for GM include an improvement in core operations of the company in South America, following the launch of new products and logistics and material optimization ("GM Outlines Strategic Plan," 2014). Also, the company focuses on continuing to address problems in its international operations outside the Chinese market, such as cost structure, brand strategy, and sourcing returns. In China, GM expects its joint ventures to maintain a range of 9-10% in net income margins, while in North America, the company aims to attain a ten percent EBIT-adjusted margins in the next five months. In Europe, the company also aims to return to profitability come 2021. Finally, the company intends to return the excess cash flow stockholders through growing and stable dividends depending on sustained improvements in the financial performance of the company.
This essay will discuss the competitive position and current business model of the company, current financial position based on the company's business metrics, and internal and external strategic factors affecting the company and the automobile industry. GM is an American automobile company that deals with designing and manufacturing vehicles such as Cadillac. GM lies in the second position in the global automobile market after Toyota. Economies of sales and net revenues are some of the business metrics that have helped the company cope with global competition. Product differentiation and cost leadership are the business models used by the company. Strengths and weaknesses, opportunities, and threats are the internal and strategic factors that affect the automobile industry. Today, the company focuses on becoming the most valued automotive company in the world.
Doiron, D., & Higgins, J. (2020). GENERAL MOTORS AND THE ELECTRIC CAR REVOLUTION: BOOM OR BUST?1. Journal Of Business Case Studies (JBCS), 10(2), 185-190. https://doi.org/10.19030/jbcs.v10i2.8507
General Motors. Gm.com. Retrieved 30 March 2020, from https://www.gm.com/.
GM Outlines Strategic Plan. media.gm.com. (2014). Retrieved 30 March 2020, from https://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/news/us/en/2014/Oct/1001-gm-plan.html.
Kissinger, D. (2017). General Motors' Generic Strategy & Intensive Growth Strategies - Panmore Institute. Panmore Institute. Retrieved 26 March 2020, from http://panmore.com/general-motors-generic-strategy-intensive-growth-strategies.
Pratap, A. (2018). General Motors (GM) Strategic Analysis. Notesmatic.com. Retrieved 26 March 2020, from https://notesmatic.com/general-motors-gm-strategic-analysis/.
Cite this page
Evaluation Essay on General Motors Company . (2023, May 01). Retrieved from https://speedypaper.com/essays/evaluation-essay-on-general-motors-company
If you are the original author of this essay and no longer wish to have it published on the SpeedyPaper website, please click below to request its removal:
- Contemporary Society in Application Essay Example
- Free Essay on the Use of Cell Phones while Driving
- Free Essay Sample on Courage and Calling
- Comparison Essay Sample: Primary Education System in the UK with that of Kenya
- Free Essay on Leadership in Criminal Justice Organizations
- Free Essay Analyzing Washington's Farewell Address
- Essay Sample on Nutritional Advice for a Patient with Marasmus