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In contemporary business arena, business-leaders need to develop strategies that can enable their organization utilize factors of production effectively. Scarcity in resources and competition in modern globalized world calls for adoption of strategic management policies; strategic management involvesdetermination of mission, vision, values, goals, objectives, roles, and responsibilities of an organisation and the pathways through which the organisation can follow to attain competitiveness. Global automobile industry is competitive with players making different models and designs of vehicles. To remain competitive in the highly volatile market, General Motors has to have strategic management policies that will enhance the utilization of its strengths to take advantage of opportunities in the market.
This paper undertakes an analysis of strategic policies of General Motors in 2009.
General Motors historical background
General Motor Corporation is world’s second largest automobile company after Toyota Motor Corporation; the company operates in more than 157 countries, it also sells cars and trucks through various divisions like Buick Cadillac, Chevrolet, GMC, Opel, Vauxhal, and Holden; it was founded in 1908 by William C. Durant. During the initial years of operation, the company targeted the well to do in the society as it produced custom-made automobile that were expensive for ordinary people. However, in the 1920s, the company was struggling to keep up with competition of its main competitor Ford Motor company that has specialized in making low cost automobiles; the then management lead by Alfred P. Sloan had no option other than change their approach to the market. At the wake of global financial crisis of 2008, the company suffered financial difficulties to the point of seeking billion of dollars to stay afloat from the government. The global financial crisis found a suffering company that had been dropping its employees and managers in dozens of thousands.
The main operating base of the company is in the United States of America where it has its headquarters at Detroit, Michigan. After the United states, China forms the second largest market for GM products; according to GM worldwide 2008 vehicle sales China sales was at 12.0% while that of America was 22.1%. In May 2009, the financial base of the company was wanting to the point that management received a bailing out of 19 Billion from the government to boost its operations.
However according to the company’s Car design Campion , Bob Lutz, the company has the potential of regaining its past glory, Strategic management aims at improving the overall performance of an organisation; it undertakes this role by focusing on an organisations strengths and energy. Pillars of strategic management ensure that members of the organization are working toward the similar goals and objectives; the teams are orchestrated and have team spirit as their guiding policy. Policies of strategic management assess and adjust organization’s direction in response to a changing environment; focus of the management policy is on minimizing operational costs and maximizing contribution. When doing business, organizations are affected by internal and external factors; when management is at the control of the business, they can manage their internal factors to work for its good. When dealing with the external environment, management are open to two main options, adoption or enactment. When using the adoption method, the management sails in the prevailing market situation to learn the market so that it can create its own opportunities. When using the enactment method, the management influences the operational activity for its own benefit, for instance the management may decide to sell its produce at relatively lower prices than those of competitors to attract more customers.
When charting through strategic course, organizations should have room for mistakes and ensure that every process or every mistake done is a learning process. The management process’s should be both deliberate and emergent where firms follow certain pathway but remain in control.
Internal strengths and weaknesses of GM
Since its inception in 1908, the company has had effective management team with the will and power to pioneer change. In the 1920’s, to fight against competition from Ford, Alfred P. Sloan decided to change the companies approach that focused on the well to do in the community and include middle income earners who were not satisfied by its then production and production of Ford that was for the less earning. The wakeup call that the company got from Ford made the management realize the need to plan its businesses effectively; at operational level, the management emphasised on treating customers’ right. The spirit of competitiveness and the need to create value to customers enabled the company dominate in the United States car market where it controlled about 65% of the market. The management team that the company employs has wide experience in the sector, they well understand the trends of the market and with the understanding they are able to responds to different issues in the market when they occur.
From the 1920, GM had had issues choosing the target market, and then the company has structured its marketing and production to target the well to do in the community leaving the masses. It was this opportunity that Ford had been able to seize and made the company face fiance competition. GM adopts a metrics organisational model; the model has issue and challenges in reporting the outcomes. Each department seems to work as an autonomy organ and the level of discussion with other departments is challenging. There is much concentration of the hierarchy of own division thus less concern on what other areas might be doing.
With such breakdown of information, the company has been corned with some inefficiencies and lack of control. The matrix model again has some challenges in conflicts resolutions; other than in divisional conflicts, times find the different divisions having friction with each other to the point of creating unfavourable working environment. One challenge that organisations adopting matrix model have had is the issue of dealing with transfer pricing among departments; there are no cut policies through which the departments can communicate and come up with the right method of setting transfer prices. With the current situation, some departments feel intimidated by the system.
External environment surrounding General Motors
The motor vehicle industry is considered as one of the fast growing industries in the world; it has attracted May players and customers buy first, second or third hand cars. Other than in the developed worlds, the industry has taken much shape in the developing worlds like Africa and Caribbean Countries. The motor vehicle industry has been on a fast change with players from different countries coming up with products aiming at different markets. In the wake of the changes, an organisation needs to enact policies and strategies that will see it remain strong in the situation.
In the 1960s, GM was the dominant automobile producer in the United States; the company was among the most profitable in the world. However in 1970s, the dominance of the company started to melt because of high competition (there was emergence of low-cost/high quality Japanese cars) and the global oil crisis of the time. The Japanese cars came with more fuel efficiency exposing the guzzlers that GM was making; there was a shift of customers to the new development. The 21st century saw the world change with globalisation; with the new trend, GM is able to target customers from the Diaspora. Enlarged market is an advantage to GM as it offers the company a wider market to sell its products, however it comes with the challenge of managing the big business as well as coming up with the right products for every customer.
In 2009, the world was suffering from global financial crisis, during the period, individuals and organisations were finding it hard to buy and maintain vehicles thus the sales of automobiles reduced. With the reduced sales, GM had to contend with losses to the point of seeking financial assistance from the government. With the low performance, the company saw Toyota Motor Corporation take leadership in sales and production of automobiles. The strategies that were implemented by Toyota were much similar to the ones that Ford has initiated in the 1920 to outdo GM competition. One challenge that is facing the automobile industry is the effect that fossil fuels driven vehicles have on the environment. Environment activists have condemned the industry for being responsible for environmental damage with the pollution and emissions that automobiles emit.
Although the automobile industry has one of the highest revenue contribution in the world, the sector has been greatly affected by environmental concerns. To remain in the market and seem to have minimal effects on the environment, different companies have developed different brands of automobiles; GM has produced electrically charged vehicles as well as hybrid ones to remain in the market and reduce the adverse effects its products have on the environment. With the new outcomes, the cost of production, innovation, and invention has skyrocketed for the company. The world is increasingly becoming cautious of the effects that human activities have on the natural environment; the effects of global warming are becoming real in different part of the world; focus has been given to the effect that the automobile has in environmental damage. Until the 21st century, the automobile industry depended solely on fossils fuels for its operation. When fuels and oils in vehicles are burnt to propel the engines, they produce green house gasses, which are harmful to the environment. In response to environmental conservation campaigns, the automobile industry has embarked on massive products improvement; they have developed highly fuel-efficient cars, gas vehicles and electric vehicles.
National and international legislations has been put in place to control the industry, for example German environmental conversation movement on 2007 released carbon emission control policy on car manufacturers; the policy required that 2012, vehicles produced should not produce more than 130 grams of carbon dioxide per kilometre.
General Motors SWOT analysis
The first strength that the company has is the wide experience that it has been able to build over time. For over a century, the company has been producing automobiles and have seen the industry grow from what it was to what it is today. The succession of management has been there to continue the spirit of improving the company’s competitiveness. With the longevity in production, the company has built strong brand name in different part of the world thus selling its products is easy. The company has a dedicated human capital that is willing to use their intellectualism for the good of the company.
One weakness that has prevailed in the company is lack of aggressiveness to invent new products; the company has been technology adopters and not inventors. With the trend, it is not able to take the cream of the market. The management structure of the company creates some departmental frictions to the disadvantage of the company. The financial base of the company has been challenged by global economic changes to the point of seeking for bail outs, these shows a company without contingency plans. There are numerous opportunities that GM has; they range from the opening of the global market where the company can sell its products in different countries. Selling is facilitated by growth in effective transport and communication channels.
As the world interacts, demand for automobiles has continued to grow to the advantage of the company. The main threat that General Motors has to face is high competition in the automobile industry; the industry is invested with multinational that seems to have captured the art of producing customer focused products. This challenge GM that has to remain on the toes to make competitive products; other than the competition, the company faces the threats of changing world economic situation; it has in the past been affected negatively.
General motors’ organisational structure
Since the 1990s in the wake strategic management structures, GM opted for a change of its organisational structure; the decision was made to streamline its operations, decision making, as well as integrate its design and manufacturing operations. The company adopts a matrix organisational structure; under the structure, activities within the company are grouped in particular basis that the management feels fits for the prevailing business environment. At GM activities are grouped on basis of products, services, customers, programs, technical process, or geography; to ensure that there is efficiency, each activity head or department is manned independently by a departmental head who has the mandate of developing and maintaining an orchestrate winning team. The structure of the company aims at ensuring that the company achieves high economies of scale through integrating functions in line with product development, engineering manufacturing, and customer relation management structures.
Generally the company is divided across two main segments as the production team and support staff sections. Under the manufacturing team, the management ensures that efficiency has been embraced and the employees in this department are well qualified. The marketing, research and development of the company ensures that the company has updated information on what is taking place in the outside world to assist it make the right decisions. As a key organisational structure, the company aims at improving innovation and invention in the company; there is much emphasis on use of employee’s intellectual capacity and personal talents and skills to undertake different tasks. When using the policy, the management ensures that staffs are highly motivated to produce products that satisfy customers. With changing global environments, the management approach assists the company establish opportunities offered by the global automobile industry and mitigate against any business risks or threats that might come along.
When making decisions, the management adopts a scientific decision making policy that emphasis on the need to research a certain challenge and come up with the best solution. When making the final decision, the company has the tendency of involving its human capital and ensuring they well understand the reason behind the decision. With modern globalized world, GM has taken advantage of the existing environment, the company has diverted in the global market using different styles that will see it able to use add value to its customers and compete against high rivals like Toyota and Ford. The company has invested heavily in Information technology to assist it minimize costs and increase the contribution it gets from its products. The company’s information and technology system is hybrid that it assists the company get solution to complex and challenging situations it is going through.
Other than the information technology structures and systems, the company sorts for consultancy services from IBM to facilitate the fast transfer of information between countries, divisions, and departments. The system integrates different policies and structures which include supply chain, human resources management, and stock management. With the expansion to different markets, the management has adopted the team management organisational structure; under this approach employees with particular qualification and those who could reinforce each other positively are grouped together to undertake a particular task.
With such an arrangement, the management aims at increasing efficiency, increasing control, and profitable growth. The management leaders who can be classified as divisional and corporate leaders ensure that the company has been managed in the best approach possible. This entails divisional leaders taking care of day to day business operations as corporate leaders look into the larger picture and corporate objectives/strategies of the company. With the two level management structures, the matrix model supports a multiple support systems and authority relationships; employees are answerable to their activities to two or more heads.
Business level structure
General Motors’ targets domestic and international markets with new and refurbished automobiles. The management ensures that the products meet the demand of the target market irrespective of their location or income. General Motors has a hub-and-spoke business strategy; the strategy assists the company advantage of the existing business opportunities.
When tapping the opportunities, the business structure assists in coming up with policies that improve its business and mitigate against business risks and threats; the company’s strategy is highly responsive to any changes in world economies and improves its products with the wave of change. General Motors business strategy is mounted on hard-to-emulate mix through visional management, geographic location management structure, embedded in an ambitious and dedicated work force. With the business strategy, the company aims to attain dominance in the global automobile industry in sales and production. The company has embarked on quality customer service and aims at improving the reliability of its products.
When operating in the internal market, the marketing team is mandated with the task of analysis the market and advising the management on the best approach to adopt in a particular market. For instance in the developing world, the company seeks to have the sale of refurbished automobiles while in the developed worlds, the market is mostly dominated with brand new automobiles.
General Motors Internal structures controls system and how they match the company’s structure
To ensure that the company has been managed effectively and there is a form of uniformity in management and decisions in different parts of the world, the company has internal control policies to address these issues. The management structure which follows the hybrid matrix model ensures that employees have a hierarchy through which they can communicate to the management and vice-versa. On the other hand the system allows for free flow of corporate information and accommodates recommendations from staffs and people on the ground. The flow of information is structured through system rights, and the level of interaction and control that someone has. For instance technical teams have to clear with their departmental heads/ divisional heads when they have an issue before channelling the same to the top management.
The structure does not however distance the management with subordinates or force dictatorship model of management. In the 1990s under the leadership of Jack Smith, the management decided to cut down the number of production plants to concentrate on adding value to the already existing once. Since then the company has an efficiency program that aims at creating state-of-the-art assembly plants and aims at closing down those areas that give inefficiency in the organisation. With the program that is currently operating, the company has managed to keep up with new developments in the market and come up with customer focused products. When deploying employing as well as appraising them, the management adopts an effective human selection and recruitment method.
Under the method, the company ensures that it has recruited highly talented individuals with experience in their area of specialization. In the event that such people have not been found, the company has a talent and skill management department that focuses on building competence among staffs. With the management policy, the company ensures that production is effective and factors of production are put into use effectively. When appraising employees, GM adopts a balanced scorecard approach, under the approach, focus shifts to looking into revenue and non-revenue features of the human resources maintained. In the event that an employee has portrayed some potential in a particular area, the management is quick to reward and motivate the employees work harder. Another way that the company maintains control is through the use of research and development team; the teams are given the task of advising the management on the best management style to adopt in the changing business environment.
When a certain recommendation has been offered, the management discusses it out using and make a decision using scientific decision making approach. With the openness of decision making, an action undertaken by one segment will have been understood by other to ensure that control has been maintained effectively. The matrix model of management is another control method that the company has adopted, the method allows for teams which are self regulated to make decisions and manage particular segments of the company. The teams are given the task and mandate of ensuring that the resources that they have been allocate has been managed in the most effective manner. In the event that some area has reported a deficit, the deficit can be traced back and addressed accordingly. In the cost management and managing how funds are managed in the organisation, the company has an effective internal finance control policy. Under the policy the management emphasis that there must be accountability of at least two people before passing any financial undertaking.
On continuous basis the management vets the system to see whether there is an area that needs improvement or an area that is yielding negatively. Financial managers have the responsibility of preparing, disclosing, presenting, and interpolating financial accounts of their organizations. To undertake above role, the managers use financial analytic tools like audit notes and financial ratios. Both audit notes and financial ratios are used by shareholders, financiers, creditors, and potential shareholders to make decisions whether to do business with a particular company. Other than above external users, financial accounts analytic tools are used by management to gauge their level of performance.
General Motors financial department has the mandate of providing such quality, timely and reliable information to the management to facilitate making of quality decisions. When such information has been provided, the company will be more competitive amidst its main competitors (Toyota and Volkswagen).
Past performances of GM have shown that the company is vulnerable to changes in the global economic environments; although this is likely to happen in all industries, the effect that it has had at GM are high. The management should learn from past performances and adopt futuristic strategies/policies that will focus on cost reduction and improvement of the products quality. This can only be attained by aggressive research and developments that will assist the company understand the prevailing business environment it operates in. The research and development team seems not to be fulfilling their tasks effectively; last hick-ups that the company has were as a result of it being caught off guard by changes in the global markets.
The management should aim at having a devolved research and management team which can address issues as they arise; with such an aggressive team the company will be able to redesign vehicles that better satisfy its customers. With the high competition, GM should embark on policies that facilitate cost management/cost minimization; some of the policies include total quality management and adopting Six-sigma management structures. When implementing cost minimization policies the company should focus on ensuring that factors of production are allocated effectively in every department and they have been used effectively. Waste management policies should be on the centre stage of the management and input-output models should be emphasised. In the international ventures that the company has engaged in, the marketing team should design the pathway for the company and creates the company brand name. Although the company boosts of a strong brand name, the management should be sensitive of effective of brand erosion. The marketing team should work with the assistance of other strategic policies like integrated supply chain and logistics management to ensure that consumers get confidence and loyalty with the company’s products.
Of late, the moves to undertake root marketing and culture intelligence in marketing should be embarked on; the company should ensure that when selling the products they well understand the needs at a micro level rather than address target markets from the macro angle. The growth of computers and various technologies can also be put in use to assist the company come up with better decisions; for example, the company should develop virtual teams situated in the country of diversification; with virtual team that work across time, space, and geographical area, sharing of information will be facilitated. The higher the quality of decisions a company has, the higher the chances of making responsive decision. When undertaking an international venture, undertaking a market research is crucial; the research will assist the company understand the market trend in the country of venture and come up with the right market entry policy. Information is power, it will assist the company make strategies that are responsive to the needs of the market; market research helps in making marketing penetration strategy, product development, and differentiation strategy; when a company gets the strategies right, then they offer it a competitive advantage. After venturing in the foreign market GM should embark on consumer-relationship management strategies to develop and retain consumers’ loyalty; the management policies will see the company success in the competitive markets.
Management gurus emphasize that the best method of remaining competitive in fiercely competitive market is through products and service differentiation. On the other hand to attain differentiation, focus shifts to quality improvement and ensuring that products address the needs of consumers. GM should embrace policies that facilitate products quality improvement. The channels through which the company offers its products should be efficiency and offer quality services to users. In contemporary business environments, there are new management practises that have been developed; they include blue-ocean management, integrated logistics management, strategic alliances, and customer relation management practices.
General Motors should adopt such programs in its internal structures as it will facilitate the attainment of its corporate goals and objectives.