Free BSGE Assignment Essay Sample
It is said that every company be it small or big, has its own business strategies. These are used as reflections on the company's business activities to gauge whether goals have been achieved or not. Strategies are basically perspectives, thoughts, and decisions that touch on issues that must be faced by the company and how they can be overcome in order to progress. This does not mean that strategies always yield the desired results; they sometimes fail to serve their intended purpose. The business environment can change beyond the estimation of the management and therefore cause incompatibility between existing plans and challenges. This is why strategic changes are required by leaders in well established companies. There are many types of strategic changes that can be undertaken by organizations many of which involve fundamental changes of how companies carry out their daily operations. Strategic changes are also used by companies under crisis as a tool to achieve strategic turnaround. Many companies crumble when faced with obstacles in business such as inflation, competition, regulatory changes, tariffs, quota restrictions, and emerging new business trends. This essay is going to look at the business strategies undertaken by General Motors Corporation.
One of GM's primary pitfalls has been product reliability, not just in production facilities, but also with consumer perception. There have been many product recalls throughout GM; this indicates that there is a serious problem in GM concerning quality assurance and that there is a lack of systems of quality control. Many models, about half of GM's models, lie below average in reliability. For GM to succeed, it must continue with its efforts to expand on its much successful Go-Fast campaign internally, which has so far managed to eliminated the slow, bureaucratic processes that were uncovered as a major weakness in GM's SWOT analysis. The Go-Fast strategy is an effective single meeting that is designed to fix, on the spot, any problem that may arise in order to eliminate the possibility of a similar issue being addressed in the future meetings. The gains of this strategy were realized as of March 2004, where savings of over $500 million were realized when the Go-Fast program was implemented. For many years, GM has had a history of its cars leaving their plants having unaddressed problems in a plan to decrease artificially the number of defects reported that are reported. These defects include faulty brakes, inadequate seatbelts and sometimes cars have missing bolts. This has seen many law suits being filed, for instance, there was a case where management routinely downgraded or deleted reports on vehicles since. In line with such cases, GM should put in place more quality check points in its line of production together with an open platform that will allow employees to express concerns. This will no doubt ensure that each vehicle that is produced has no flaws. (Kneer 2009, p4).
Trends in technology within the automobile sector are an area that General motors should look at seriously in order to be ahead of others. This can be in terms of internet related information systems especially when the rapid development in computer based technologies together with the generation of the emerging demand for e-commerce and the issue of globalization has been posing serious problems to many companies including G.M. The G.M. management should know that it is not just the customers who have become global, but competition has become so intensive leading to global capital outflows where by companies and organizations have employ international sourcing of labour and other useful resources so that they can achieve advantages in terms of costs. Another important aspect that G.M. should look into is environmental issues, where most customers have nowadays become environmentally aware and sensitive. This means that the company should come up with designs and products that are environment friendly, something that other companies are already doing. This will help the company to deal with the legal requirements that have been put in place for environmentally friendly automotives. Many people of the 21st century have adopted the internet both in usage and numbers, a factor that G.M. should see as an opportunity not just in terms of online abilities to help satisfy its customers better but also as another business opportunity for online shopping and also provision of the much needed product information to prospective customers. Research and studies have proved that buying of automobiles is highly involving and therefore requires a proper understanding of the behavior of customers. From this it has emerged that many consumers will allocate most of their time on the process of information searching and also comparing products that are related and similar. Changing lifestyles have seen many people resorting to alternative forms of transport, for instance, the decline in the national economic performance resulted in customers demanding more economical cars in terms of flexibility, efficiency and reliability (Davenport, Leibold, & Voelpel 2006, p 34).
In order to align itself competitively in both local and global market, General Motors can employ Porters competitive five force model, which can help in examining its corporate competitive position in relation to the prevailing business environment. The company should know that customers' bargaining power determines how much pressure they impose on margins and volume (Henry 2008, p72). Over the years the increasing power to bargain of customers has put pressure on General Motors both in terms of cost control and delivery of consumer oriented products and tailored products. The company should also deal with the issue of the suppliers bargaining power (Porter 2008, p13). For a long time the automotive dealers were very important as a link between consumers and car manufacturers, this meant that an increase in dealers' bargaining power in choosing products and styles they wish to display to customers, forced the company to be always concerned about costs in terms of inventory, and provision of better quality products both in terms of design and components as compared to competitors. To curb this, the company should make sure that its market is not dominated by few suppliers but diversify its supplier base. Because this is a very lucrative industry, there is bound to be competition and threats from new entrants, many auto companies have emerged and even surpassed G.M, for example Toyota motor company. General Motors being a global manufacturer should look for ways to defend itself against these new entrants into the industry. This is because these new entrants into the market have changed major market determinants such as market share, price, and customer loyalty. Using its strategic group map, G.M can study these competitors and come up with appropriate ways to deal with them (Enz 2009, p 200). There is also the threat form substitutes, this happens when other alternative products that have better performance parameters for the same purpose. For instance the use of public transportation such as trains as a substitute to cars can reduce the demand for cars and significantly affect the sales volume of the company. The company should therefore factor in such issues so that it can be in a position to know regions where cars are in demand and those where public transport is preferred and make necessary adjustments (Recklies 2010, p 1).
The recent economic hiccups experienced at G.M. are a reminder that the status quo is not sufficient for the company to remain the top automobile brand in America. Top management in this company should look into the future and decide where the company will be in the automobile industry. As it has already been hinted, the company should streamline its brands and come up with those that represent quality and efficiency in terms of fuel consumption, brands that will appeal to the American citizens that are largely environmentally and economically sensitive so as to regain their trust and confidence that it used to enjoy in the yester years. When one looks strictly at the numbers, Saab and Buick so far have the lowest revenues and therefore should be the easiest to do away with. Between the years 2000 to 2008, Buick sales dropped in market share fro 2.3% to a mere 1%, while Saab on the other hand retained a constant market share of 0.2%. Moreover, there are claims that GM has been executing damage control on the Pontiac as it carries on with business while struggling to keep customers. While it seemed nice for GM to sell its Hammer brand, it will be wise if these two other brands are also dropped. If three or four brands are dropped, GM will not only be raising the much needed cash but also funnel its budget into its other profitable brands instead of wasting it on models that are failing (Levy 2002, p 1).
General motors can also employ the cost leadership strategy in order to progress in its operations. This strategy involves coming up with fairly standardized products and then under pricing every one else. The main requirement for this strategy is "heavy upfront capital investment in state-of-the-art equipment" (Emeritus 2009, p1), something that is not a problem to G.M. because it already has a strong and established economic base. Having the largest, most modern plant in the automobile industry is an added advantage to a firm in maintaining cost leadership. General Motors can also take advantage of its experience to under price the risk of competition. According to this theory, being a market share leader, you can under price competition because you have lower costs due to the accumulated experience over the years, and G.M. is in this position. But because this is an easy to imitate strategy it may not bring about the required long term goals, but can only be used to win back the consumer confidence and trust that used to be there previously. To be a successful cost leader, G.M. should not ignore differentiation (Hax & Wilde, p 57). Efforts aimed at reducing cost can be classified in three categories: reducing costs of unit manufacturing through higher volume of units, scale facilities that are efficient, and experience; carrying out strict cost control over engineering costs; and minimizing discretionary costs although this type of cost is vital in promoting products and increasing sales volume (Emeritus 2009, p1).
To reduce costs, G.M can also look at salary expenses. Just as customers have been forced to tighten their pockets due to the harsh economic times, G.M executives should do the same. Executives in the upper level are paid in millions of dollars coupled with stock options and bonuses; this should be examined so that a more modest model of compensation can be adopted. A maximum salary should be set and incentives provided basing on key performance indicators. This with the other cost reduction initiatives will help offset the lack of liquidity and self sustainability that G.M has experienced in the past (Knudson 2010, p1).
Many consumers look at the residual value when they are buying or leasing a car, unfortunately for many years American autos have ranked in the top ten for Kelly Blue Book resale value. Over the years GM has posted very low resale values because it apparently overbuilt autos to gain market share. This means that it paid little attention towards building quality small vehicles and concentrated on the much inefficient SUVs. To add on this, in 2007, a publication in the consumer report showed that only one GM vehicle got a most reliable rating out of its 39 models and the two lowest rated autos were GM's. in the wake of decreasing car demand, GM resorted to selling its cars to rental fleets, this played negatively on the vehicles resale value. The high discounts released by GM also damaged further the perception of customers and resale value. Japanese automakers have so far come out as leaders in reliability ratings; perhaps GM should imitate their strengths to bring about competitive parity that may just give it a competitive advantage eventually. Consumer report tests show that fuel efficient vehicles are much reliable, these are the hybrid and MPG models that include the Honda Fit, Smart ForTwo and the Toyota Yaris. GM should also come up with more fuel efficient vehicles that will among other things increase the perception of consumers about its products. It should eliminate the poor consumer perception by implementing a public relations and advertising campaign in which it should demonstrate past flaws have been fixed and that it has improved its reliability through the consumer reports (More 2009, p 1).
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G.M should strive to have the capacity to deal with market and economic down turns like the ones experienced in recent years. In order to grow economically, market focus is important in moving resources to support opportunities of high cash flow. It is more critical in declining markets where withdrawing resources becomes the most appropriate option. A high market focus will always ensure that an organization has enough cash reserves at any moment to buffer the impacts in the economy and also lower the impact of negative cash flow brought about by declining auto sales. G.M. should make sure that every level of its corporate portfolio creates, supports, and sustains customer choice and market share for each product in the portfolio. If there is a level that does not support car choice an action should be taken quickly enough to turn around the strategy, re allocate resources that were assigned to the particular strategy, completely shut down the initiative, or just sell or even exit from the failed situation. This means that every product developed should create high market share in the respective market segments it competes. This company can no longer afford to market its auto mobiles in small quantities, or products that compete in small specialized market segments. The products should also create and sustain long run net cash flows from the market shares (Morden p 34).
For a long time G.M has been stereotypically inclined towards big and powerful gas guzzling engines that lack luster interiors. The company should know that at present, most car advertisements are based on fuel and gas efficiency and also good design of comfortable interiors. G.M did most of its advertisements using celebrities in most of their commercials. This worked in those years, but the company should know Americans will only buy those cars that perform, those that will prove to be dependable, and give the owner superior experience. Advertisement is very important in the marketing mix, it is an important factor in buying decisions, and therefore buying of cars is not an exception. For many years, advertisements have been through word of mouth, commercials; the company should employee the internet. Other automaker companies like Toyota have employed this service and have been successful in their marketing campaigns. Honda has been posting their cool commercials on YouTube to attract the attention of prospective, young consumers. Honda's main point here is to communicate its eco-conscious models that are affordable. To attract this young generation of consumers, General Motors will have to employ the internet and use it effectively in its marketing strategies. This can include viral marketing, Pay Per Click marketing service, social media, and if possible, email marketing. These are good in announcing sales and personal offer invitations to its many customers. When a company reaches out to its customers on a personal level, it makes them feel exclusive and willing to transact with it one more time. Facebook is another important site that will keep customers engaged and always aware of any changes happening at G.M. This will also force car dealers to clean their act. If this is put in force, together with G.M's new focus on customers, automobiles, and culture, the company will no doubt be headed to a bright sure (Melissa 2009, p1).
Another move that can enable G.M gain market share and also build a stronger brand image is to enter into competitive joint ventures with other industry leader such as Apple Inc. This strategy falls under the power school where an organization like G.M uses its power in the industry to negotiate fort collective strategies in its interest (Swayne, Duncan, & Ginter 2006, p 16). Having leading telematics system already in place, such an alliance will jointly increase the telematics innovation and the perception of consumers about the products made by G.M. It can employ the same line of strategy as the one employed by the partnership between Ford and Microsoft that resulted in the formation of Sync. Toyota on the other hand offers an in-car entertainment and information system in it Lexus and Toyota brands. A partnership with Apple can go a long way in pioneering technologies like interactive applications, which can be customized by the owners of vehicles. Applications like real time weather, sports and traffic reports, and other important updates can be instantaneously downloaded via the system. A partnership like this one will most probably appeal to the younger generation that is more advanced in technology. The blending of wireless communications and computer technologies is the strategy employed by many automaker companies in their bid to woe younger car buyers. The high ranking of Apple in respect to customer royalty would definitely spark the interest of many dedicated apple users. Utilizing these innovative skills from Apple, G.M will no doubt remain as a leader in the telematics field as it addresses its declining market share especially in North America (Bergh, Lefkovitch, Scotti, & Warner 2009, p 12).
Employing the environmental school strategy, G.M can explore other market areas for its products. There are many emerging markets in the world, areas like China, Eastern Europe, and India have increased their buying power per capita, and this has increased their demand for vehicles. The Indian government supports a very comprehensive system that is poised to increase growth in the automobile industry. The Chinese government has loosened financial restrictions in the automobile sector allowing car dealers to come up with their own financial structures. G.M can take this as an opportunity to expand their global brand in these new markets. To benefit from this, the company must establish manufacturing facilities that will not just create jobs in those countries, but also come up with favorable relationships with the governments in those countries. This should be part of the flexibility strategy that will among other things, ensure that all G.M's plants follow a global bill of process. This will map out the sequence in which all the vehicles made by G.M are put together. It outlines a globally common, documented, and balanced approach for product manufacture and assembly. For this to be done effectively, G.M should have one coordinated manufacturing and engineering team, which does not digress from the set standards (Katsioloudes 2006, p32).
Any company participating in the global market, should first seek to understand the nature of the competitive advantage it is working in for it to be able to attain its objectives and also establish strategies for the future. For G.M to survive in this changing global market, it should come up with a strategy that is aggressive, comprehensive, and doable, one that will respond positively to the changing industry and economic conditions, a strategy that will put the company on a sound, sustainable and very competitive footing not just in the United States, but around the whole world. This plan will call for considerable sacrifices to be made by all the stakeholders, who include, bondholders, unions, suppliers, dealers, retires, executives and all active employees. GM should improve its product reliability together with its vehicle resale value; it should consolidate its brand portfolio, form a strategic partnership, and increase the efficiency of it manufacturing plants. If it does all these properly, then it can align itself for a sustainable global growth.