GM CASE STUDY ASSIGNMENT

Introduction:

This report provides information pertaining to business scenario of GM cars in US and China
especially when it bounced back after recession. It covers the struggle to gain stronger position in
the global automobile market. It outlines the success of GM in China and its effort in retaining
the stronghold that it had on SUVs sales in the US markets. The report also throws light on
future challenges in Chinese markets from trade barriers, competition and its strategy as outlined
by its CEO.

External analysis:

Threat of new Entrants There are several government supported car manufacture companies in China, those companies has
initiated a cut-throat price price war in order to gain market share.

The slowing down economy and the high price of fuel in China is the main problem of the GM. That is why
GM needs to tie up with the domestic car manufacturers of China to penetrate the huge Chinese market.
Threat of Substitutes Also, GM is known for its big bulky and luxurious SUV cars. But the high fuel price in the Chinese market
has made people least interested in fuel consuming luxury SUVs. Chinese people want more fuel-efficient
cars and GM is offering them the exact thing with their Wular line cars.

Chinese market wants value for money and fuel-efficient cars and GM has to offer it in order to get a
stronghold in the Chinese automobile market. The ‘new’ GM has to sacrifice its car manufacturing
Bargaining Power of Suppliers philosophy to get a stronghold in the Chinese automotive market. GM also makes the luxury car ‘Cadilac',
which has a high demand in the Chinese market. The bargaining power of the other suppliers .

Determinanats of Buyer power: The operation has been cost effective. They have less employee than US ,
though they sell more vehicles that US, GM's Cadillac brand is in high demand and it is considerd as status
symbol. It is due to the low cost strategy. Thus the company has been successfull in supporting the
bargaining power of the suppliers.

Figure1: External analysis

(Source: Shigang, 2010)

Internal analysis:
Strength:
The direction of the economy and the tides of business cycle determine the fate of an automotive
company. When the economies are on a high, the automobile industry too ride the tides while
they become hard to run during downturn. The ‘old GM’ needed sales to keep it from going
down. At present GM has a hold on nearly 17-18 % of the market share, the ability to hold onto
business is impressive. No Chinese car dominates the US like the GM dominates the Chinese car
segment. In Spite of the general slowdown of the Chinese economy and devaluation of Chinese
currency (Yuan) sales of GM in China has surpassed the total number of vehicles that GM sells
in US. GM along with its Chinese partner has posted record sales of more than 1.6 million
vehicles. GM automobiles are in high demand as the Cadillac is considered a status symbol.
Despite of the revival of US car market, china will remain a robust market for GM (Shigang,
2010). The importance can be gauged from the fact that every three out of four vehicles
produced by GM are sold outside US. Its implications are to create pathway to earn customer
loyalty and to build a stronger relationship. In these endeavors, GM strives to lead in
development of product and technology, establish Cadillac as its flagship brand, continue to
grow its ventures in China by opening five new vehicle-manufacturing plants in china, and
deliver core operating efficiencies like earn more volume of global sales through lesser vehicle
architecture, and improved logistics (Shigang, 2010).
Weekness:
Insufficient liquidity has been attributed to reduced sales and low working capital. Increasing
cost of production and rising fuel prices. GM was known to have gone bankrupt in 2009 but
emerged out leaner. China has imposed high tariffs of nearly 21% to 30% on automotives
imported from America. The US taxes imported cars and car parts only at 2.5%, this works as an
incentive to manufacturers in China to avoid paying import tariffs. Moreover, china has a clause
for foreign subsidiaries to operate as 50-50 ventures with Chinese companies (Fernandes and
Awamleh, 2016). The system may not be fair but it came into force in 2001 when China joined
World Trade Organization. It was assumed that future negotiations in WTO would lead to
lowering of trade barriers on part of China but the talks have stagnated because of standoffs.
Ford has also been making strides in increasing car sales but it is still way behind GM. more so
because it made a late entry in to Chinese market whereas GM was already in the process of
developing guanxi- a social network system that helps in forging business relations.
Threats:
Post recession of 2009, world economies are on a path to recovery but have not fully recuperated
leading to tighter credit controls.
China has imposed high tariffs on automobiles imported from America. GM is facing huge
challenges in the present scenario. It will need to be watchful against dependence on sales of big
trucks and SUVs or minivans. These have become popular again in the US. It is probable that
revival of domestic market may lead to shift in focus of management. Rising prices in the recent
times, Cheaper gas rates and low interest rates. China is the largest car market in the world scene
and US firms are not willing to complain against the unfair trade rules for the fear of being cut
off completely (Kennerley and Neely, 2013). It has to share profit and information beforehand
because of the joint venture with a Chinese affiliate Shanghai Automotive Industrial Corp.
(SAIC).Maintaining harmonious relations with joint venture partners on China which are
affiliates of Chinese governments is an important part of Chinese growth strategy. Strong
competition from local and other US car manufacturers are there.

Opportunities: Growth rate is projected to reach a high in China.

Threats: Post recession of 2009 , world economies are on a path to recovery but have not fully
recuperated leading to tighter credit controls. The ‘new GM’ has done a lot of efforts in fighting
back after the recession of 2009 and coming up against the performance of other automotive
giants in the US markets. With the preference growing for SUVs GM was able to retain the
market share. When the operations of GM are scrutinized, the industry watchers are analysing
and evaluating that sales and earnings were down from previous years but the share prices were
going up. Sales were higher in US markets and much higher in China (Buitendach and De Witte,
2015). The resurgence of the new ‘GM’ can be attributed to its high margin automobiles, the
Cadillac and the Buick which made it a global giant whereas it used to focus only on the
domestic market in its heydays. It is going to add to its sports utility vehicles line and trucks
which was always its stronghold in the US.

Quantitative Analysis

GM can retain its competitive edge in the US when it makes some changes in the policy
decisions, use higher pay packages and incentivize its executives, investing in workable ideas. It
has build reputation for quality and re liability. The tie-up between GM and Shanghai Automotive
Industrial Corp can be a good opportunity for the company. The low wage of the Chinese labor
and the extraordinary productivity from the GM’s car manufacturing plant in China has helped
this company to provide the cars at a competitive price point.

GM has done well in niche categories like such as large crossovers like Buick, and full sized
SUVs like Cadillac (Buitendach and De Witte, 2015). The basic structuring of the US economy,
the timeline of the automotive segment, and GM’s new product replacement points to the fact
that it can do sustain itself in the US. China for it continues to be a winning territory as long as it
can keep up with competition proffered by the local Chinese and other car manufacturers. The
test of abilities will most probably come at the next downturn.

Conclusions and Recommendations

GM has the goal of fostering and maintaining its position as an automotive giant. GM has to
present ideas as different from previous work modules, switch decision making, make changes in
the framework and cause a more generic impact. The GM’s new CEO,Mary Barra considers
building of company’s brand and reducing costs as her top priorities and the timing is just right.
Reference List:

Buitendach, J.H. and De Witte, H., 2015. Job insecurity, extrinsic and intrinsic job satisfaction
and affective organisational commitment of maintenance workers in a parastatal. South African
Journal of Business Management, 36(2), pp.27-37.

Fernandes, C. and Awamleh, R., 2016. Impact of organisational justice in an expatriate work
environment. Management research news, 29(11), pp.701-712.

Shigang, Y., 2010. Competitive strategy and business environment: The case of small enterprises
in China. Asian Social Science, 6(11), p.64.

Kennerley, M. and Neely, A., 2013. Measuring performance in a changing business

environment. International Journal of Operations & Production Management, 23(2), pp.213-229.