A case study of General Motors 2005

Douglas E. ThomasUniversity of new Mexico

Presented by:M. Adeel (20)

Izhar ullah (60)Shahid ahmad (54)

Raees (79)khurshid (92)

Distribution Of Presentation

• Rais Iqbal(Introduction and products and services)

• Izhar ullah(mission,vision and history)• Khurshid(Industry trends)• Shahid (competitor analysis)• Adeel(swot analysis and five porter forces)

General Motors

• In 2005 company made a Loss of $1 billion in 1st quarter & $286 million in 2nd quarter

• The losses was due to failure of operations in North America

• Rising prices, pension cost & health care was their main issues

Company strategy against the loss

• GM adopted the strategy of “ employee discount for everyone”

• It increased 47% of sales.• It also increased the market share from 25.5%

to 32.4% .

Products and services

Company Description

As a top company in the Automotive industry General Motors specialize in the manufacture of cars and trucks selling them under the brands of Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling.

General Motors Slogan

A slogan is a short, memorable catch phrase, tagline or motto used to identify a product or company in advertisements. The advertising slogan, or business slogan most associated with General Motors, is:

"People in motion."

Brands of GM

General Motors Mission Statement

General motors is committed to be the leader in providing transportation products and services of

such quality that our customers will receive superior value, our employees and business

partners will share our success and our shareholders will receive a sustained superior

return on their investment.Suggested mission: GM will become an industry

leader, not a follower. To regain lost market share that was lost to foreign competition, and once again be the auto industry leader in sales and

market share in today’s global market

Vision Statement

• GM’s vision is to be the world leader in transportation products and related services. GM will earn our customers’ enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation of GM people.

• Proposed vision :To become the automotive industry leader in alternative fueled vehicles and providing superior quality products that global consumers call to mind when they think of quality and innovation.

About General Motors

• One of the world’s largest automakers, traces its roots back to 1908.

• its global headquarters in Detroit USA.• GM employees 209,000 people in every major

region of the world.• Doing business in more than 120 countries. • GM and its strategic partners produce cars and

trucks in 31 countries.

History

• Creation (1897-1909) 1901 curved dash old mobile.

• Acceleration (1910-1929)1912 Cadillac• Emotion (1930-159) 1949Buick road master• Revolution (1960-1979) 1964 Pontiac gm• Globalization (1980-1999)1999Saab 9-5• Innovation (2000-present)2008 Cadillac CTS• Transformation(future)Chevrolet volt concept

vehicle

GM today

• GM continues to rapidly increase in size but not in sales.

• Its total assets increased from $ 370.782 billion to $479.603 in almost 2 years.

• GM is overly dependent on US automobile market, more than 2/3 of its sales are made in US.

• It is overly dependent its financing division.

Hierarchy

Financial Ratio Analysis

Net Working Capital (In millions) N.W.C= C.A–C.L $53053 - $47157 =$5896Current Ratio 1.12Quick Ratio (Acid Test Ratio) .86Debt to total Asset ratio 8.3Debt to total equity ratio .32/1Gross profit Margin Ratio9.88%Net Profit Margin Ratio 3.2%

Swot Matrix Strengths

• Large market share• Global experience and world wide presence• Variety of brand names• GMAC financing• On star satellite technology

Weaknesses

• Behind an alternative energy movement• Poor organizational structure• Stagnant profitability• Overly dependent on US market• Overly dependent on GMAC financing• Poor credit status

Opportunities

• Alternative energy movements• Continuing to expand globally• Low interest rates • Develop new ideas• Develop new vehicles and models• Growth Potential in India and China• Increased Global truck markets

Threats

• Rising fuel prices• Growth of competitor• Pension payouts • Increase health care cost• Controlling global rescission• Intense competition

SO

• It have large market of share so if it use the technology of hybrid vehicles and produce fuel efficient vehicles, so they once again become the leader of automotive industry

• It rely on GMAC financing and with the usage of good marketing strategy if they offers at low rate of interest, so they increase their sales

• Variety of brand names such as Cadillac, Chevrolet etc so it has to develop new models and vehicles because “what is in today will be out today”

WO

• Gm is behind in Research and development, so there is big opportunity to made innovation and come again in tough competition

• Gm can continuing globally by properly using the markets of India and China and it can increase its profitability

• Gm mostly based on US market but if it positively turn to other markets with out losing the US market, so they once again come on top in automotive sector

ST

• Gm have global experience and doing business in most of the world and by using R&D innovations, globalization to compete in the market

• By using star satellite technology they can capture the customer interest and also compete with competitors

• R & D is necessary because fuel prices are increasing day by day and people needs fuel efficient cars.

WT

• Organization has to change its organizational structure because communication between employees generate new ideas and collaboration can put organization in front of his sector

• Gm not be solely rely on his financing because if they increase their profitability they can easily handle with health care and pension cost.

• Gm has to use hybrid technology because there competitors are using and due to which it is one step behind in technology.

Porter’s Five-Forces Analysis

1. Rivalry between existing competitors • With the rise of foreign competitors like

Toyota, Honda and Nissan in the 1970's and 80's, rivalry in the American auto industry has become much more strong.

• Firms compete on both price and non-price dimensions.

2. Threat of entry by new competitors

• The presence of new firms in an industry may force prices down and put pressure on profits.

• There are, however, barriers to entry that tend to protect established firms.

• One would expect the production of automobiles to require significant economies of scale, an important barrier to entry.

3. Price pressure from substitute or complementary products

• Although new cars generally are slightly price elastic, suggesting few real substitutes (e.g., bus and rapid transit), the demand for a particular model is highly sensitive to price because of the availability of close substitutes for a given model.

• A change in the price of a complementary product (e.g., gasoline, batteries, and tires) could have a significant impact on the demand for automobiles.

4. Bargaining Power of Buyers

• Buyer power refers to the ability of individual customers to negotiate prices that extract profit from the seller.

• Individual consumers have some influence over price within a given dealership, but little power over manufacturers.

• Customers can easily, and with little cost, switch to other auto dealers.

5. Bargaining Power of Suppliers

• Auto manufacturers require inputs-labor, parts, raw materials and services.

• cost of these inputs can have a significant effect on profitability.

• Whether the strength of suppliers is weak, moderate or strong depends on how much bargaining power they can exert.

• The auto manufacturers have large supplier networks that appear to exert little bargaining power.

Key industry trends

1. Political 2. Economic3. Sociocultural4. Technology5. Demographics

Political

• Laws and government regulations have affected this industry since the 1960s.

• Almost all of the regulations come from consumers increasing concerns for the environment and the concern for safer automobiles.

Economic

• The automobile industry has a huge impact on every country’s economy

• According to various studies this industry is the major user of computer chips, textiles, aluminum, copper, steel, iron, lead, plastics, vinyl, and rubber.

Sociocultural

• Today’s society judges people on the type of car you drive.

• Society does not like to admit to this but it is very true.

• Manufactures know this happens and targets their markets by these thoughts

Technology

• The internet has affected just about every industry in the world and has also had a huge impact on the automobile industry.

• Business-to-business marketplaces have given the industry many opportunities because of the internet, such as more efficiency and lower cost.

Demographics

• For many years now, the baby boomers generation has been the main target market for just about every product. As their generation is getting ready to retire and spend less money, the automakers are looking at the younger generations.

Competitor’s Analysis

Ford Motor Company • Ford Motor Company is a global company with

two core businesses: Automotive and Financial Services.

• The Automotive business consists of the design, development, manufacture, sale and service of cars, trucks and service parts.

Honda Motor Company • Originally know for motorcycles, Honda has

managed to elude the dominate keiretsu system in Japan and become one of the dominant automobile manufactures in the world.

• Honda has a reputation for producing high quality products from cars to motorcycles.

Toyota Motor Corporation • The Toyota Motor Corporation was

incorporated in 1937 and has many strengths being one of the industry leaders in the automotive industry.

• Toyota has three major brands underneath the company umbrella; Toyota, Lexus, and Scion.

Recommendations

• GM’s manager must decide how it will produce and market its vehicles in future.

• One major issue in he degree to which it will rely on its core North America Market in the future & if it will be able to fend off competitors and establish position in market.

• GM motor should adopt alternative fuel technologies, including production of hybrid vehicles

Any Question