General Moters Strategic Analyisis

I. Background

Mission Statement-

General Motors is committed to be a 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.

Vision Statement -

Gm's vision is to be the world leader in transportation products and related services. We will earn our customer's enthusiasm through continuous improvement driven by the integrity, teamwork and innovation of GM people. Becoming the best is an unending journey, a constantly changing destination. But that's where we're determined to drive - one car, one truck, one customer at a time.

Founded in 1908 General Motors immediately began manufacturing and selling their vehicles in several countries throughout the world. They quickly grew and shortly thereafter became the worldwide leader within the automotive industry. Due to the success of their business in 1919 GM decided to establish General Motors Acceptance Corporation (GMAC) in order to finance vehicles bought by their customers. Once again GM experienced success. The establishment of the GMAC has been extremely profitable over the years and currently makes up almost all of GM's profits. Throughout most of the 20th century GM has been at the forefront of innovation and technology inventing products such as the electric self-starter as well as developing popular vehicles such as the Suburban and Corvette. GM however, did not stop there. They also stressed the importance of service and customer care, and in 1926 created the first nationwide service policy to accommodate their Cadillac product. By 1938 GM was annually selling 350,000 cars outside the US and Canada. By 1976 they had produced over 100 million vehicles in the US and owned 47 percent of the US automobile market. As far GM was concerned they were the automotive leader and nothing was going to change that.

Today however, GM is in trouble. They are no longer the company that dominated the majority of the last century. Their share of the US market has decreased to roughly 26 percent, a number not to be ashamed of but a serious drop from 47 percent in the late 70's. In 2004 GM's current ratio was at 1.06, there ROE has dropped from 15% in 2003 to 10% in 2004, and their profit margin was about 1.5 %. As we can see these numbers do not indicate a stable company. It has not particularly been any one event that has caused GM's downfall, rather a combination of several factors. These factors include the increase in costs, such as supplies, fuel, healthcare, and pension payouts; the over dependence on the US market, their organizational structure, and most costly their inability to keep up with the alternative energy movement. During the late 90's early 2000's the automotive industry began to shift from the big gas guzzling vehicles to the smaller more compact fuel efficient vehicles, and or vehicles powered by alternative energy, i.e. hybrids. This was the result of both the continuing rise in gas prices, as well as the environmental issues that we now know of. GM however, did otherwise and did not develop a hybrid vehicle until 2004, five years after the release of Honda's Insight Hatchback. Now four years later they are fighting their way back, however competitor's like Toyota, now the leader in hybrid vehicles is challenging GM for the largest automotive manufacturer in the world. The following sections will outline GM's current situation, both internally and externally, and will look to provided information helpful to General Motors strategic plans.

II. External Environment

Opportunities

A. Alternative Energy Movement

It is obvious that GM was behind its competition with regards to the research and development of hybrid vehicles. However hybrid technology is still very much new giving GM the opportunity to once again become the automotive industry's leader in innovation and technology.

B. Continuing to Expand Globally.

Recently GM saw an increase in the Chinese automotive market, which proves there needs to be more emphasis put on foreign markets. If GM can infiltrate these markets and successfully grow along with their continuing focus on the US market they will be headed in a positive direction.

C. Low Interest Rates

With the right marketing strategy the low interest rates have the potential to generate an immediate increase in sales.

D. Develop New Vehicle Styles and Models

This is an opportunity that will never be satisfied, meaning that GM should always be attempting to develop the automotive world's most popular vehicles, and as we know, what is in today will be out tomorrow.

Threats

A. Rising Fuel Prices

With GM being a large producer in both trucks and SUV's, sales have drastically decreased due to the lack of fuel efficiency. The rise in fuel prices has played a significant role in creating the opportunity for development of both hybrid and more fuel efficient vehicles. As you will find with most threats, an equal opportunity will usually emerge as is the case here with GM's opportunity mentioned above.

B. Growth of Competitors

GM no longer has the luxury of being the known leader in the automotive industry and faces the reality that they are in serious trouble. As I mentioned earlier Toyota took the first step in the direction of hybrid technology and has since drastically grown and become the questionable automotive frontrunner to start the 21st century.

C. Pension Payouts.

Part of this threat is their own doing and the other is simply unavoidable. GM is responsible for providing generous pension benefits to its employees, which at the time seemed like a great idea, however they are now experiencing problems as more and more people begin to collect.

D. Increased Health Care Costs

GM, like many large companies with quality employee health care benefits, is experiencing a large financial hit that only gets worse as time continues.

E. Rising Supply Costs, i.e. Steel

Once again this threat affects the entire automotive industry and forces each company