The G.M. Case Class Notes THE G.M. CASE SYNOPSIS SYNOPSIS OF THE CASE 1. HENRY FORD STRATEGY A. LOW - COST B. MASS PRODUCTION C. DEVELOPED MASS MARKET - ONE MODEL T D. LIMITED PRODUCT DIFFERENTATION E. MFG. DISTINCTIVE COMPETENCE STANDARDIZATION OF QUALITY COMPONENT PARTS FOR EASY
AND CHEAP ASSEMBLY THE G.M. CASE SYNOPSIS 2. ALFRED P. SLOAN STRATEGY BROAD DIFFERENTIATION OF PRODUCT DECENTRALIZATION - PROFIT CENTERS
FIVE DIVISIONS - FIVE MARKET SEGMENTS CUSTOMER COULD UPGRADE WITHIN G.M. CHEVROLET, PONTIAC, OLDSMOBILE, BUICK, AND CADILLAC MASS PRODUCTION THE G.M. CASE SYNOPSIS 3. DEVELOPING PROBLEMS AT G.M.
VERTICAL INTEGRATION CARRIED TOO FAR - 60% TRANSFER PRICING PROBLEMS - CORPORATE CONTROL HIGH COST - POOR QUALITY PRODUCT DIFFERENTIATION BETWEEN DIVISIONS BECAME EXCESSIVE - DISTRUCTIVE COMPETITION ROI DECLINED TOO MANY MODELS AND PLATFORMS THE G.M. CASE SYNOPSIS 4. OIL CRISIS AND JAPANESE COMPETITION SMALL CARS - G.M. LITTLE EXPERIENCE
LEAN PRODUCTION - LOW COST HIGH QUALITY G.M. EUROPEAN DIVISION HAD THESE SKILLS BUT COULD NOT TRANSFER THEM TO U.S. THE G.M. CASE SYNOPSIS 5. ROGER SMITH ERA - 1980S AN ATTEMPT TO REDUCE COST, INCREASE QUALITY, AND IMPROVE CUSTOMER RESPONSIVENESS FUNCTIONAL - LEVEL STRATEGY $50 BILLION INVESTMENT
AUTOMATION AND ROBOTICS - PEOPLE IGNORED TOYOTA NUMMI JOINT VENTURE - LEAN PRODUCTION SATURN PROJECT THE G.M. CASE SYNOPSIS 5. ROGER SMITH ERA - 1980S CONT. BUSINESS - LEVEL STRATEGY
80 MODELS AND 15 PLATFORMS REDUCTION OF MODELS AND PLATFORMS CONSOLIDATION OF FUNCTIONAL ACTIVITIES LOST ITS DIFFERENTIATION - DIVISION MODELS ALL BEGAN TO LOOK ALIKE DIVISIONS LOST THEIR AUTONOMY THE G.M. CASE SYNOPSIS 5. ROGER SMITH ERA - 1980S CONT. CORPORATE - LEVEL STRATEGY COSTS REDUCED BUT STILL TOO HIGH: $1,800 - $600
REDUCED LEVEL OF VERTICAL INTEGRATION - MORE OUTSOURCING. PURCHASED EDS AND HUGHES AIRCRAFT WITHOUT MUCH SYNERGISTIC EFFECT. THE G.M. CASE SYNOPSIS 5. ROGER SMITH ERA - 1980S CONT. CORPORATE - LEVEL STRATEGY CAR DIVISIONS DIVIDED AND COMBINED INTO TWO BUSINESS GROUPS: CPC (SMALL CARS) - CHEV AND PONTIAC AND BOC (LARGE CARS) - BUICK, OLDS, AND CADILLAC DID NOT WORK: COSTS STILL HIGH, LACK OF
DIFFERENTIATION AMONG MODELS, DIVISIONS LOST AUTONOMY G.M. CASE ISSUES
Leadership, Vision, And Mission: Focus Technology Vs. People Profit Vs. Market Share Financial Considerations Competition: Quality, Cost, And Product Differentiation Vertical Integration Vs. Outsourcing Strategy - Structure Link EDS And Hughes Aircraft The Oldsmobile division
THE G.M. VISION GMs vision is to be the world leader in transportation products and related services. We will earn our customers enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation of GM people. G.M. CASE MISSION STATEMENT G.M. is a multinational corporation engaged
in socially responsible operations, worldwide. It is dedicated to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment. G.M. OBJECTIVES BECOME PROFITABLE SATISFY CUSTOMERS WITH BETTER
PRODUCTS GROW THE BUSINESS IN FUTURE YEARS G. M. SWOT ANALYSIS STRENGTHS SIZE AND MARKET SHARE
TECHNOLOGY POTENTIAL NEW LEADERSHIP QUALITY IMPROVEMENT AND PERCEPTION THEREOF MODEL ACCEPTANCE HAS IMPROVED BENEFITS DERIVED FROM A NEW STRATEGY STRUCTURE APPORACH AND RELATIONSHIP. G. M. SWOT ANALYSIS WEAKNESSES Failure To Make Technology Work Too Much Vertical Integration Bureaucratic Culture
Relationship With UAW Relationship Of Strategy To Structure G. M. SWOT ANALYSIS WEAKNESSES cont. Product Design Problems - Public Acceptance And Reduction Of Cycle Time Market Share And Profitability Negative Effects Of Downsizing Still Much To Learn About Lean Production - High Cost Producer Hughes Aircraft Situation G. M. SWOT ANALYSIS
OPPORTUNITIES USE OF KNOWLEDGE GAINED FROM SATURN EXPERINCE AND TOYOTA (NUMMI) JOINT VENTURE. EXPANSION OF THEIR GLOBAL PRESENCE - THEIR OWN EUROPEAN MODEL OPERATON AS AN EXAMPLE. CONTINUE TO BUILD ON THE NEWFOUND CUSTOMER CONFIDENCE. CHANGING CONSUMER DEMAND FOR NEW MODEL TYPES AND STYLES - EXPANSION AND LEADERSHIP. G. M. SWOT ANALYSIS THREATS
DOMESTIC AND FOREIGN COMPETITION U.S. FEDERAL LEGISLATION AND REGULATION CONSUMER LAWSUITS FOREIGN LEGISLATION AND REGULATION DECLINING QUALITY OF THE INFASTRUCTURE IN THIS COUNTRY
DECLINING VALUE OF JAPANESE YEN G. M. SWOT ANALYSIS INDUSTRY ANALYSIS MATURE PRODUCT SEGMENTATION BY PRICE AND FUNCTION TECHNOLOGY CHANGING IN MFG. PROCESS AND PRODUCT DESIGN OVERCAPACITY WORLDWIDE G. M. SWOT ANALYSIS INDUSTRY ANALYSIS
MEGADEALERS AND AUTO SUPERMARKETS WORLDWIDE DEMAND - STAGNATION - DECLINE MUST BE WORLD CLASS IN EVERY RESPECT - PRODUCT, MFG. OPERATIONS, FINANCING, AND DISTRIBUTION 1992 RATIO ANALYSIS INDUSTRY G.M.
COMMENTS Current Ratio 1.4 1.1 Low Quick Ratio
0.7 1.0 OK Inventory Turnover 6.5 11.2
Good 64.5 96.7 Poor ROA 4.6
0 Poor ROE 6.6 0 Poor
Debt Ratio COMPETITOR ANALYSIS Cost - G.M. too high Quality - G.M. marginal, competition continues to improve Styling - G.M. must watch Product line and segmentation - price and function - G.M.
OK Suppliers - G.M. too vertically integrated Buyers - sport utility and pick-ups New entrants - not likely a threat STRATEGIC CHOICE G.M. has been through some difficult times the past 10 years or so and appears to have learned some hard lessons. Based on these lessons G.M. has begun to adopt a strategy of restoring profitability to its North American operations, by aggressive marketing, redesigned products,
decentralized MGT style, and a profit rather than a market share goal. RECOMMENDATIONS CUT COSTS BY: Dropping Unsuccessful Product Lines Trimming Its Product Line Reduce the Number of Basic Platforms Standardizing Component Parts Across Models Reducing the Number of Parts Needed to Produce a Car RECOMMENDATIONS
CUT COSTS BY: cont Streamlining Operations by Consolidations Within the Corporation Decentralizing Decision Making Integration of It Design & MFG Activities Better Managing Its Supplier Relationships RECOMMENDATIONS Focus resources on core products, cars, & trucks . Realignment of organizational structure to support core products and meet costs & quality goals. Example: self managed creative work teams to figure out how to speed-up product development & improve product development.
Implement common systems & processes where possible. Balance needs of employees and unions with needs of the company. GM UP-DATE
MADE A PROFIT EVERY YEAR SINCE 1993 % OF THE MARKET APPROX. 30% CONTINUE TO DOWNSIZE AND CUT COSTS STILL HAVE SOME UNION PROBLEMS HAVE REORGANIZED TOP MANAGEMENT OUT-SOURCING MORE-VERTICAL INTEGRATION DECREASING INCREASING OVERSEAS OPERATIONS - EAST EUROPE, RUSSIA, ASIA, AND SOUTH AMERICA GM 1998 UP-DATE GENERAL STRIKE DURING SUMMER 1998
ESTIMATED EARNINGS DOWN 20% REORGANIZATION - MERGING ITS NORTH AMERICAN AND EUROPEAN OPERATIONS UNDER A SINGLE PRESIDENT WITH GLOBAL RESPONSIBILITIES (RICHARD WAGONER, JR., 45) COMBINED SALES OF $135 BILLION GM 1998 UP-DATE cont THERE ARE NOW FOUR REGIONAL DIVISIONS - NORTH AMERICA, EUROPE, ASIA, AND LATIN AMERICA CHAIRMAN AND CEO JOHN (JACK) F. SMITH, JR. MAY NOT BE THE MAN TO FIX G.M.
SPINNING OFF DELPHI AS AN INDEPENDENT COMPANY GM 1998 UP-DATE cont COST CUTTING MEASURES--OPERATION YELLOWSTONE-SMALL CARS--LOSING $1000 PER CAR--SUPPLIERS WILL CODESIGN AND USE MODULARITY NEW PLANTS WILL BE HALF THE SIZE OF THE OLD PLANTS AND COST ABOUT $300 MILLION MORE ALUMINUM WILL BE USED TO KEEP THE WEIGHT DOWN IN THE FUTURE GM 1999 UP-DATE
1998 SALES $161.3 BILLION 1998 NET INCOME ALMOST $3.0 BILLION EST. 1999 SALES $176.6 BILLION EST. 1999 NET INCOME $6.0 BILLION OUTSIDE NORTH AMERICA 1) CADILLAC 2) CHEVROLET 3) GMC 4) HOLDEN 5) ISUZU(49%) 6) OPEL
7) SAAB (50% - 100%) 8) VAUXHALL 9) NUMMI JOINT VENTURE WITH TOYOTA GM 1999 UP-DATE cont MARKET SHARE DOWN TO 30% INVESTED IN OVERSEAS PLANTS IN BRAZIL, CHINA, INDIA, POLAND, RUSSIA, THAILAND SEEKING A 10% MARKET SHARE IN ASIA SEEKING BROADER TIES WITH HONDA, DAEWOO, AND SUBARU GM 2000 UP-DATE
RICK WAGONER NEW CEO JACK SMITH STILL CHAIRMAN OF THE BOARD JOHN SMALE, FORMER CEO OF P&G, RETIRED FROM GM BOARD AFTER 19 YEARS(1982) GM 2000 UP-DATE cont US MARKET SHARE DOWN TO 28% PURCHASED A 20% SHARE IN FIAT AUTO OF ITALY GM PUSHING SUVs AND TRUCKS
OLDS-ALL RELATIVELY NEW MODELSSTILL SUFFERING LOW SALES 2001 G.M. Update G.M. paid $600 million to double its stake in Suzuki to 20% G.M. paid $340 million on a joint venture with Auto VAZ (Russias biggest automaker) to build 75,000 SUVs a year G.M. made a $400 million deal to take over many assets of Daewoo Motors(Korean Automaker). This gives G.M. a 67% stake in Daewoo.
2001 G.M. Update (Contd) G.M. is working on a deal to combine Hughes Electronics (and Direct TV) with Rupert Murdochs news corporation, Echostar (no. 2 U.S. satellite TV business). G.M. plans to discontinue the following models:Camero and Firebird as well as the Olds line. 2002 UP-DATE MARKET SHARE INCREASED FOR THE SECOND STRAIGHT YEAR. FIRST TIME THIS HAS HAPPENED SINCE 1976.
2000 27.8% 2001 28.1% 2002 28.4% LAST YEAR GM POSTED ITS FIRST MARKET-SHARE GAIN SINCE 1987. MUCH OF GMS GAIN CAME AT THE EXPENSE OF FORD. FORDS TRADITIONAL BRANDS WERE DOWN NEARLY 9 PERCENT. CHRYSLER GROUP SALES WERE DOWN ABOUT 3 PERCENT. 2002 UP-DATE (contd.) CADILLAC SALES INCREASED 16% CHEVY BECAUSE OF THE SUBURBAN AND SOME OTHER
TRUCKS IS THE LARGEST SELLING BRAND OF VEHICLES THAT COST $30,000 OR MORE OTHER BEST SELLERS 1. TRUCKS FORD F-150 SERIES (TOP SELLING VEHICLE IN US.) 2. SUV FORD EXPLORER 3. TOYOTA CAMERY NO. 1 & HONDA ACCORD NO. 2 CARS 4. TOYOTA 1.8 MILLION UNIT SALES, BEST YEAR YET (45 YRS.). LEXUS WAS THE MOST POPULAR LUXURY BRAND.
