In the 20th and early 21st centuries, General motors' company, formerly knew as General Motors Corporation was a big auto maker of the world and historically had been the largest and successful. It built some of the famous and classic vehicle during his days of glory, vehicle which portrayed modesty and displayed class consumers who range from working class to superstars.
General motors' was founded on September16, 1908, in which the company's largest national market was United State. It manufactures cars and trucks, with its headquarters located in Detroit. GM was a manufacturing company that grew along with the American economy in the 1950s and 60s, while holding 40.45% of U.S automotive sales, it is faced with increasing severe competition from Japanese and other automakers. In the early 1990s, it was forced to close plants which in return reduced its workforce in 2006.
Critical Analysis of Management Processes of General Motors from Case Study
Process is a systematic set of activities carried out together to achieve a result. The term management process refer to the system used to transform organizations activity with the purpose of improving the operation and aiming at achieving the goal and objectives of the organization. Wrapp (1967) talks about ‘sacred cows’ relating to managers having helicopter view of the company, proactive, forecasting issues and formulating precise objectives, However, another observation by Kotter (1982) reveal that contrary to how books suggest managers function, they are not well organized, systematic nor strategic.
George T.K (2013), defines management process as simply coordination and controlling activities. Successful managers must align and harmonize the interest of different groups in the organization while cultivating commitment and motivation (Garvin 1998). Management is referred to as a process because of the inter-related functions they engage in to achieve goal. The processes includes; planning, organizing, leading and controlling. GM refused to make appropriate plan for change. I presume they were carried away by the past glory and neglect change in the market demand.
With effective management planning, the management of GM would have forecasted ahead of time a course of action from a set of alternatives. After a proper planning process, is organizing which produce a structure and relationship for the organization. GM operated a bureaucratic system where staffs perform a routine task, this led to staffs becoming bored of the job, or get used to the ways of doing things thereby sabotaging change (Efere, 2003).
GM also use the autocratic style of management where employees don’t have a say but only listen to instructions from superior which most times lead to demotivation in the workplace. Definitely employee would not have a sense of belonging when they are not involved in the decision process, the management is hostile to the employees and there was also no job security and staffs have to protect their jobs by whichever means. While Toyota practice a democratic management style where employees feel important and feel their opinion count.
The structure of the GM is another reason it was difficult to effect change easily because of the chain of command at different stages. Problem of clarity in communication was also a factor; management focused solely on short term financial goals along with multiple level of control and its large number of employees and suppliers made building credibility difficult. Additionally, organizing makes managerial processes easier bringing people, resources and equipment’s in line to the common goal. It’s also makes clear who is responsible for what, who reports to who and where decision making is made. Toyota also uses the short lead method in production and they remain flexible to market change unlike GM with narrowly defined assembly line as mentioned in the case study. While Toyota has invested in cross-training its employees to the extent of handling six to eight different jobs on the production line, GM motors employees are still on a single routine job wasting a lot of production time in case of a minor error or delay.
Responsibility are also given to Toyota employees in the production process for quality and continual improvement of process which will motivate workers and foster team work. GM management personnel’s are more of a manager while Toyota personnel can be referred to as leaders. Management and leadership are used interchangeably (Brotherton 1999). The role of managers and leaders was not clear until mid-1990ssenior management were assumed to have leadership. Managers and leaders remain a controversial topic but I believe while managers plan, budget and organize, leaders inspire, motivate and establish direction. Leaders live philosophy and teach it to others. GM managers also has no strategic plan in place in case of emergency, therefore it was easy for the Japanese competitors to enter the market. Three (3) strategic plan used by Toyota includes: cost reduction, quality enhancement and innovation.
Controlling has to deal with correcting the activities of the organization performed to achieve goals. (Herser et al.,2008) define its as matching result with plan often. GM continue to spend more investing in technology instead of small cars which is one of the lesson at NUMMI. The company failed to introduce small cars that were attractive to its consumers, at the time Toyota and Honda was doing so. Time constraints also affected the company in adopting Toyota managerial practices while having issues in building new relational contracts thereby, indicating its effort to respond effectively either through innovation or imitation.
Furthermore, the management relationship within the company was best described as ongoing war, which deeply increased the decline of GM because a company operating under a bad union of management relationship is likely to experience low productivity, poor work enthusiasm while killing down work motivation. Motivation determines performance level of employees and influence achievement of goals (Hersey et al., 2008). It was discovered by William james in Herseys work that if employees are well motivated by leaders, they could work 80%-90% of their abilities, failure to motivate employees was another issue for GM and this will led to employees not acting in the intrest of the organization
In conclusion, the major problem that the company must put into consideration and resolve is their high cost structure, managerial practices within the company, workers performance and motivation while increasing production quality and supply chain relationship management not trying to imitate competitors.
Analysis of Internal and External Challenges Based on Case Study
Analyzing the internal and external issues can be done using different framework and models and using the right techniques is important to produce clear understanding of the factors affecting the organization both internally and externally and planning the right course for the future success. The methods that can be used includes: Dunning’s Eclecttic paradigm (Cavusgil et al., 2008), Porters Diamond and Five forces, Directional policy Matrix. From Mintzbergs school of thoughts (Mintzberg et al 2003) value chain analysis (Johnson et al 2008), SWOT analysis (Kotler and keller, 2009).
Company’s todays operate globally and are usually a conglomerates, therefore it is important to both regional and global environment (Schlie and Yip, 2000). The methods you will choose depends on what require attention by the company and in the circumstances the company has found its self (Johnson et al., 2008). The best tool to assess competitive advantage is the Porters five Forces and model focusses on where change is needed to sustain competitive advantage over competitors and making more profit. In addition, a school of thought by Mintzberg Ten school of thought provides also a good analysis for companies. The design focus on strategy formation as achieving essential fit between external and internal issues. However, threats and opportunities are seen as external while strength and weaknesses are said to be internal.
For the purpose of this assignment, GM Company would be analyzed using strategy of the company. I will use porters five process and then use the internal and external approach by Mintzbergs School by applying SWOT and finally PESTEL and BCG Matrix analysis will be examined.
Competitive Advantage Analysis of GM According to Michael Five Forces
The competitive advantage is important and I will identify this using the Michael five porters as follows:
Rivalry in the market with competitors. Without rivalry, there would be no innovation in business so business owners like GM have to have a continues plan for innovation through research and development. Therefore GM in 1970s and 1980s competition in the US markets is stronger with the Japanese manufacturer entering the country. The ideal behind NUMMI is to get the secret of Toyota but at the end it was not successful but instead create a platform for the Japanese company to enter the market. Although GM motors was strong at that time and occupy the market but the rivals like Toyota has started to produce cars cheaper than that of GM with high quality just to shift them from the comfort zone.
Barriers to entry. According to porter, ne capabilities comes with new entrance therefore gaining market share can be achieved by new entries. GM made huge profit during the world war and they were able to grow their business and it became very difficult for small companies to enter the market and compete with GM.
Pressure of price from substitutes. It was Cleary written in the case study that, GM lost many customers as a result that their cars are more expensive than that of Toyota and it became a problem. Another issue is that the Japanese cars are fuel efficient compared to the big SUV produced by GM at that time and customers spending pattern also change because they are not interested in buying small vehicles with less maintenance cost to reduce cost. The recent increase in gas rice was another point which really affected GM.
Bargaining power of buyers. Price is always very important when it comes down to buying, buyers will compete with the industry by forcing down price for good quality and will always play competitors against each other. Information of other competitors products make customers of GM aware of what they were buying and where they might get better value at same price.
Bargaining power of suppliers. Supplier pays a significant role in businesses and GM were not able to, maintain good relationship with their supplier through relationship management because of their management practices. They have the power to reduce quality of product or even increase price. Though the threats of suppliers for GM is low because they have many suppliers as studied in the case study.
There are risk associated with every business and this risk are classify into external and internal challenges. Each category is important to the organization and how effectively the challenges are managed will have impact on the organization. Internal challenges are within the organization and are issues affecting the productivity internally. The company has control over the internal challenges since they are within the organization. External challenges on the other hand refers to issues that are outside the control of the organization and affect the productivity of the organization. To tackle the internal and external challenges of GM, I will use PESTEL and also SWOT analysis. (Andrew 1987; Ansofff 1965) explain SWOT analysis as a tool that offers basis for studying organization issues. Also PESTEL analysis tools will be used to provide information external factors affecting GM. They must address the issues that would be marked out by this two analysis tools.
The PESTEL Analysis
The PESTEL analysis will state the most important of the issues affecting productivity of GM externally and these will be classified under political, economic, sociocultural, technological, ecological and legal (PESTEL/PESTLE).
Political laws and government regulations. This have affected the automotive industry since the 1960s and most of the regulations come from consumers increasing concerns for the environment. This is relevant in the case of general motors macro environment and has to influence the company productivity. These includes government discouraging the usage of private cars and encouraging public transport to reduce emission of fossil fuels in our environment. This is a great threat to automotive industry and not only that, also re aggressive tax policies on combustion automobiles not only in the US but even in the UK. People driving hybrid care pays less tax to those driving petrol cars. GM could also look at investing in other economy with good political stability which might be a great opportunity. Additionally to aggressive tax, it also reduces profit, therefore, GM should make provision for the political external factor identified in the company strategy.
Economic issues of GM is based on the trends in the economy. According to various studies, the industry is a major user of computer chips, aluminum, textiles, copper, steel, iron and others. Studies also shows that for automobile industry created employment. In the GM case, the following are significant to note in the company strategy and they are as follows; rising competition in developing market which is a threat to GM. The management should have a plan on how to handle competition which is now a common problem as the world is developing. Also is the issue of economic stability of major markets which is an opportunity for the company. GM can expand its dealership network to these area i.e India, Indonesia. However, despite the developing markets, GM must ensure adequate skills and training for employees and address the rising competition with regional and local firms. If these analysis is properly checked and attended to, GM can expect growth if it ensure competitive advantage.
Social cultural factors includes. Today the car you drive represent your status, anyone who drive big cars is thought to be wealthy so, manufacturer should be aware of this and tailored the product to target the market. Increasing demands of electric vehicles which is a new business line and also self-driving vehicles. There is high demand of electric vehicles. This external factors is a great opportunity for general motors through the sales and manufacturing of electric under any of their brands. Also on the other hand, ride-hailing program is a threat to organizations like GM.
Technological factors. The internet is a major breakthrough when it comes to technology and has affected almost every industry in the universe and GM is not left out. Study by J.D Power and associates in 2002 using 27,000 new vehicle buyers as sample come to a conclusion that, 60% of buyers refer to the internet facility in the car before making a purchase decision. Also, out of the 60%, 88% visits the sites before going to test drive. The internets have also increase efficiency and lower cost. GM invested in technologies in its operations and develop competitive advantage in the market this aspect analyses the technological trends and conditions. The following external technological issues relating to general motors includes; increasing self-driving vehicles technology and rising fuel efficiency in automobiles.
Demographics/Ecological. This analysis evaluate the external activities that deals with ecological changes and trends which affect supply chain, product usage and the resources availability. Here, GM should address changes in climate pattern which is an opportunity for the company. So also there is rising concerns on the air quality which is a signal to direct innovation and development to electric cars which is a new and emerging business for automakers. Also, the baby boomer is a target from every product now especially when the old generation is preparing to retire and most likely will spend less money. The focus has shifted to younger generations (Generation X) who are between 20s and 30s, according to a survey, generation x will occupy 30% of the vehicle sales within 5 years from now. Legal factor issues includes; Expanding regulations and safety, stricter emissions regulations and expanding environmental regulations. Most of the big companies like Daimler, BMW, and Volkswagen, Volvo etc. come together to create trade association and form alliance of car manufacturer. The goal was to replace the American automobile manufacturer association that focusses only on the US manufacturer, they aim at working on public policy matters of common interest to provide strong industry, information and data and seek consistent global regulatory.
Expanding automobile safety is good for GM product development in regards to external factor which point at stricter emission regulations which is an opportunity for the company to improve products. The company can inculcate the emerging safety regulations in product design to boost the brands value. Additionally to the external analysis shown, various issues that influence GM has been listed but the global concern of automobile emission and the rising competition in markets stand as most significant issues facing GM externally. After a details PESTEL analysis, it is important to conclude and make view recommendations which includes; GM should increase investment on R&D to enhance product development especially to meet the growing demand for hybrid an electric cars. GM should also open dealership network in developing countries to exploit potentials. Improve sustainability issue to strengthen GM corporate image.
Internal and External Analysis of GM According to Mintzverg Design School
The Mintzberg school of thought explain the following: The school view strategy formation as essential fit between internal and external aspect. (Mintzberg et al 2003:23). He views internal factors as threat and weaknesses and external as opportunity and threats. However, GM in this case study will have to conduct a proper SWOT analysis using both the internal and external challenges using Mintzberg’s Design School.
Strenght. GM has been leading the automotive industry since the 20th century, although the company had some issues but its market shares still strong in the sector. GM has branches around the world and also have rising share in developing countries. Additionally, GM had different brands such as Cadillac, Chevrolet and operates in more than 100 countries around the world and has almost 250,000 staffs. In the case study, GM also at a time said to be richer that both its competitors put together which is an advantage to the company. GM has also invested so much in technology even when ‘Roger smith’ took over, he still invested 100 ($) of millions of dollars in technology which further give GM an edge in over its competitors.
Weaknesses. Analyzing the weaknesses of general motors to me as a manager, I would say the management practices is the number weakness they face during the period. In modern day’s management, there are better management style like the democratic style instead of autocratic which GM uses. From Goleman 6 leadership style lecture note by McDonagh. T (2019). Also not making appropriate planning for change through innovation of new product to meet customers need cause a great setback and gave Toyota an opportunity to take advantages of their weaknesses. Another challenge is GM not investing in the new trends of alternative energy. Toyota and Honda are using these fuel efficient product to put GM of the market and also Toyota and Honda are producing more environmental friendly cars which has led to GM losing its market share and also profit.
Opportunity. In the past view years, GM has achieved an increase in the Chinese market and this has made GM start seeing the opportunities in foreign markets. The opportunity of producing the hybrid cars and electric cars is still an ongoing one with enormous opportunity so GM should take use of that. Also developing new models would be a good opportunity to compete with the Japanese manufacturer of small high quality design at a reasonable cost to at least attract their customers back. Also is to innovate fuel efficient cars to meet the growing demands of consumers.
Threats. The very alarming production cost is a big threats for GM. They should device a way to cute down production cost while maintaining quality. Another course for concern is the consistent increase in fuel price. After the steel price increase noticed and the economic recession in 2008 it has posed an enough threats to start thinking on producing hybrid cars if not. It will be difficult to cut down production cost.
BCG Matrix Analysis of GM
The BCG is related to the product life cycle and to me, I think some products that not economical should be scrabbled off the product list, product like hummer, Ford and Cadillac. Products like Pontiac, Chevrolet which are fuel efficient and portable should be invested in the more. Also hybrid and electric cars should be on the production line.
Conclusion
In conclusion, I analyzed GM corporation using different models such as porter FF, BCG, PESTEL and the SWOT Analysis and I concluded that mistake is inevitable in business, what is most important is the plans in place to redirect the operations toward its goals, however minimizing the mistake is very important as so can be very delicate and can go as far as taking you off the Market. Looking at the history, GM was doing well before the Japanese competitor enter the market and displaced them. Its mean they were just managing in the bubbles and not prepared from change. They underrate the strength of the Japanese management strategy and waited until they begin to lose the market share and business profit. After the long analysis I will make some recommendations for GM as a manager.
Firstly, GM should change their management style from autocratic to democratic or consultative style where employees feel important and have a sense of belonging in the organization. Secondly, relationship management is a great deal in business, therefore, GM should practice it with their supplier and other stakeholders in the organization. Lastly, GM should refine it production line and cross train its employees to do more while maintaining motivation of staffs.