General Motors Case Study

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At the turn of the 20th century there were fewer than 8,000 automobiles in America, many of them powered by steam or electricity, others had gasoline engines. An unexpected turnout at the first New York Auto Show in 1900, showed the magnitude of the public’s fascination with the automobile. Over the next few years, hundreds of fledgling companies would try to meet the demands of a growing market. General Motors was founded by William “Billy” Durant on September 16, 1908. Durant had become a leading manufacturer of horse-drawn vehicles in Flint, MI before making his foray into the automobile industry.

At its inception GM held only the Buick Motor Company, but in a matter of years would acquire more than 20 companies including Oldsmobile, Cadillac, and Oakland, today known as Pontiac. In Germany, a company named Opel began by manufacturing dependable sewing machines. Opel became a brand recognized worldwide after adding bicycles to their product arsenal. In 1899, Opel entered the growing automobile market with the Opel-Patent-Motorwagen System Lutzmann and became a part of General Motors thirty years later.

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Earlier inventions such as the electric light bulb, the telephone, and the radio marked a new era of possibilities. In particular, the automobile sent the imagination racing and expanded the horizon upon which people could dream. As demand for automobiles grew to unexpected heights in the 1920s, General Motors set the pace of production, design, and marketing innovation for others to follow. Adding Chevrolet, Vauxhall and Opel, diversified the selection and added to the reach of GM.

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With the philosophy and strategy of “a car for every purse and purpose,” and a series of landmark innovations that changed the automobile itself, GM’s vehicles went beyond transportation, becoming statements and aspirations in their own right. During these years GM also opened more than a dozen new plants outside the United States. The milestone 1927 Cadillac LaSalle, with curves rather than sharp corners and a long, low stance, made people see cars as far more than just a mode of transport. Designed by Harley Earl, the LaSalle was a world apart from the high and boxy Ford Model T, marking the beginning of true automotive design.

Earl would head GM’s design studio until his retirement in 1959. Hard times in America and political change in Europe throughout the 30s brought new uncertainty, but GM’s commitment to innovation continued unabated. The return of peace following World War II brought a new optimism with consumers eager for goods that had been out of reach for so long. GM responded with an unprecedented string of milestone designs that continue to inspire to this day. In addition to innovations like independent front wheel suspension unibody construction, and the one-piece steel roof, General Motors pushed the envelope in design with a succession of vehicles including the 1949 Buick Roadmaster, the Chevrolet Corvette and BelAir, and the 1959 Cadillac El Dorado. These machines were as much fun to drive as they were to see drive by. During the war GM supplied the Allies with more goods than any other company.

In 1940, former GM President William Knudsen was chosen by President Roosevelt as Chairman of the new Wartime Office of Production Management. By 1942, one hundred percent of GM’s production was in support of the Allied war effort. GM delivered more than $12 billion worth of materials including airplanes, trucks and tanks. The 60s and 70s were a time of new challenges and great change. Environmental concerns, increased as prices and foreign competition led to an unprecedented downsizing of vehicles across all GM vehicle lines. It was the largest reengineering program ever undertaken in the industry, ushering in an age of lighter, aerodynamic and more fuel-efficient vehicles. In 1971, GM pioneered the use of engines that could run on low-lead or unleaded gasoline.

Two years later, General Motors was the first to offer an air bag in a production car. In 1974, GM introduced the most important step in reducing emissions with the catalytic converter. This technology, shared by General Motors, is still used by the entire auto industry. Germany and Japan, now recovered from the devastation of World War II, began exporting cars to the U.S. in larger numbers, and fuel price shocks sparked consumer interest in these new, more fuel-efficient vehicles. GM rushed to develop smaller vehicles as well, but the company had been too large and too successful for too long to change direction easily, and GM’s undisputed dominance of the U.S. market began to erode. Although General Motors was always active internationally, the 1980s and 1990s brought a new urgency for GM to operate as a single global company, to improve the efficiency of its operations and better compete with global competitors.

GM also began a series of reorganizations in North America that led to a single business unit there. In 1982, GM marked its largest single production expansion outside of North America with the opening of the new complex in Zaragoza, Spain. This facility immediately began building the fuel-efficient Opel Corsa. With joint ventures in China and India plus the additions of Saab and HUMMER to the GM family, the company expanded both the reach and variety of vehicles sold worldwide. 1995 was a big year for GM. Annual vehicle sales outside North America exceeded three million units for the first time. Five million vehicles were sold in the United States that year and GM entered into its first joint venture agreement in China. By the end of the 90s, the foundation for global growth in the new millennium had been set. During this period, GM also formed NUMMI, a joint-venture with Toyota, and Saturn, a wholly new company focused on creating a new small car and a new way of doing business. Lessons from these and other innovations were spread throughout GM.

By the start of the new millennium, GM had built a strong presence in emerging markets such as China and Brazil, and had largely completed its transformation into a single global company. The creation of GM Daewoo in 2002 gave GM a new organization specializing and engineering and manufacturing smaller cars, proving an important boost to Chevrolet’s growth as a global brand. The design and quality of GM’s new cars improved significantly, but GM found it difficult to regain share from its offshore competitors, and legacy cost from GM’s decades as a larger, less efficient company continued to weigh on financial results. It was also a period of tremendous innovation at GM. The company continued to push ahead with electric vehicle technology, developing a series of hydrogen powered fuel-cell concept and demonstration vehicles. Then, in January 2007, GM shook the industry with the Chevrolet Volt concept, a vehicle that could drive on battery power for daily commuting, then continue operating with a range extender when the battery charge was depleted.

The first production Volts were delivered to customers in December 2010. GM also became an industry leader in flex-fuel vehicles, which can run on either gasoline or E85, and developed a sophisticated two-mode hybrid system to significantly extend the economy of full-size trucks and SUVs. Notable new models included the Chevrolet Aveo small car, the Chevrolet Equinox crossover, and the Pontiac Solstice and Saturn Sky roadsters. The new Saturn Aura and Chevrolet Malibu put GM back into the thick of the midsize car fight, and the Cadillac CTS began a renaissance at Cadillac that is gaining momentum to this day. However, in 2008, a major recession and global credit crisis drove car sales to near depression levels and dried up private sources of capital. GM, critically short of operating cash, received a bridge loan from the U.S. Treasury, under the conditions that the company further accelerate a tough restructuring of its US operations that had been underway for several years.

General Motors Corporation filed for bankruptcy on June 1, 2009, and a new General Motors Company, which acquired many of the strongest assets of the old company, was created July 10, 2009, with the U.S. Treasury, Canadian governments, and the UAW Retiree Medical Benefit Trust as its major shareholders. This new GM is smaller, leaner company than its predecessor. It has four brands in the U.S.: Chevrolet, Buick, GMC, and Cadillac. It has a more focused network of 4,500 dealers and competitive labor agreements with its unions.

Globally, GM continues to grow rapidly, and more than 70 percent of its sales now come from outside the U.S. GM’s top five markets by sales are now China, the United States, Brazil, the United Kingdom, and Germany .Re-emerging at the new GM is the competitive spirit that, for decades, drove GM to leadership in styling, technology, engineering, marketing, and other key areas of the auto business. This spirit guides the new GM as it works to design, build, and sell the world’s best vehicles. Corporate Level Strategy

GM is focused on a single global vision: To design, build and sell the world’s best vehicles. This powers the development of world-class products that are winning in the marketplace, and is helping to transform their business and fortify their balance sheet. This business model also creates a self-sustaining cycle of reinvestment that drives continuous improvement in vehicle design, manufacturing discipline, brand strength, competitive pricing and margins. Here’s how they bring the insight, drive and vision of their business model to the market every day to yield positive results for our investors, employees and customers worldwide:


Focusing on core brands; leveraging global resources to create the most compelling vehicles and technologies, leading in the research and development of advanced technologies to reinvent the future of transportation.


Optimizing their global footprint to cost-effectively develop best-in-segment vehicles. Maximizing the efficiencies of operating their facilities in an environmentally and socially-responsible manner.


Maximizing revenues with a focused brand strategy; delivering world-class vehicles to the marketplace that offer their customer’s higher residual value, with lower incentives and appropriate pricing.


Consistently reinvesting cash and profits into vehicle and technology development at strategic points in the business cycle. Putting their financial strength to work to ensure the economic viability of their company. Today, General Motors is one of the world’s largest automotive companies – with annual sales of over 9 million vehicles and operations in more than 120 countries worldwide. Their business is diversified across products and geographic markets. They meet the local sales and service needs of their retail and fleet customers with a global network of independent dealers. Over 70% of total vehicle sales volume, is generated outside the U.S. Across the globe, they are a top global automotive manufacturer, led by a diverse portfolio of brands sharing core platform efficiencies and connected by GM’s global reach.

In North America, GM manufacturers and markets the following brands: Buick, Cadillac, Chevrolet and GMC. Outside North America, GM manufactures and markets the following brands: Buick, Cadillac, Chevrolet, GMC, Holden, Opel and Vauxhall. Presently, they have equity ownership stakes directly or indirectly in entities through various regional subsidiaries, including GM Korea Company (GM Korea), Shanghai General Motors Co., Ltd. (SGM), SAIC-GM-Wuling Automobile Co., Ltd. (SGMW), FAW-GM Light Duty Commercial Vehicle Co., Ltd. (FAW-GM) and SAIC GM Investment Limited (HKJV). These companies design, manufacture and market vehicles under the following brands: Alpheon, Baojun, Buick, Cadillac, Chevrolet, Daewoo, Jiefang and Wuling. Business Level Strategy

The business level strategies that GM uses are brand re-structuring and cost cutting. Over the next five years GM will be focusing on restructuring of their brand while focusing on our core business. Chevrolet, Cadillac and Buick will remain at the core of our business. Other brands such as Saab, Saturn and Hummer will either be sold or closed. This decision is based on sales statistics that are lagging in our domestic market. Saab and Saturn sales lag behind throughout the board and introducing new models and re branding of these franchises this late in the game will only push our breakeven point further rather than having a positive impact on the bottom line. Hummer doesn’t fit with GM’s strategy of fuel efficiency and sustainability but accentuates a lifestyle of excess that doesn’t promote the green initiative. Although the brand is still profitable today its viability for the future is in question.

The youth demographic is increasing rapidly, over 3 Billion People will be Between 15 and 44 in 2020. This statistic emphasizes the need to recognize the needs of today’s youth and cater that need through vehicles with options and features that appeal to that market. Pontiac will fill this market niche and will cater to the increasing youth demographic offering entry to mid-level vehicles such as the G5, G6, Grand Prix and Grand Am. This will effectively reduce the number of SKU’s thereby reducing manufacturing and overhead costs. With this brand restructuring will also come a significant number of GM dealer closings to further reflect cost cutting initiatives. Through the reduction of GM brands and models they can gain significant cost savings. With the sale of these brands will bring about many dealership closings that will be another cost reduction opportunity.

But this is not enough to offset the lack liquidity and self-sufficiency that General Motors currently faces. There needs to be a reduction in salary expense at GM. Just as many consumers have had to tighten their wallets due to layoffs, pay cuts and bankruptcies GM executives will be asked to do the same. Upper level executive pay in the tens of millions of dollars plus stock options and bonuses should be a thing of the past. A more modest compensation model needs to be adopted. A maximum salary cap of $500,000 plus incentives should be implemented with the opportunity for increases based on key performance indicators.

Structure and Control Systems

GM operates according to four values; quality, leadership, service and value. Part of their organizational culture is the delivery of quality vehicles and service wherever the branch is located. Their mission/vision/aims/objectives of GM will affect the culture of GM to an extent. Initially, GM’S key objective of providing the customers quality vehicles links in with their culture (values) which is that GM places customer satisfaction at the core of what they do. This will result in repeat business and hence improve the profitability of the business which is another value (culture) of GM. Another key objective of GM is to be a socially responsible company; this has again affected their culture to a great extent.

It is clear that GM’s investment is carefully considered. This again is reflected in their culture, which shows us that GM is committed towards their shareholders and stakeholders. Another aim of GM is to provide customers with outstanding quality vehicles and make every customer smile; this is again reflected in their culture (values) as the website informs us that GM strives to improve continually. Therefore, as the company is innovating and continually making improvements, it would satisfy more customers who were maybe previously dissatisfied with a particular aspect.



Although GM’s market share in the US has dropped it is still very much competitive at 26 percent. They also have an increasing share in the Chinese market. With the right decisions there is no reason for GM to not become the automotive leader it once was. As explained above even with GM’s recent decline they still have the market share and the experience to bounce back. They have been a worldwide company for over a century now and have established themselves as a global leader for most of them. One of GM’s current opportunity is to expand globally and as everyone can see they already have the experience to do so. It is just a matter of the correct planning and proper implementation of those plans that will decided whether or not GM’s goals are achieved.

GM as I mentioned has been the automotive leader for the majority of the last century. A large reason for that is the wide variety of quality brand names that appeal to all target markets. The current GM brands include: Chevrolet, GMC, Cadillac, Buick, Pontiac, Saturn, Hummer, Saab, Opel, and Holden. Since GM’s establishment in 1919 it has proven to be GM’s most reliable source of revenue. A new technology developed in 1996. OnStar currently has over 3 million subscribers and is standard on all GM vehicles. This technology allows the vehicles to be tracked in the event of an emergency or theft. It also allows the driver and or passengers the ability to communicate with OnStar personnel at the click of a button. Weaknesses

One of GM’s biggest weakness is being behind on the alternative energy movement. The alternative energy/hybrid trend has begun to take place in the automotive industry and GM has been one step behind the competition in terms of alternative energy vehicles. This has led to many problems including loss of market share and a decrease in company profit. In order for any automotive company to be successful from this point forward they must be Hybrid friendly and fuel efficient. Looking at GM’s profit we see that they are certainly struggling with respect to the size of their company.

Their profit margin was about 1.5% and the ROE has dramatically decreased over the recent years dropping to 10% in 2004. This is a situation that shareholders will not be pleased with. GM has become too dependent on the US market and must take advantage of the opportunity to expand globally. The competition is becoming too strong to focus on just one country. GM’s credit status like everything else has been steadily declining. Their current ratio is just barely above 1 and their acid test is even lower. Although, they probably will not be getting denied based on their credit at this point, the seriousness of the matter is certainly apparent.


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. Recently GM saw an increase in the Chinese automotive market, which proves their needs to have more emphasis put on their 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. With the right marketing strategy the low interest rates have the potential to generate an immediate increase in sales. 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.


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. 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.

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. Once again this threat affects the entire automotive industry and forces each company to cut manufacturing and production costs as much as possible, without taking away from the quality of the product.

SWOT Matrix

Large Market Share
Global Experience
Variety Of Brand Names
GMAC Customer Financing Program
OnStar Satellite Technology
Behind on Alternative Energy Movement
Stagnant Profitability
Overly Dependent on US Market
Poor Credit Status
Alternative Energy Movement
Continuing to Expand Globally
Low Interest Rates
Develop New Vehicles Styles and Models
Rising Fuel Prices
Growth of Competitors
Increased Health Care Costs
Rising Supply Costs, i.e. Steel


The competitive structure of an industry is another important component of identifying factors that are a threat to diminish profitability. One of the most efficient ways to assess competitive issues is to consider Michael Porter’s five-force analysis. Porter (1980, 1985) has highlighted five such factors: (1) rivalry between existing competitors, (2) threat of entry by new competitors, (3) price pressure from substitute or complementary products, (4) bargaining power of buyers, and (5) bargaining power of suppliers.

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 intense. Firms compete on both price and non-price dimensions. The price competition erodes profits by drawing down price-cost margins while non-price competition (e.g., new car rebates and interest free loans) drives up fixed cost (new product development) and marginal cost (adding product features). One of the other reasons there is such high rivalry is that there is a lack of differentiation opportunities. All the companies make cars, trucks or SUVs. The competitors are compared to one another constantly. In recent years there has been significant market share variation, another indication of rivalry and its very strong threat to profits.

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. The new entrant would have to achieve substantial market share to reach minimum efficient scale, and if it does not, it may be at a significant cost disadvantage. While the evidence suggests that economies of scale in the auto industry are substantial, there are also indications that large size may not be as important as commonly assumed. Nevertheless, entry would represent a large capital investment to any new firm and the body of research still indicates that economies of scalar present a substantial barrier to entry. Consequently, entry is currently a weak threat to profitability.

3. Price pressure from substitute or complementary products

While five-forces do not directly consider demand, it does consider two factors that influences demand substitutes and complements. 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.

The rising price of gas, an important complementary product, is likely to affect some firms more than others depending upon the vehicle composition. Recent rising fuel prices are likely to have a greater impact on the big three (GM, Ford Motor and Daimler-Chrysler) whose most profitable models are energy inefficient pick-up trucks and sports utility vehicles. On balance, the overall impact on “industry” profitability from substitutes and complements is weak to moderate.

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. Furthermore, customers now have access to market information (prices and costs) from the Internet that enhances their negotiating power. But when you have many individual customers, each representing a small proportion of total sales, they will have little bargaining power with manufacturers and therefore pose a weak threat to industry profit.

5. Bargaining Power of Suppliers

Auto manufacturers require inputs-labor, parts, raw materials and services. The cost of these inputs can have a significant effect on profitability. Whether the strength of suppliers is weak, moderator strong depends on how much bargaining power they can exert. The auto manufacturers’ have large supplier networks that appear to exert little bargaining power. Nevertheless, the United Auto Workers (UAW), the only supplier of labor, has historically exerted a great deal of leverage over the benefits and wages provided by the big three. Because of this historical dominance by the UAW and the uncertain results of their current negotiations with the big three, one has to characterize supplier power, at least in this segment of the American market, as a strong threat to profits.


Recommended strategies for General Motors would be product development, market development, liquidation, and restructuring. Reasons for product development being at the top of priorities is that GM has to create a type of Hybrid vehicle that will allow it to keep up with the pace of the competitive environment, but must be a product that stands out from the crowd at the same time. Prime example of their idea for a Hybrid SUV, it fits the GM profile with maintaining the SUV portion, but allows the firm to stay with trend patterns.GM must also re-evaluate the market they are trying to approach, because for so long they have continued with a tradition outlook for automobiles, but now that times are changing their original target market is not looking for what they once were. General Motors needs to take a step back and take look at how they want to position themselves and towards what market since what they have been doing is no longer in favor for the company.

An example of what GM could possibly do is produce a futuristic vehicle, which has been heard in rumors from Toyota about their next plan of action. If General Motors could provide a “futuristic” vehicle before Toyota has the chance to hit the market with theirs GM would be a step ahead of the competition. Liquidation is important to GM because their assets are a lot higher than revenues, and if GM could turn assets into cash then there would be more readily available funds and then GM would not have to depend some much on their U.S. sales, which only include 2/3 of that market and their financing tactic wouldn’t be as much of a risk. Liquidation would clearly help out the financial parts of the organization.

Last but not least is restructuring, which General Motors most desperately needs to review possibilities. The company has taken a large hit in recent years and needs to find a way back to the top. This is only going to be achieved if something drastic is changed. Restructuring the product development pace would be a start as well as cutting back on employees because the company is growing in size but not in profit, which causes a red flag for GM. The company needs to be re-evaluated in many ways, but GM has been strong for many years that it is very possible for the company to overcome these issues.


In conclusion GM has remained one of the largest automotive companies of today. Although they have experienced financial difficulties in the past, they have kept their promise of their vision and mission statements by providing quality vehicles and standing on customer satisfaction. Reining among the cream of the crop current GM brands include: Chevrolet, GMC, Cadillac, Buick, Pontiac, Saturn, Hummer, Saab, Opel, and Holden. Their sales have increased from bankruptcy with annual sales of over 9 million vehicles and operations in more than 120 countries worldwide. Since the financial difficulties that GM experienced they have been focused on one single global vision, and that is to design, build, and sell the world’s best vehicle. They have spent majority of their time reinvesting what drives continuous improvement in vehicle design, manufacturing discipline, brand strength, competitive pricing and margins.

Not only does GM meet the local sales and service needs of their retail and fleet customers they have expanded their corporation with a global network of independent dealers. GM have also become technology savvy with the addition of OnStar and satellite radio features to their vehicles as well. Also in the newer models they are equipped with Bluetooth capability which allows the driver to connect their phone by Bluetooth to use the car speakers as a hands-free device, or there’s another option that allows the driver to play music from their phone to the car speakers as well.

GM has changed their game plan and have become more environmentally and sociably responsible. They are consistently reinvesting cash and profits into vehicle and technology development at strategic points in the business cycle. Putting their financial strength to work to ensure the economic viability of their company. Overall if GM continues to use the method of providing quality vehicles and focusing on customer satisfaction, other automotive companies will become a thing of the past.

Work’s Cited
“About GM” General Motors Corporate Website. Accessed 3 May 2014. < corporate/about/>.
“Car & Automobile Manufacturing in the US.” IBISWorld Industry Report 24 Apr 2009: Print. General Motors Vehicles .
“GM Corporate Information: History” .

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General Motors Case Study. (2016, Aug 17). Retrieved from

General Motors Case Study

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