Internal Analysis Essay
GM has marketed the Chevy Volt as not a green car, but focused mostly on the technological aspects of it with a bit on the electric aspect. There is not a very large market for electric cars, especially for when selling to the average car consumer, so they had to essentially sell the idea that people want an electric car, and then sell them on the Volt. It was billed as the newest, most technologically advanced car in the market that has less of an impact on the environment without having to drastically change your way of life.
GM was hoping for sales of 45,000 to 60,000 for the Volt in 2012, and while it was at 16,000 sales though September, there has been a steady increase in sales since the beginning of 2012. Currently the Volt is the leader in the plug-in car market, with the recently released Prius plug-in model, has 2012 sales of 7,734 in just 15 states, closing the gap the more that they expand their launch. As for other competitors, the Nissan Leaf is the next closest with 2012 sales of 5,200, and all other competitors, Honda Insight, Mitsubishi i-MiEV, well behind the top three. While the gas-electric car market is growing, it still makes up a very small portion of total car sales, which makes it a very competitive market.
GM, which was founded in 1908, employs 202,000 people in 158 countries on six continents. The original GM Corporation filed for bankruptcy on June 1, 2009 and on July 10, 2009 with help from the U.S. Government the GM Company was created. They took the strongest assets of the original GM and got rid of the brands that were not profitable. From June of 2009 until September or 2012, GM was forced to close down 1,500 dealerships which lead to 63,000 job losses, and since then have only been able to gain back 4,500 jobs. Due to the government bailout, the U.S. Government now owns a 26% stake in GM (50,000,000 shares), but the approx. $22 that the shares are trading at now would only be enough to cover half of the initial bail-out. In 2011 GM was able to post profits of $7.6 billion and with estimates for 2012 being slightly lower than that figure, in addition to the $30 billion that GM has as an emergency fund, they are in a much better position than they were less 4 years ago.
GM is always striving to do right by the customer, as they emphasize the need to make all those that buy a GM vehicle a life-long customer rather than a one-time customer. Their focus has shifted towards more fuel-efficient vehicles as consumers want to get more for their money. They also value their employees greatly, and work to create an environment where everyone thinks of themselves as a member of a team, one that relies on everyone for it to succeed.
To achieve their goals, GM believes that the following has to be done in the future: * Move faster and take risks to achieve sustained success, not just short-term results * Lead in advanced technologies and quality in creating the world’s best vehicles * Give employees more responsibility and authority and then hold them accountable * Create positive, lasting relations with customers, dealers, communities, union partners and suppliers to drive our operating success
The main focus for the marketing behind Volt was that because there is not a huge market for electric/electric-gas cars, they needed to expand what they showed the Volt to be so that it would appeal to a broader market. They focused on the technological aspects of the car, as well as how it was fuel-efficient, eco-friendly, and a sporty-looking vehicle. They were very focused towards younger, urban-based professional types, who have disposable income and those who would appreciate the technology in the car (the very early buyers received a small video camera so that they could record their first experience with the Volt and upload it to the GM site).
What they showed of the car itself was that unlike most other gas-electric cars, it can go up to 40miles with just the charge, which takes 10 hours on any standard household outlet, and more than 400miles with the charge plus gas. While the Prius gas-electric model is only able to go up to 50 mph when using the electric mode, the Volt is able to exceed that when using just the electric mode. Also, while the Prius model of cars tends to be more on the boxy side, the Volt is a sleeker, sportier looking car.
The pricing of the Volt would be its main weak spot. Due to the production costs and the still low demand, the price of the Volt, $41,000, is $9,000 more than the Prius gas-electric model, and while there have been efforts made to reduce the costs by using different types of cells and other parts related to the electric motor component, the only thing that will reduce costs is to have a greater number of consumers buying the Volt.
The reason however that the Volt is so expensive is a Volt has $56,000 in fixed costs, $18,650 in developmental costs, $37,350 in tooling costs, and $24,000 in parts and labour according to consultants. GM responded saying that those numbers are incorrect, saying that “while currently they are not making money on the Volt, it will eventually make money as the demand increases and they get into the Gen 2 car, the losses will turn around.” The reason they are losing so much now is that because of the still low number of sales, the $1-1.2 billion that was spent on development is being divided up based on the current sales, so they will lose money until they start to see a significant increase in sales.
The distribution method of GM is to generally build where they are going to sell, and buy where they are going to build. They believe that it makes sense for the company, as well as markets and communities that they are going to operate in. With this localized supply chain they can better build vehicles that are able to adapt to local requirements, and the working with local suppliers helps to support the community that they are located. This in turn helps to build the brand loyalty which leads to a higher rate of success. With having as many parts of the operation close together, this reduces the amount of time that that parts have to be spent transported from one spot to another, reducing the costs as well as the environmental impact that goes along with transporting.
During 2012, GM has been attempting to cut its marketing budget by $2 billion and also improve the efficiency of the marketing currently in place. One of the big changes made was that GM cut its Facebook advertising, which had been as much as $10 million a year, because GM marketing executives did not believe that advertising on Facebook made sense. Even still, their online advertising budget is still $300 million, so with the removal of Facebook advertising that is just a 0.3% of the total online budget. The majority of the marketing budget is spent on television advertising.
You are able to reach millions of people, even more during events such as The Super Bowl, Olympics, however, due to the significant price associated with advertising during those periods, GM has decided to back out of any commercials for the 2013 Super Bowl. Along with print, online and other advertising such billboard, buildings, bus, GM’s worldwide advertising budget is $4.5 billion globally. GM utilizes a pull strategy towards marketing, where the amount of vehicles that they do or do not make is based on the demand for those vehicles. They produce cars based on the demand that they are seeing from their dealerships, and that makes it so that they will not have an amount of cars for sale that is not realistically sellable.
Subject: General Motors,
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 25 November 2016
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