Case Analysis: Will GM’s Strategic Plan Lead to Future Success?
As we know, General Motor (GM) is a famous American manufacture and distributes vehicle. It was founded in 1908 and led the global automotive industry for a long time. Now, you can see a car and commercial vehicles which were produced by General Motor anywhere. GM produce, sell and provide service brands including: Chevrolet, Buick, GMC, Cadillac, Hummer, Holden, etc. At present, GM’s full range of models sold in more than 120 countries and regions, including electric cars, micro cars, heavy-duty full-size trucks, compact car and cabriolet. We have to say that GM’s success is attributed to its successful strategy.
Four basic type of strategy GM used to lead success
Lower the cost in production. Since the labor cost is relatively high in Europe which has made the company losing money for more than a decade. The bloated costs in Europe’s engineering and manufacturing operations is still a big problem. As a result, the next strategic step is that General Motors will further expand the scale of production in low-cost countries, narrowing the scale of production in high-cost countries, such as Europe. Mr. Ammann is trying to lower the costs and boost revenue by increasing the global sales and cut incentives on some models. The fewer auto “platforms” helps save a lot of money since GM’s competitor Volkswagen and Ford have done further on this way and made roughly hundreds bulks more profit than GM. The success of its competitor motivate GM to keep on going this way.
GM also tried to change its culture to improve the status of its current depress situation. Since the company has been focused on selling as many cars as possible for decades to support the United States market share, even it had to pay the price of sacrificing the bottom line. At the beginning of 2011, GM implement a plan with getting a sales quick start and provide a great full of incentives on Chevrolet trucks, Cadillacs and GMC vehicles. This strategy made the Sales grew by 20 percent at this year, but the soft profit in North America did not satisfy investors. As a result, the top managers of GM decide not to provide full incentives again.
Consequently, cutting incentive has become one strategy of GM. The manager of GM hope that it can help saving more of its cost through cutting incentive. They also believe that it is very important to lead their company than just focus on market. According the report of their January sales totals, Ford had a 7.3 % rise, while they had a 6% decline.
From 2008, GM made a big change by slimming down its scale dramatically. Since GM was saddled with a huge burden, the large population of employee. The company has to pay pensions and health care cost for its every employee. It has not only a financial burden, but also has a employee burden. According to the contract, even in the difficult time, the company can not dismiss its employees, or the company has to pay fines. Its 8 brands also have to be maintained. Each one needs new models and continuous improvement, and these also require a huge investment. General Motors announced a new restructuring program in 2008. According to the plan, GM will cut the number of employees in 2008 to 6.2 million reduced to 40,000 be in the United States before the end of next year. The number of dealers will be cut as well. GM’s vision
GM is targeting to be the best-in-class peers. In other words, GM want to be the leader of peers in transportation products and related services. GM has set a specific goal: making more than $ 10 billion per year. GM has produced income of about 8 billion in its history. As well, GM has an ambitious goals in the future: raise the profit margin, promote the portion of revenue left after producing expense to 10%. Generally, the goal is relatively a huge jump compared with the current 6% profit margin. From my opinion, it’s a great long term aim to such a large scale company. The vision is very positive and inspiring, as one of first implementation of the U.S. stock and expert group management of large enterprises. However, I am concerned that the current goal of GM should be eliminating all debt. As we know, GM still need to pay off $ 23 billion it borrowed to survive. So for the short time goal, GM should devote itself to being debt-free, lower the cost, get more profit.
State two SMART goals for GM based on the case. Are these goals attainable? Discuss. The first smart goals for GM is that to be debt-free in five years. Since GM has afford a big amount of debt and have to pay the interest of debt annually. Especially in Europe, the cost of production and service is high enough. It’s time to reduce the expense now, transfer to the lower-cost countries, since the development of those lower-cost countries is high speed enough to satisfy the demand of the production and providing service. Additionally, try best to reduce the cost of producing expense, focus more on design of production, reducing the auto “platforms”, etc.
The second goal for GM is to be a innovate company in peers. To be more prospectors- create their own opportunities, not wait for them to happen. Let other companies imitate, rather than follow them. We have a good example, Apple. Apple focus most on innovation, which makes it to be one of the most profitable and fastest speed automobile company. Such as try new raw materials instead of old, try invest in emerging market. As we know, China, India, those development countries has getting more power and higher status in the market, looking for new partner for GM as quick as possible is a good way to take the head of peers. Additionally, continuing to expand globally and try to develop new vehicle styles and models, satisfy the people’s new view to vehicles.
Using Figure 5.5, describe the extent to which GM is using the planning/control cycle. Based on the case of GM, GM’s main plan is to cut the cost and make higher profit, GM carry out the plan followed by Mr. Ammann’s words,” setting out to cut billions more in costs while boosting revenue through global sales growth and reduced incentives on some models”. They did and control the direction by comparing the result with the plan, lower the producing cost, cut incentives, and slimmed down the scale. GM also tried to compare the result of the yearly plan and based on the last year plan to make new plan for next year.
What did you learn about planning based on this case? Explain Based on the case of GM, GM gets a typical plan and with the plan/control cycle. As a famous vehicle company, GM not only has a greatest long term goal for its
development, making more than $ 10 billion per year, but also has a great ambitions still, promote its profit margin to 10%, which allows GM to pursue a long range strategy it had planned. The typical plan/control of GM used was that GM firstly offered plump incentives on its products, analyzed the result, then finally control the direction by correcting deviations the plan, made its new plan through cutting down incentives next year to support its profit. The first and most important condition for GM to survival and develop is adapting to the change of environment, satisfy the demand of outside and find its proper culture of inside, seeking opportunities and try to avoid threats. These keys I think are mainly factors to be a leader company in peers.