Essay on "General Motors Europe"

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General Motors Europe

As of 2008, the economic agents are under tremendous pressure. A financial crisis commenced within the United States' real estate sector to quickly expand to other industries as well. The automobile industry was severely affected; probably it was the most affected industry after real estate for the simple reason that automobiles represent the second largest acquisition of an average family, after the house. Given this situation, vehicle manufacturers implemented a wide series of strategic decisions in order to respond to the emergent challenges. Most of these strategic actions revolved around cost cutting endeavors, such as the closing down of manufacturing plants or staff downsizing, but also the request of governmental loans. General Motors subscribes to this pattern of responses to the internationalized financial crisis. This report revolves around its trouble with the European subsidiary and the analyses conducted are valid for that period, namely late 2008 through today.

2. General Motors

Before actually lunching an analysis of the company and its decision regarding the European subsidiary, it is necessary to become familiarized with the organization. General Motors was established in 1908, to have been incorporated eight years afterwards. It operated within an estimated 140 countries, but only 35 countries hosted actual manufacturing plants. Its official headquarters are located in Detroit, United States, but the company employs more than 200,000 individuals worldwide. General Motors manufactures and distributes the following nine brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall and Wulling (Official

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Website of the General Motors Company, 2009).

In 2008, it was met with tremendous financial challenges and filed for protection under the law of bankruptcy. With the support of the United States Government however, now the company's greatest shareholder, GM managed to overcome the situation and emerged from the bankruptcy file; the resulting organization is generically called the General Motors Company. Major processes of reorganization are currently underway.

3. Analysis of the Internal and External Environments

As it has been mentioned so far, General Motors began to feel the pressures of the internationalized economic crisis as early as 2008. However, it was only this year that they considered renouncing their operations within the Old Continent. The analysis of the internal and external environments will help better understand their decision.

3.1. The External Environment

The basic means of conducting an analysis of the external environment is that of constructing a PESTEL table of the elements which characterize the political, economic, socio-cultural, technological, ecological and legal environments. Given the current context however, the features of the external environment were those generally characteristics to the emerged financial crisis. As people began to lose their jobs, the automobile purchasing decisions were put on hold. This materialized in a significantly reduced demand for automobiles not only within the United States, but also in other markets. Then, in the faces of the new challenges, competition intensified at a national level as more and more automobile manufacturers would diversify their offering with the intent of attracting customers. Basically, what they did was to open financial services subsidiaries that would present prospective customers with more effective financial solutions when purchasing a vehicle. These loan offers would generally be calculated below the interest rate promoted by banks and they implemented more flexible terms and conditions, meaning that they stood increased chances of appealing to buyers. Manufacturers and providers would also struggle to present their prospective customers with the most attractive promotional offers and a variety of discounts. All this translates into an increased competition among national providers, such as Ford Motor Company or Daimler-Chrysler.

But there was also the competition raised by foreign manufacturers, generally Japanese automakers such as Toyota or Mazda. The success of these players within not only the American, but also the international market, was pegged to changes of an economic and socio-cultural nature. In a context in which the soaring prices of oil were pressuring the world, consumers felt the growing need for smaller size vehicles that integrated fuel efficient engines. Additionally, this demand was also fueled by the growing concerns of environmental instability.

An analysis of the competitive environment through Porter's five forces will reveal that the threat of new entrants is medium to strong, generally due to foreign competitors; the threat of suppliers is low; the power of buyers is also low; the power of substitute products is medium and the overall competitive rivalry is increased (Investopedia, 2009).

3.2. The Internal Environment

General Motor's internal environment before the decision relative to the operations in Europe was characterized by instability and fear. The staff members feared the loss of their jobs and these feelings seemed easily understandable in the given external context. A specific feature that was characteristic for the internal environment at GM was the company's reduced ability to compete with the Japanese manufacturers. Similar to Ford Motor, GM had invested large sums of money into developing large and luxurious vehicles, but as the crisis unfolded and the needs of the population changed, it was not able to change its direction and serve the new needs of the customer base.

In terms of actual results for 2009, these were significantly poorer comparative to 2008 and 2007. Sales in 2009 registered a 17% reduction comparative to the previous year. Revenues in 2008 decreased to $148,979 million, comparative to $179,984 in 2007. Relative to 2009, only the revenues for the first quarter are available, but the figures are not encouraging -- at the end of March 2009, revenues registered $22,431 million, nearly half of the value registered at the same time of 2008. Most of the company's financial rations indicate values inferior to the industry averages, pointing once more to the internal difficulties faced by GM (Reuters, 2009).

3.3. SWOT Analysis

In order to better understand the situation which surrounded General Motors in its pre-decision hours, it is best to organize the elements onto four categories -- internal strengths, internal weaknesses, external opportunities and external threats.

Internal Strengths

GM is a strong company, which has created a powerful reputation within international conscience; its more than a century old existence has consolidated this strength

The company was able to emerge from its bankruptcy file and has the ability to reorganize itself in a means that it gets through the internationalized economic crisis

Internal Weaknesses

Reduced ability to fight international competition, namely the Japanese manufacturers

Due to the large size of the entity, General Motors is generally unable to rapidly and efficiently implement change; this means that in situations of crisis, it is rigid and not easily adaptable

Major financial downsides in terms of various highlights, such as sales, revenues or financial ratios

Eternal Opportunities

The government of the United States of America recognized the growing threat of the financial crunch and will most likely step in to save the American automobile industry; this opportunity in fact materialized in the last month of 2008, as confirmations came that GM would received funds under the federal plan Troubled Asset Relief Program (TARP)

External Threats

Both the national and international environments manifest intensifying levels of competition; competition has always been present and even fierce within the automobile industry, but is now becoming ruthless as companies no longer fight just for customers, but for their very survival

The needs of the customers are changing as a results of the modifications which impact the global environment, such as the soaring oil prices or the growing concerns over the health of the natural environment (generally pegged to the threats of pollution and global warming); these changes imply the immediate necessity for change in order for General Motors to survive

The previous two threats give raise to the increased competition coming from manufacturers of eco-friendly vehicles, such as Toyota, with their already reputable Prius

The European Union had implemented a series of regulation which increased the taxes paid by importers of foreign cars, or which forced automakers to obey new environmental protection laws (Best Auto Review, 2007); the decisions significantly reduced the revenues of GM in Europe

3.4. Strategic Issues

Based on the results of the analyses conducted, it becomes clear that General Motors faced severe strategic issues as 2009 unfolded. The most important challenge to which they had to strategically answer was the internationalized economic crisis. They were also faced with the necessity to answer to the challenges posed by the intensifying competition within the United States and outside it, by both national as well as foreign manufacturers who were striving to maintain their competitive position. Finally, they had to develop and implement strategies that would help them respond to the changing needs of the customers. Before making other decisions however, it was imperative for the company to set the strategic course of action for the future of their European subsidies -- German Opel and British Vauxhall.

4. Available Alternatives

In establishing the alternatives available to the General Motors Company, the managerial team had to decide if it should treat Opel and Vauxhall as separate and independent subsidies or whether they should include them in the same… READ MORE

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Quoted Instructions for "General Motors Europe" Assignment:

“

Requirement:

To conduct a strategic analysis of General Motors. A brief introductory article is provided( see separate attachment headed *****˜the Brief*****) You may use any published sources of information in this task in addition to the article provided, such as books, academic journals, periodicals or newspapers, web pages etc.. Write your answers to the following questions in a clearly structured report(see format on page 3), based on the following :

1. Using relevant frameworks, conduct an internal and external analysis of General Motors position in 2009 leading up to its decision to withdraw from its European operations. (30 marks)

2. Conclude your analysis by identifying the main strengths, weaknesses, opportunities and threats that GM faced at the time. What were the key strategic issues that GM faced?(20 marks)

3. Use relevant frameworks to identify and evaluate potentially suitable options that were available to GM, including the option that it chose. Which option would you have chosen and why?(30 marks)

4. Taking account of GM*****s key stakeholders, outline the implementation issues GMs faces following its decision to withdraw its operations in Europe (20 marks)

The above question to be answered while covering the following:

*****¢ To understand the different levels of strategy

*****¢ To recognise the place of mission statements

*****¢ To understand the difference between *****closed***** and *****open***** objectives

*****¢ To understand the difference between economic and non-economic objectives

*****¢ To understand the different levels of objective

*****¢ To be able to identify objectives and place them in a hierarchy

*****¢ To understand the complexity of the modern business environment

*****¢ To understand the macro-environment

*****¢ To understand which frameworks to use to an***** the business environment

*****¢ To understand the purpose of external analysis

*****¢ To be able to identify and explain key features of the industry and the market:

*****¢ To understand the difference between the far (macro) and near (micro) environments

*****¢ To be able to identify and explain the factors and trends affecting the industry

*****¢ To understand how industry profitability will be affected by the competitive forces

*****¢ To be able to identify each of the 5 forces in Porter*****s framework

*****¢ To be aware of link between PESTEL & Porter*****s 5 forces

*****¢ Internal analysis

*****¢ To understand the meaning of and be able to carry out a comparative analysis

*****¢ To be able to identify and evaluate the resources available to an organisation:

*****¢ To understand the significance of the financial statements of a business

*****¢ To understand how an activity can add value

*****¢ To understand and be able to construct the value system for the suppliers and distributors of an industry

*****¢ To be able to explain how the configuration of activities can be a source of competitive advantage

*****¢ To be able to identify and explain the core competence of the business

To understand what is meant by *****organisational culture*****

*****¢ To be able to draw together the results from the external and internal an*****s in order to create a list of Strengths, Weaknesses, Opportunities and Threats

*****¢ To be able to limit the SWOT summary to the most important points by filtering out the less significant ones

*****¢ To understand what is meant by a *****key strategic issue*****

*****¢ To be able to synthesise the key issues from the earlier analysis

*****¢ To understand the influence of stakeholders

*****¢ To understand the meaning of *****sustainable competitive advantage*****

*****¢ To understand how the competitive strategy can deliver a sustainable competitive advantage

*****¢ To be aware of Porter*****s generic competitive strategies and their limitations:

*****¢ To understand and be able to identify examples of Bowman*****s competitive strategies

*****¢ To assess the extent to which value adding activities support the competitive strategy

*****¢ To understand the meaning of *****strategic direction*****

*****¢ To be able to identify an organisation*****s core business

*****¢ To understand how the frameworks can help us understand strategy in the real world

*****¢ To understand and be able to identify Ansoff*****s development strategies:

*****¢ To appreciate that international expansion is a form of market development

*****¢ To be able to explain the reasons why businesses set up operations abroad

*****¢ To know the main entry methods

*****¢ To be able to explain the advantages and disadvantages of each method

*****¢ To understand what is meant by a *****Global Market*****

*****¢ To be able to explain the reasons for the trend towards globalisation of markets

*****¢ To be able to explain the factors limiting this trend

*****¢ To understand what is meant by a *****Global Industry*****

*****¢ To be able to explain some of the factors which encourage or discourage industry globalisation

*****¢ To be able to evaluate each strategic option in terms of its Suitability, Feasibility and Acceptability

*****¢ To be able to show which options are most attractive for the business

*****¢ To understand that the implementation of strategic change can be very difficult

*****¢ To be able to explain the role of organisational culture and stakeholders in implementing change

The FORMAT of the answers:

*****¢ The answer to be written in a report style. This simply means structure your work, using headings and a numbering system if appropriate. We do not want essay style nor do we want purely bullet points answers. We advise you to structure your report clearly around each element of the task.

*****¢ The use of theoretical frameworks in your anaylsis. It is not necessary to explain the frameworks, but it is useful to point out which frameworks you are using before you apply them and provide appropriate referencing. It is expected that you understand and apply appropriate models and theories.

*****¢ Clarity and conciseness are to be encouraged and rewarded. Remember: you should be thorough and detailed in your analysis, and points should be fully explained and justified - but there is a balance to be sought between a mass of detail and a thorough, yet relatively concise report. Be selective and prioritise so as to highlight the most significant factors.

*****¢ Please make appropriate use of Appendices to support the discussion and analysis in the main body of the report. Appendices should be properly organised with the reader being referred to the appropriate appendix at the appropriate point in the text.

*****¢ You should only use *****˜bullet***** points in summaries. Statements must be justified and supported with evidence. Figures, charts and tables must be explained.

*****¢ Please ensure all materials/sources are referenced in the Harvard style.

PLEASE SEE EMAIL WITH ATTACHMENT WITH ARTICLE ON GM FOR FURTHER CLARIFICATION OF THE TOPIC, NOTE IT SHOULD BE IN A REPORT FORMAT AS PER INSTRUCTION ABOVE WITH THE 4 QUESTIONS, THANKS

ARTICLE:

1. *****Opel and Vauxhall to go to Magna***** (BBC News, 2009/09/10)

2. *****Fears for UK jobs as General Motors sells European arm to Canada's Magna***** (Guardian, Thursday 10 September, 2009)

General Motors

General Motors (GM) Company, one of the world's largest automakers, traces its roots back to 1908. With its global headquarters in Detroit, GM employs 235,000 people in every major region of the world and does business in some 140 countries.

GM is the world's 18th largest corporate entity and third largest automaker as ranked by 2008 revenues on the Fortune Global 500

GM was the company that pioneered the development of different brands.GM and its strategic partners produce cars and trucks in 34 countries, and sell and service these vehicles through the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall and Wuling. GM's largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia and Germany.

In the United States it sells cars under the Cadillac, Chevrolet, Pontiac, Buick, and Oldsmobile labels, and more recently it developed the Saturn as a separate, Japanese-style quality car brand.

GM is one of the largest car producers in Europe, using the Vauxhall badge in the UK and Opel in the rest of Europe. More recently, it acquired a controlling stake in Sweden's Saab Motors, which it continues to operate as a separate brand.

In Australia GM operates one of the country's most well-known brands, Holden. It also has a tie-up with the Japanese car and truck maker Isuzu.

In Latin America the company has a major subsidiary in Brazil, which makes engines and Opel cars.

GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. General Motors Company acquired operations from General Motors Corporation on July 10, 2009, and references to prior periods in this and other press materials refer to operations of the old General Motors Corporation.

On July 10, 2009, GM announced plans to trim its U.S. workforce by 20,000 employees as part of its reorganization by the end of 2009 due to economic conditions. While no GM shares are currently available to the public. GM plans to focus its business on its four core US brands *****” Chevrolet, Cadillac, Buick, and GMC.

Opel and Vauxhall to go to Magna

General Motors (GM) has announced that it has chosen the Canadian car parts manufacturer Magna to buy Opel and its sister company Vauxhall.

Under the terms of the Magna bid, the consortium would take a 55% stake with GM continuing to hold 35% and Opel workers 10%. GM was previously worried that its car designs could end up with competitors such as Russian car maker, GAZ, which is competing with GM's Chevrolet in the Moscow market.

The German government has been backing the bid from Magna and Russian bank Sberbank by offering almost Â£4bn of finance. Berlin championed the Magna bid because it involved guarantees not to shut down German plants, which employ 25,000 workers, but Lord Mandelson been pressing for a "commercial" decision to be made rather than one influenced by politics.

The decision was welcomed by German Chancellor Angela Merkel, who said she was "very pleased" about it. Magna, which is backed by Russia's Sberbank, has said that it will keep all four German plants open. But British unions have expressed concern about the future of Vauxhall's 5,500 UK workers.

A spokesman for Magna said that the company is committed to keeping open the Ellesmere Port plant, where the Astra is made. The company plans to honour its existing contract to produce vans in Luton until 2013, and will try to find a way to keep the plant in production after that date.

UK Business Secretary Lord Mandelson said he had received assurances from Magna "that the futures of both plants are secure." He did, however, say that all of Opel's and Vauxhall's workforce across Europe "will face restructuring."

"The uncertainty surrounding the ownership of Vauxhall is now over, but the uncertainty surrounding the long-term future of Britain's plants will continue," said Tony Woodley, general secretary of the Unite union.

"We need to make sure that British plants and people are not treated disproportionately during the restructuring that will take place."

Other Opel plants outside Germany are also at risk

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