GM PROJECT REPORT
58
STRATEGIC PLANNING GM: FINAL PROJECT GM: FINAL PROJECT November 25 th 2016 GENERAL MOTORS STRATEGIC PLANNING Karolina Galinska Lucía Domínguez García-Guijas Santiago Napal Laguna Ángel Solanas López Master in Industrial Engineering + MBA Professor: Manuel R. Tejeiro Koller November 25 th 2016
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Transcript of GM PROJECT REPORT
STRATEGIC PLANNING
GM: FINAL PROJECT
GM: FINAL PROJECT
November 25th 2016
GENERAL MOTORS STRATEGIC PLANNING
Karolina Galinska
Lucía Domínguez García-Guijas
Santiago Napal Laguna
Ángel Solanas López
Master in Industrial Engineering + MBA
Professor: Manuel R. Tejeiro Koller
November 25th 2016
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Index FIGURE INDEX ................................................................................................................................ 3
INTRODUCTION ............................................................................................................................. 4
ASSIGNMENT 1 .............................................................................................................................. 5
INTRODUCTION ......................................................................................................................... 5
VISION AND MISSION ................................................................................................................ 5
STRATEGIC PLANNING ............................................................................................................... 5
PLANS FOR THE FUTURE............................................................................................................ 8
ASSIGNMENT 2 .............................................................................................................................. 9
STRATEGY STATEMENTS............................................................................................................ 9
MISION STATEMENT.............................................................................................................. 9
VISION STATEMENT ................................................................................................................... 9
STATEMENT OF CORPORATE VALUES ................................................................................... 9
OBJECTIVES .......................................................................................................................... 11
STAKEHOLDERS ANALYSIS ....................................................................................................... 12
CSR AND ETHICS ...................................................................................................................... 15
ASSIGNMENT 3 ............................................................................................................................ 16
INTRODUCTION ....................................................................................................................... 16
MACRO-ENVIRONMENTAL ANALYSIS (PESTEL) ....................................................................... 16
POLITICAL FACTORS ............................................................................................................. 16
ECONOMIC FACTORS........................................................................................................... 17
SOCIAL FACTORS ................................................................................................................. 20
TECHNOLOGICAL FACTORS ................................................................................................. 21
ENVIRONMENTAL FACTORS ................................................................................................ 21
LEGAL FACTORS ................................................................................................................... 21
WEAK SIGNALS, INFLEXION POINTS AND MEGATRENDS .................................................... 22
KEY FACTORS ....................................................................................................................... 22
SCENARIO MAKING ............................................................................................................. 23
SECTOR ANALYSIS (PORTER) ................................................................................................... 24
POTENTIAL ENTRANTS ........................................................................................................ 24
POWER OF BUYERS.............................................................................................................. 25
POWER OF SUBSTITUTES ..................................................................................................... 25
POWER OF SUPPLIERS ......................................................................................................... 26
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COMPETITIVE RIVALRY ........................................................................................................ 27
COMPARATIVE INDUSTRY STRUCTURE ANALYSIS ............................................................... 30
ASSIGNMENT 4 ............................................................................................................................ 31
INTRODUCTION ....................................................................................................................... 31
STRATEGIC GROUPS ................................................................................................................ 31
MAPS OF COMPETITORS ......................................................................................................... 32
MARKET SEGMENTS ................................................................................................................ 37
COMPETITOR ANALYSIS AND “BLUE OCEANS” ....................................................................... 38
ASSIGNMENT 5 ............................................................................................................................ 41
RESOURCES, COMPETENCES, THRESHOLD AND DISTINTIVE CAPABILITIES ............................ 41
RESOURCES.......................................................................................................................... 41
COMPETENCES .................................................................................................................... 42
DYNAMIC CAPABILITIES ....................................................................................................... 43
VRIO ......................................................................................................................................... 43
ASSIGNMENT 6 ............................................................................................................................ 46
VALUE CHAIN ........................................................................................................................... 46
VALUE SYSTEM ........................................................................................................................ 49
SWOT ANALYSIS ...................................................................................................................... 51
CONCLUSIONS ............................................................................................................................. 56
BIBLIOGRAPHY ............................................................................................................................. 57
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FIGURE INDEX Figure 1.Corporate values ........................................................................................................... 10
Figure 2. Stakeholders ................................................................................................................. 14
Figure 3. Power Interest Matrix .................................................................................................. 14
Figure 4. Automotive Sector share of Spanish GDP (%). ........................................................... 18
Figure 5. Evolution of the Spanish employment in recent years. ................................................ 18
Figure 6. Automotive Spanish sector exports and production per vehicle units. ........................ 19
Figure 7. Sales of vehicles in Spain. ........................................................................................... 20
Figure 8. Scenarios ...................................................................................................................... 23
Figure 9. Commercial and personal vehicles sold in Spain in 2015 ........................................... 25
Figure 10. Importance of each supplier sector ............................................................................ 26
Figure 11. Min GM competitors in Spain ................................................................................... 27
Figure 12. Automotive companies market share ......................................................................... 28
Figure 13. GM Five Forces Framework ...................................................................................... 29
Figure 14. GM comparative industry structure analysis ............................................................. 30
Figure 15. Strategic groups ......................................................................................................... 32
Figure 16. Competitors ................................................................................................................ 33
Figure 17. Power-Price Comparison ............................................................................................ 33
Figure 18. Price-Market Share ..................................................................................................... 34
Figure 19. Number of Models-Market share .............................................................................. 35
Figure 20. Innovation- Exclusive design ...................................................................................... 36
Figure 21. Innovation- Exclusive design ...................................................................................... 36
Figure 22. Spanish market ........................................................................................................... 39
Figure 23. Spanish market (II) ..................................................................................................... 39
Figure 24. VRIO ............................................................................................................................ 44
Figure 25. Value chain ................................................................................................................. 49
Figure 26. Value system .............................................................................................................. 50
Figure 27. SWOT analysis ............................................................................................................ 51
Figure 28. Investment in R&D ..................................................................................................... 52
Figure 29. Steel price index ......................................................................................................... 55
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INTRODUCTION
General Motors is an American vehicle manufacturing company with its headquarters
located in Detroit, Michigan. It is composed by several firms such as Chevrolet, Cadillac
and Opel. The last one is a German brand. We will put special attention in this one, due
to the fact that it is manufactured by GM España, in the factory located in Zaragoza. GM
España represents a 36% of the Opel production. Although the corporative managers
belong to GM, the influence of Opel executives from Germany is really important.
The current company, General Motors Company LLC ("new GM"), was formed in 2009
as a part of its 2009 bankruptcy restructuring, after the bankruptcy of General Motors
Corporation ("old GM"). The new company purchased the majority of the assets of "old
GM", including the name "General Motors". General Motors Corporation led global
vehicle sales for 77 consecutive years from 1931 through 2007, longer than any other
automaker, and is currently among the world's largest automakers by vehicle unit sales.
GM España was responsible for the operation of General Motors businesses in
Spain. It is in charge of the production, marketing and aftersales services of all the cars
manufactured in Spain, including exportation to other countries in Europe. Besides, the
company is responsible for the importation and distribution of Opel cars manufactured in
other countries. The production system is managed in Zaragoza while the aftersales
service is operated in Madrid.
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ASSIGNMENT 1
INTRODUCTION
General Motors is an American vehicle manufacturing company with its
headquarters located in Detroit, Michigan. It is composed by several firms such as
Chevrolet, Cadillac and Opel. The last one is a German brand. We will put special
attention in this one, due to the fact that it is manufactured by GM España, in the factory
located in Zaragoza. GM España represents a 36% of the Opel production. Although the
corporative managers belong to GM, the influence of Opel executives from Germany is
really important.
VISION AND MISSION The vision of the company is to become world leader in automotive products. Its
mission is to be a multinational enterprise which operates all over the globe, offering a
product based in quality and being socially responsible.
With this said, we can proceed to explain the strategic planning GM España
accomplished in 2015. These strategies are mostly corporate-level; however, some
business-level strategies are also explained due to its influence in the development of the
first ones.
STRATEGIC PLANNING
In first place, General motors developed a Business plan deployment (corporate-
level) which consists in 5 business goals (Safety, Quality, Cost, Productivity and People).
A board system has been implemented in order to trace their fulfilment. The objective is
to get all the employees to know the development of those features, so they can see its
participation in the business.
This plan gets shape in the Global manufacturing system (business -level) which
is based on:
- People involved: teamwork and safety
- Quality operations: Information and control
- Short-time manufacturing: FIFO “First In First Out”
- Continuous improvement: Problem solving
- Standardization
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Secondly, GM España increased production and productivity with the new model
implementation (Corporate-level). The year started with the launch of the new Opel
Meriva, it continued with the line production of the Opel Mokka and it ended with the
launch of the Opel Corsa fifth generation.
In addition, a new project was released in collaboration with Citroen (Corporate-
level). The idea behind it is that both companies developed similar concept cars so they
can share suppliers and manufacturing methods. Furthermore, the Citroen model will be
manufactured in the Zaragoza plant in exchange of a percentage of the profit.
A Global exchange policy of human resources has been developed too. The
objective of this strategy is to have high level managers moving among different factories
from different countries and firms which form General Motors. This way they can share
knowledge and experiences. As an example of this, GM España Quality director is an
American “expatriate” who used to work for Chevrolet.
Regarding sustainability, GM España put a big effort on being environmentally
responsible (Corporate-level). This decision affects the whole business from office
departments to the production line. GM set a list of objectives for 2020 which include
reducing a 20% of the total CO2 particles emissions and a 40% of the generated wastes,
and finally developing systems in the production plants to generate at least 125MW of
renewable energy. In practice, they already implemented that year a couple actions to
achieve these goals:
- The first one was to renovate the production line system to make it more
sustainable. It includes changes in Body Shop, Painting, General
Assembly and Logistics. As an example, new robotic welding systems
were introduced in line. This promotes less water consumption and
electricity.
- Furthermore, Opel design engineers also did their part in order to reach the
objectives. A GLP tank was added to the structure of the cars. As a result,
it supposed approximately a 40% cost saving and a 15% CO2 emission
reduction.
- And last, Repsol and GM signed a strategic agreement in order to promote
the use of alternative combustibles. I+D departments of both companies
will work together to make it happen.
GM also accomplished a big innovation in the field of personnel recruitment and
assessment. They collaborated with the University of Zaragoza to give more than 200
internships in 2014, but in 2015 the university network was extended to the United States
(University of Rhode Island), Denmark and Germany. Besides, the hiring process now
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includes an assessment based on team problem solving, developed in groups of 8 people
where applicants can show their skills and abilities.
One of the GM main principles is ensuring high quality to its clients. To achieve
this, the strategy followed was making a Quality Assurance Plan (Corporate-level). That
plan led to several business-level strategies described by the following measures:
- RCCM (Root Cause Coordinator Meeting)
Is a daily videoconference among ITDC (German engineering company),
supplier’s quality, car lines delegates and after-sale services. The after-sale service
presents the problems occurred with the cars, then are analysed by each department and
solved for the next meeting.
- Plant-Quality Meeting (PQM)
Quality Direction, after-sale service and manufactured engineering are
represented. It is an annual meeting to control internal and external quality parameters.
They are proposed to go to a car dealership to get to know client’s complains and possible
failures.
- Captured Test Fleet (CTF)
A determined number of vehicles are tested in order to detect faults while the
manufacturing process of new models continues.
There were some actions taken in the marketing field as well. GM developed the
ABC program (Business-level). The acronym corresponds to 3 principles: Attract clients,
build relations and customize services. Clients have access to www.miopel.es in which
they can contact their directly suppliers.
And finally, we would like to highlight one last action taken due to the current
situation of the Spanish politics. After all the corruption scenes affecting politics and big
companies GM has decided to work on transparency and open a web where everybody
can access and consult information regarding the financial status of the company. It can
be found at www.gmsustainability.com.
Those are what we have considered the most relevant plans in 2014 and 2015.
However, one of the keys of the General motors success is to look at the long run. For
that reason, they also planned to accomplish some plans in the following years.
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PLANS FOR THE FUTURE
First, GM has an important commitment with their clients. The products offered
are based on quality and cost. During 2014 they analysed several vehicles from their direct
competitors and they discovered that Opel offers a wider range of models and packages
than most of the similar brands and that makes the overall cost higher. While they don’t
want to reduce the customization options, they want to tighten the range. A plan called
Reducing complexity is being developed. The idea is to reduce the number of models to
a smaller number. They still want to cover the entire diversity that can be found in the
market, but offering just one model per type of car. This way they can focus on the
customization of those models allowing a wider pack of options without increasing the
cost.
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ASSIGNMENT 2
STRATEGY STATEMENTS
First of all, to clarify what General Motors seeks as an organisation and on what
is based on, fundamental goals are going to be described. These goals comprise mission,
vision and main corporate objectives.
MISION STATEMENT
The mission statement of the company expresses its overriding purpose. It will
basically allow stakeholders and employees to uncover what General Motors is there to
do. It will answer fundamental questions such as `What business are GM in?’ or `What
would be lost if the company did not exist? ´.
In particular, the mission of General Motors is described as it follows:
VISION STATEMENT The vision statement is the desired future state of the organisation. It involves
what General Motors seeks to achieve or create in the future (`What does GM
want to achieve?’ or `Sitting here in 20 years, what do we want to have created or
achieved? ´).
So basically, the vision of General Motors could be summarized by the following
way:
STATEMENT OF CORPORATE VALUES
The corporate values are the “principles” that guide the strategy of the
organisation as well as determine the way it should operate. These cores values will
remain inside no matter adverse constraints or situations happened.
According to the GM´s values, we can distinguish among four main principles:
GM mission is to produce and commercialize vehicles at a competitive worldwide level basing the
products on safety, quality and efficient response capability. And to manufacture all the vehicles
demanded by the market. They have a strong commitment with employee’s improvement,
community development and enthusiasm of suppliers, clients and shareholders.
GM pursues to be the leading automotive company in the world. They seek to design,
manufacture and sell the best cars in the world while building loyalty and earning the
enthusiasm of their customers.
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Figure 1.Corporate values
Each of the values commented above, are going to be explained:
- Customer enthusiasm
GM puts the customer at the centre of everything they do. They listen
intently to their customers’’ needs. Each interaction matters. Safety and
quality are foundational commitments, never compromised.
- Continuous improvement
Efficient problem solving, quick response time and simplified design of
products and equipment.
- Excellence
To act with integrity. GM is driven by ingenuity and innovation. They
courage to do what is difficult. Each of them take accountability for results
and have the tenacity to win.
- People involved
CUSTOMER
ENTHUSIASM
CONTINUOS
IMPROVEMENT
EXCELLENCE PEOPLE INVOLVE
GM VALUES
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The success of the company depends on their relationships inside and
outside the company. We encourage diverse thinking and collaboration
from the world to create great customer experiences.
OBJECTIVES
A company of this size has a very long list of objectives classified in a really wide
range of categories. As this is a summary of all of them, we selected the most important
ones, basing this fact in choosing those which have corporate-level effect and reflect the
overall business strategy that the corporation is taking in the last years. We can find the
following:
- Increase the sales volume of new products (launched in the last 18 months) over
the total sales. It is expected for them to grow to a 27% in 2015, to 38% in 2017
and to 47% in 2019.
- Upgrade Cadillac as the luxury brand of the company. Create a new independent
business unit in New York for this purpose. Pursue opportunities of market growth
with more clarity and focusing by launching 9 new models in the next 5 years.
- Keep growing in China. GM plans to invest $14 billion from 2014 to 2018 in order
to open 5 new factories and to support the sales of 5 million cars annually (market
objective).
- Promote GM Financial to increase the sales of brand new products all over the
world. Increase the number of clients in the US, Canada, South America and
Europe and to support its position in the Chinese market (financial and market
objective).
- Reduce costs and complexity in inventories and logistics in order to achieve better
operating margins in the new models. They plan to focus on essential platforms
and they expect 99% of the global production to be from those (financial
objective).
As it can be proved with the examples above, the objectives are consistently
“SMART”: they are specific, measurable, achievable, resource-based and time bound.
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STAKEHOLDERS ANALYSIS
The company believes that its success is dependent on relationships with all its
stakeholders. Therefore, embracing continuous, positive and fruitful collaboration is one
of the things company focuses on.
Main stakeholders that General Motors tends to mark out are:
Customers
Direct sale to concessionaires by using Just In Time (JIT) methodologies.
Managers
GM’s Board of Directors is comprised of 12 members. Except Chairman and CEO
Mary Barra, former Vice Chairman Steve Girsky and former UAW Vice President
Joe Ashton, all of the rest directors are independent, as it is defined by the Board’s
Corporate Governance Guidelines, which are based on the standards of the New
York Stock Exchange and the U.S. Securities and Exchange Commission.
The Board has the following standing committees: Audit, Executive
Compensation, Governance and Corporate Responsibility, Finance, Risk, and
Executive. The Audit, Executive Compensation, and Governance and Corporate
Responsibility Committees are composed entirely of independent Directors.
Shareholders
American Syndicate of Workers (33%)
Government of the United States (32%)
Government of Canada (12%)
Common stock (23%)
Banks
Employees - both current and potential new talent
220.000 workers worldwide
5500 workers in GM España factory in Zaragoza, including
subcontractors.
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Suppliers
Approximately 2000 suppliers, such as:
CFF
CEFA
Bridgstone
Mann+Hummel
Gestamp
Sogefi
Axalta coating systems
Saint Gobain
Navarra Estampación e Inyección
Governments at national and lower levels
NGOs (Nongovernmental organizations)
WWF
Proud U.S. Business for Climate Action
Subcontractors
Android
Logiters
Regional Employment Offices
GM contributes to the creation of jobs. GM Spain has partnered with regional
employment office to manage the employment selection processes for GM, which
prepares young candidates for work in the industrial sector.
In particular, GM has signed an agreement with the Instituto Aragonés de Empleo
(INAEM) in order that they will be in charge of all the selection processes for GM.
In order to notice the relevance of the commented stakeholders, a power/interest
matrix has been implemented.
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Stakeholder Type Power Interest
Customers Primary and
external
HIGH HIGH
Managers Primary and
internal
HIGH HIGH
Shareholders Primary and
internal
HIGH HIGH
Banks Primary and
external
HIGH LOW
Employees Primary and
internal
HIGH HIGH
Suppliers Primary and
external
LOW HIGH
Governments Secondary and
external
HIGH LOW
NGOs Secondary and
external
LOW LOW
Subcontractors Primary and
external
LOW HIGH
Regional
Employment
Offices
Secondary and
external
LOW LOW
Figure 2. Stakeholders
Figure 3. Power Interest Matrix
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CSR AND ETHICS
GM company commitment within stakeholders is boosted with the values
previously described. One of the main strategy pillars is transparency. In this sense, Public
annual reports are published annually and they work to improve their sustainability goals
and to manage the business at its best responsible way.
GM business is more than selling a determined product; it involves values
(customers, relationships and excellence, as commented). In this sense. Excellence means
acting with integrity and diligence (“doing the right thing”). According to this idea, the
GM´s Code of Conduct, which is called “Winning with integrity”, was developed.
Employees are required to complete several ethical courses each year to ensure
the fully understanding of the GM´s policy and procedures.
Furthermore, “Winning with integrity” provides some measures for avoiding
interest conflicts among suppliers and others groups of interest.
GM España promotes integrity, prevention and bad conducts solving. In fact,
every worker can report unethical conducts in an anonymous way by GM´s internal
channel system “Aware line”.
A significant ethical measure was the implementation of the Equity Plan, by which
GM tries to provide a better work-life balance, avoid discrimination and equalise male
and female workers. As a result, the number of female employees has increased by 33%
in the last five years.
There is also a bullying protocol which includes specific measures against
bullying (no matter what type); especially sexual and gender bullying. All workers are
responsible for creating a good atmosphere at work.
Finally, GM takes part in a Diversity Chart since 2012, which is an European
initiative to promote diversity and non-discrimination at workplace. Some measures are:
Support a diverse workforce.
Promote effectively integration.
Expand respect and communication at work.
Respect and be aware of diversity.
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ASSIGNMENT 3
INTRODUCTION
In the following document, an analysis of the factors that most affect to GM
framework is going to be carried out. First of all, we have carried out an external analysis
(PESTEL) to identify what are the most significant environmental threats and
opportunities. Moreover, this will lead us to an internal analysis studio by highlighting
the five competitive forces of Porter.
MACRO-ENVIRONMENTAL ANALYSIS (PESTEL) The external analysis is going to be described by categorizing the relevant
environmental factors into six types: political, economic, social, technological, ecological
and legal issues, as follows.
To clarify the conclusions extracted from this analysis, we must say that we are
specifically studying GM España. GM España is in charge of all the vehicles produced in
Spain, but also of all the sales in the country, even if the car was manufactured in a foreign
country. This means that from the production’s point of view we must focus on those
affecting Spain, regardless where the vehicle is sold afterwards. However, from the sales’
perspective, we must focus on every vehicle sold in Spain, regardless where it was
produced.
POLITICAL FACTORS
In order to analyse these factors, we are going to focus on the politics taking place
in Spain. The most important current political factors in this area are the following:
Political encouragement: Plan PIVE, Plan 2000E, Plan VIVE, Plan Renove.
The Spanish Government has promoted since 1994 several incentive plans in
order to increase the number of sales of the automotive sector. By these plans, the
government endeavors to help people to afford a vehicle. In fact, it offers people
a special discount or low financing cost at the time of acquiring a new car.
Since this plans provides economic aids for people that want to change their old
car for a new one, this factor highly affects car’s renewal and increase vehicle
sales.
Most of these plans conclude at the end of this year or at the beginning of the next
one. There are no renewal plans following these dates due to the political
uncertainty.
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Tax system: plate tax, VAT (Value-Added Tax), Traffic taxes, Special tax on
emissions.
The automotive industry is one of the sectors which most contributes to the
Spanish tax system due to the fact that people have to pay taxes during its whole
life cycle. Firstly, it is compulsory to pay the plate tax as well as the VAT when
people buy a vehicle. In addition, vehicle usage comprises several taxes such as
the traffic tax or an extra tax depending on the amount of emissions produced.
Besides, the trend of the VAT percentage rate through the last years has increased
significantly in the region. Therefore, vehicle companies have been forced to
narrow margins to maintain market prices.
Spanish authority DGT (Traffic General Direction) campaigns against
speeding, alcohol and drug consumption. Speed radars and alcohol tests.
The Spanish Government carries out measures which involve society awareness.
In this sense, the traffic authority launches several campaigns related to speeding,
alcohol and drug consumption to concern people about those issues.
Practical actions also comprise the implementations of radar to control vehicles
speed and unforeseen alcohol/drugs tests.
All this actions have affected car purchasing. The average age of car buyers has
increased due to the fact that young people can’t afford cars themselves and their
parents refuse to pay for them because of the risks.
ECONOMIC FACTORS
The most relevant economic factors are explained as follows:
Petroleum price
In the last recent years, the petroleum price, and consequently the gas price, have
gone down. The reason for this is the new methods promoted by the US to extract
this material. Therefore, Middle East countries have been forced to reduce their
prices to keep market domain.
As a consequence, people is willing to take on the cost of daily gasoline rather
than buying low consumption vehicles (Hybrids) that require a higher initial
investment.
Fast-growing sector
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The automotive sector is highly relevant for the development for the Spanish
economy due to the following reasons:
The automotive sector in Spain represented a 6% of its GDP in 2013. This
figure has risen up to 7.3% in 2015, what means a favorable tendency for
this sort of industry. This tendency can be observed in Figure 1.
Figure 4. Automotive Sector share of Spanish GDP (%).
ANFAC
As it is described in Figure 2, the automotive industry comprises the 9%
of the Spanish employment in 2015, including direct and indirect jobs.
Figure 5. Evolution of the Spanish employment in recent years.
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The industry comprises the 85% of the exports in 2015. As the below
figure demonstrates, the number of exports and units produced has
increased since the recession period (2011).
Figure 6. Automotive Spanish sector exports and production per vehicle units.
ANFAC
Crisis effect
Since the Spanish economy is progressively recovering from the recession period
suffered in 2011, the number of car registrations has increased. Sales figures are
indicated in Figure 4 and 5. In addition, Figure 5 also shows that the number of
GM vehicles sold in 2015 is highly relevant compared to competitors´ sales.
In 2011, GDP rises to values close to years prior to the crisis, but prices of vehicles
didn’t grow so fast. Therefore, it has been a good opportunity for investing in
transportation over the last years.
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Figure 7. Sales of vehicles in Spain.
ANFAC
Another factor becoming more and more important in the last years is that people
take into account very importantly gas consumption and efficiency. This could be
mainly because crisis made people care much more about costs and gas represents
one to be considered. Nevertheless, other factors such as sustainability and
environmental care may also reinforce this fact.
Crisis has also affected salaries. On the one hand people have less purchasing
power, what reduces potential clients. On the other hand, employees in this
industry are also paid less, what allows companies to tighten costs, and thus,
prices.
In addition, interest rates are very low nowadays. This encourages people to
finance this type of expenses, increasing sales in the sector.
SOCIAL FACTORS
An important fact in developed countries is that people associates vehicle brands
to their owner’s status. This highly affects prestige brands such as Mercedes, BMW and
so on. Therefore, we can expect a tendency in the following years of people investing
more money in quality-based vehicles in order to improve their social reputation, as long
as they can afford it.
And last, we can also observe that different social groups look for different vehicle
features. In a simplified way, we can say that younger people look for fast, sportive and
fresh-design cars while older people looks for comfortability and reliability.
Consequently, marketing has to be specific for certain clusters and the brand’s reputation
plays a significant role.
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Since current lifestyle is leading people to move to cities for decades, customers
require more practical cars like small size or low-powered cars. This makes the sector
adapt designs and engines to these preferences in order to survive in the market.
TECHNOLOGICAL FACTORS
Several technological recent chances have been considered:
More information available and customization via internet: Since the
worldwide technological revolution, people have more access firm´s information
and can customize their vehicles´ characteristics by adding new parts, colors,
engines, shapes, and so on.
New sources to buy cars, besides dealers. A second-hand market has been
developed via internet. Moreover, Internet give people the possibility of entering
in a new digital market where they can sell or buy second-hand vehicles. As a
response, firms developed second-hand car sections in their webs.
Electric and hybrid car development due to petroleum dependence.
Petroleum reserves are limited, so new green energy sources have to be
implemented in order to guarantee the energy usage and sustainability in the
forthcoming future. That is why a development in electric or hybrid technologies
is expected to happen.
ENVIRONMENTAL FACTORS
Traditional gasoline engines are becoming socially adverse. People tend to buy
bio-diesel cars or even hybrid and electric. While a market might lose potential in the
long run, a new market of bio-diesels, hybrid engines and electric motor development
opens up.
In addition, average emission rates in Spanish are below European Union
restrictions. The legal regulations are explained below (topic 2.6).
LEGAL FACTORS
Spain has to obey EURO 6 regulations spread by the Union. The limit of NOx
emissions for diesel engines is 0.08 mg/km and 0.06 mg/km for gas engines.
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From the manufacturer’s perspective we can find legal regulations regarding
maximum emission rates (EURO 6). When designing and manufacturing, this feature has
to be considered. Therefore, companies have to invest in testing to make sure they respect
regional legislation.
In Spain, this factor is particularly important due to the introduction of driving
licenses by points.
WEAK SIGNALS, INFLEXION POINTS AND MEGATRENDS
The unique future tendencies that we can identify are a weak signal which explains
that the increase in hybrid and electric car sales might indicate society willing to move
towards a green and sustainable transportation frame. It could mean an inflexion point in
the future when electric cars resources are developed enough to compete against
traditional gas engines. On the other hand, we do not observe a relevant megatrend.
KEY FACTORS
The main identified key factors are the following ones:
1) Increase in sales due to optimal current situation.
This means that companies, which base their production on costs, will have a
remarkable rise in sales because people are may take advantage of the optimal
situation to buy these type of cars (cost reduction and PIVE/Renove plans).
2) Gas consumption awareness in economic and environmental sense.
This is people’s consciousness regarding gas consumption. Not only because they
care about their own economy, but also because they care about the environment.
This also includes any other benefit that can be taken out of making consumption
more efficient, such as vehicle autonomy.
3) Electric car development due to petroleum dependence and sustainability.
Short-term expectations about the development of new technologies in the
automotive industry, especially electric engines or other technologies related to
reduce the necessity of fossil fuels.
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SCENARIO MAKING
Austerity mindset Natural trend Innovation race
1 ↑ (moderate) = (remains the same) ↓ (moderate)
2 = (remains the same) ↑ (moderate) ↑↑(severe)
3 = (remains the same) ↑ (moderate) ↑↑ (fast penetration) Figure 8. Scenarios
Austerity mindset
This scenario represents what would be perfect for General Motors in economic
terms.
On the one hand, we see an increase in sales of cost-based products. This is the
tendency that we observed during the first years of this decade. Despite crisis was
not overcome, people took advantage of the reduction on prices in this sector and
decided to invest in this type of cars. Here this trend will keep on going. Besides,
GM is also focused on making consumption more efficient, so people care about
this in the current scenario. However, people are not completely falling into a
radical tendency in this way because that could mean a rise in hybrid cars sales.
On the other hand, there won’t be a lot of new technologies entering the market,
because GM is focused on traditional engines, and they could mean a significant
decrease in sales for our company. Nevertheless, the reality is that these
technologies will arise sooner or later. So being optimistic, they will remain the
same in the short term.
Innovation race
In opposition to the previous scenario, we see here a big penetration of new
technologies due to the fact that people is very conscious about gas consumption,
petroleum dependency and sustainability. Furthermore, the tendency of cost-based
cars becoming more and more popular ends. Crisis is overcome and people’s
economy is better, so there is a trend of people investing more money on quality-
based products and new technologies.
Natural trend
This scenario represents something in between the previous two. We consider that
people will still buy cost-based cars, but the opportunity to purchase this kind of
cars at a really good price is over (PIVE plan and others end this year). However,
it is still a product affordable for the majority of the population and people will
keep consuming it. Consequently, we can assume that economy gets better, but it
reaches a steady state of slow and constant growth.
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As said before, new technologies will enter the market. In this case we consider
that they will do it slowly due to the fact that resources for electric cars are not
enough yet (public battery charging mainly). However, we can already see the
popularity of hybrid cars going up, so we will consider a moderate rise in this type
of technologies.
SECTOR ANALYSIS (PORTER)
The analysis is based on analysis the Porter´s Five Forces Framework in order to
identify the attractiveness on GM. General Motors manufactures half a million vehicles
per year. They have one main factory located in Zaragoza, where they manufacture the
Opel Corsa and the Opel Meriva and Opel Mokka. General Motors manufactures both
individual and commercial vehicles.
POTENTIAL ENTRANTS
In the car-manufacturing sector the threat of new entries is not very big. This is
due to the high barriers of entry. The first big barrier is the initial investment that any firm
of the sector has to take. This investment is big because the fixed assets needed to
manufacture vehicles are really high. The main purchases that a company in this sector
has are the plant and equipment, the employees, the raw materials and the technology.
They should also have some research and development costs as the sector is a
nonstop development. Without the research and development, the company will have no
future and therefore won’t be able to stay in the market. Another barrier to the market is
the brand image the firm needs. As most companies the customers must know the brand
and there will therefore have big marketing costs.
The economies of scale are really important in this type of business. The existing
companies have big business groups, and are worldwide firms. They have big levels of
production which allow them to reduce the unitary cost of their products when they
increase their production. This will avoid small companies entering the market.
The car-manufacturing sector has a steep learning curve; this means that the
companies in the sector will be old businesses which have learned from their past years.
If a new business enters the sector they will need to move along the learning curve which
will be difficult if they have no experience.
Another key factor which makes it difficult for new entries in the sector is the
need of suppliers. All the existing companies have a big supplier network, some of them
are exclusive to the company and this will make it difficult for new companies.
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The last important factor that has to be taken into account is the need of good
distribution channels. If the firm is able to manufacture the vehicles but cannot reach the
final customers the company will sink. This is why it is important to have authorized
dealers, which will make the link between the production and the final customer.
POWER OF BUYERS
In the car-manufacturing sector the buyers have a big negotiation power. This is
due to the fact that the customers are usually dealers of mid to big size, and they are able
to interfere in the price of the product. The companies which acquire several vehicles at
the same time may be able to change the price or try to do economies of scale because
they have a bigger negotiation power.
The crisis period that began in 2008 has influenced the negotiation power of the
customers. The vehicle manufacturing businesses had a big stock and they needed to
liquidate it. In order to do so they have reduced the prices of the vehicles during the last
years. The demand of vehicles has gone down due to the recession, and the customers
have gained in negotiation power. This has made it possible for the customers to interfere
in the price, the way the payments are done, the characteristic of the products and other
facilities.
Nowadays, due to the maturity and the excess of the sector, customers have taken
advantage by the increasing competition in the sector making the product more
homogeneous. This competition has brought the price of the vehicles to the lowest
possible levels. If vehicle companies won’t lower they prices they won’t be competitive
and will surely need to leave the business.
POWER OF SUBSTITUTES
In 2015, 51421 commercial vehicles and 2218980 particular vehicles were sold in
Spain, which add up to 2733201 vehicles sold in total.
Figure 9. Commercial and personal vehicles sold in Spain in 2015
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The car-manufacturing sector has somewhat considerable threats of substitution.
Taxis has always been a possible substitute, especially in short-distances within cities.
However, it hasn’t been a feasible option to sustainable substitute cars due to the high
prices. Nevertheless, new apps such as Uber or Car To Go allows people to quickly move
from one point of the city to another at relatively low prices. These are the two main
substitute forces related to technology development.
In the medium-long distances the main substitute in Spain has been the AVE.
These trains might be a threat because it has a competitive price, shorter journey time and
it is more comfortable. The main journeys that have seen the number of cars reduced since
the AVE is operating are Madrid-Barcelona, Madrid- Valencia and Madrid-Seville.
Therefore, the AVE might be a threat to the vehicle sector.
The electric and hybrid vehicles aren’t seen as substitutes nowadays. They are
seen as evolutions of the product but they will certainly gain a big importance in future
years. That is why all the firms of the car-manufacturing sector must have a big research
and development capital. General motors have done some studies in order to start
manufacturing hybrid car, but this won’t be done in Spain.
POWER OF SUPPLIERS
In Spain, the main association is the SERNAUTO (Asociación Española de
Fabricantes de Equipos y Componentes). This group includes suppliers from different
sectors, as the vehicles need many different suppliers. In the pie chart we can see the
importance of each supplier sector.
Figure 10. Importance of each supplier sector
Motor 24%
Electrical components
11%
Plastic3%
Bodywork30%
Tires1%
Chassis21%
Other10%
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The main reason affecting suppliers’ bargaining power in this case is the relative
size of the supplier and the car manufacturer. In most cases car companies are way larger
than their suppliers. This leads to an apparently low bargaining power. However, some
of those suppliers are still very large companies which provide devices to several car
companies. For example, BASF and Bridgestone supply raw materials and systems to a
lot of car manufacturers, therefore their bargaining power rises.
Furthermore, some parts are especially design for a particular vehicle, but it is
outsourced to a supplier, in this case the supplier gains power, regardless its size, due to
the uniqueness of the device.
To conclude, local suppliers have, in general, small negotiating power, whereas
large international suppliers have a bigger market to supply and therefore a big influence
over GM.
COMPETITIVE RIVALRY
General motors’ main competitors are Nissan, Volkswagen, Mercedes, seat, Ford
and PSA. They have fabric all over Spain: Ávila (Nissan), Barcelona (Seat and Nissan),
Madrid (Iveco and PSA), Navarra (Volkswagen), Palencia (Renault), Santander (Nissan
and Mercedes-Benz EvoBus), Sevilla (Renault), Valencia (Ford), Valladolid (Iveco and
Renault), Vigo (PSA), Vitoria (Mercedes-Benz) and Zaragoza (Opel).
Figure 11. Min GM competitors in Spain
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The main market share is therefore divided in a small amount of companies. As it
can be seen in the pie chart, there are only 9 companies manufacturing vehicles in Spain.
The biggest one is Seat.
Figure 12. Automotive companies market share
87% of the GM manufactured vehicles in Spain are exported. 2.03 million cars
were exported in 2015 to Germany (14.7%), United Kingdom (13.6%), Italy (7.8%) or
Belgium (2.9%).
After the economic crisis, the number of sold vehicles has been increased. The
companies must offer a greater innovation to attract clients. All companies have tried to
reduce their costs. This fact has encouraged a greater rivalry among companies in the
sector.
Most of the car-manufacturing companies have changed their strategies. The fact
that the vehicles are similar has obligated the companies to keep an eye on each other’s
work. They need to be up to date to keep in the sector.
Each firm has a great variety of vehicles to keep the largest number of customers
in their market. They are also trying to add different customized vehicles. To keep in the
market and avoid the other companies growing above them general motors needs to invest
in development and keep their products competitive.
General Motor’s main competitor in Spain is Volkswagen. Volkswagen has a big
part of the market share thanks to brands such as Seat or Audi. The group has an old
history and experience in Spain. They are leader in to small vehicles market.
Seat20%
Ford 17%
PSA16%
Renault14%
GM10%
Nissan8%
Volkswagen 8%
Iveco 6%
Irizar1%
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Figure 13. GM Five Forces Framework
VERY HIGH
COMPETENCE
LOW THREAT
MEDIUM THREAT
MEDIUM
NEGOCIATION
POWER
RELATIVELY HIGH
POWER
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COMPARATIVE INDUSTRY STRUCTURE ANALYSIS
To sum up, we state here some bullet points extracted from the analysis:
In 5 years the entry threats won’t change.
Rivalry will be higher as some other companies like Tesla will be entering
the Spanish market.
Substitute will be higher as new technologies arise and the possibility of
new transport or higher taxes to the vehicles might appear.
Supplier power will be higher because they are starting to form
associations and the bigger the association the higher the power they have.
Buyer power will remain unchanged as the customers will continue buying
cars individually
Figure 14. GM comparative industry structure analysis
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ASSIGNMENT 4
INTRODUCTION
In the following document, we continue developing in more detail our company´s
external analysis. GM´s strategic groups as well as market segments are going to be
described. This will lead to compare GM with the competence in several success factors
in order to analyse its situation, forecast the evolution of the sector and identify “blue
oceans” (new market space).
STRATEGIC GROUPS
Strategic group is a group of companies within a given industry that have similar
strategic characteristics, following similar strategies or simply competing on similar
bases. Such grouping allows us to understand better what kind of competition the
company has to deal with, what opportunities can GM takes advantage of and, if it wants
to do so, what will be the obstacles to overcome.
How can we assign a company to a particular strategic group? There are several
factors that can significantly distinguish firms within industry. Nevertheless, it’s useful
to take under consideration characteristics concerning scope of activities like extent of
product diversity, geographical coverage, and number of market segments served,
distribution channels or resource commitment like extent of branding, marketing effort,
extent of vertical integration, product or service quality, technological leadership or size
of an organization.
However, we have decided to focus on the factors we think are the most important
for GM España. First step in distinguishing strategic groups is choosing strategic
dimensions that differentiate companies. As we analyse the automobile industry, we have
chosen characteristics that require significant commitments which are:
● Degree of vertical integration
● Degree of product scope
The first strategic group is characterized by high level of vertical integration and
great range of products. It is formed out of companies that were the most important
players in the United States’ car-manufacturing industry before the oil crisis in 1970s:
Ford, Chrysler and General Motors. All these companies have a wide offer of cars, and
can therefore have a wider target market. As these companies faced similar opportunities
and threats they performed tacit collusion to avoid harmful high competitive rivalry
strategies such as price wars.
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In response to such powerful formation a new group has emerged. It was
characterized by much lower range of products and warm relationships with suppliers
instead of integrating them. The combination of these two factors allowed to keep low
inventory levels as well as making manufacturing more efficient. Nevertheless, at some
point in time, the scope of products has increased so as to compete better with the first
group. These companies were Toyota, Honda and Nissan.
GM has a very high degree of vertical integration because they produce many of
the components that they use to build their cars (in 2008 they produced 423011 vehicles
and 164930 components). Toyota on the other hand, worked to streamline the production,
they rearranged their supplier’s factory in order to reduce their costs, and therefore kept
their vertical integration at low levels.
Companies such as BMW and Mercedes-Benz have a lower range of products as
they have a different strategy. They are focused on higher quality vehicles so they do not
compete in the same market segment as GM, Toyota, Honda or Nissan. The analysis can
be represented in the table below:
Strategic group Degree of vertical
integration
Degree of product of scope
General Motors, Ford,
Chrysler
high high
Toyota, Honda, Nissan low high
BMW, Mercedes-Benz high low
Figure 15. Strategic groups
MAPS OF COMPETITORS We are going to compare GM with the industry´s competitors according to the
following relevant parameters: the price, engine power, market share, number of models,
innovation and exclusive design.
The comparison among GM and the rest of the industry´s competitors in the
Spanish industry could be summarized in following table:
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Power (HP) Price ($) Innovation (1-10) Exclusive design (1-10) # models Market share (%)
1 Mercedes 250 40000 9 8 10 2,5
2 BMW 270 35000 8 7 7 4,2
3 Audi 180 30000 7 5 9 3,7
4 Ferrari 450 270000 7 10 3 0,01
5 Lamborghini 550 230000 8 9 4 0,02
6 Bugatti 800 1000000 3 10 1 0
7 PSA 90 15000 4 2 7 13,1
8 Renault 110 20000 4 3 7 7,5
9 Opel 100 17000 5 3 8 7,4
10 Nissan 160 25000 7 5 5 5,3
11 Toyota 120 18000 5 4 3 4,8
12 Seat 90 13000 3 3 5 7,5
13 Volkswaggen 110 22000 6 4 7 8,5
14 Ford 140 26000 7 5 5 6,2
Figure 16. Competitors
To analyse in more detail, the current situation of GM and try to find its real
competitors, several plots have been implemented according to the parameters mentioned
above.
1) Price-Power Comparison
Figure 17. Power-Price Comparison
As it can be observed, we can distinguish four main clusters. We can extract that
the more power the car has, the higher its price. The first one is only composed by Bugatti
which offers highly-power and expensive cars. the second one includes Ferrari and
Lamborghini, the third one comprises Mercedes and BMW, but we put special attention
on the third one, which includes GM. Opel, Audi, PSA, Renault, Nissan, Toyota, Seat,
Volkswagen and Ford are located in the same cluster. Therefore, these companies
represent the current GM´s competitors in the Spanish market in terms of price and power.
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These firms offer medium power cars at a reasonable price (differences in price car among
them are not so significant).
2) Price-Market share comparison
Figure 18. Price-Market Share
The table above indicates that the lower the vehicle´s price is, the higher its
company´s share market is. In this sense, four different clusters can be observed. In order
to calculate the price of each firm’s product we have taken the average price of all their
products. Firms as Ferrari, Bugatti and Lamborghini have the lowest market shares rates,
but this is due to the fact that they target a niche market. On the other hand, the highest
market share in Spain corresponds to PSA. Companies which have a similar share market
than GM´s represent our competitors, which are: Renault, Nissan, Toyota, Seat,
Volkswagen and Ford.
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3) Numbers of models and market share comparison
Figure 19. Number of Models-Market share
Here we can see that companies with the highest market share have between 5 and
8 models. This is probably because with that number the brand provides enough diversity
for every type of customer, but at the same time their production complexity is not too
high. This fact allows to keep prices competitive while covering every single customer
need. Evaluating, particularly, the upper cluster (Where Opel is held) we can see that all
the brands of that group (Volkswagen, PSA, Renault…) offer at least a SUV model, a
compact model, a family car and a business vehicle. So they all compete, not only in the
same market, but also on every business line.
As we commented in the first assignment, Opel seeks a reduction in complexity.
As we can observe, Opel is the company with the highest number of models of the cluster.
This might be the reason why they want to limit themselves to only one car of the same
kind and therefore reduce the number of models to 5-6. This would allow them to keep
covering the range of products the other companies do, but at the same time become more
competitive on costs.
Mercedes
BMWAudi
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PSA
Renault
Opel
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Volkswaggen
Ford
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4) Price-Innovation and Price-Exclusive Design comparison
Figure 21. Innovation- Exclusive design
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Exponencial (Innovation -Exclusive design)
Figure 20. Innovation- Exclusive design
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As it can be deducted from the above diagrams, there is a clear correlation
(exponential behaviour) between the grade of innovation in a firm and the exclusive
design of its models. Moreover, related to the car price, the higher the innovation and the
exclusive car design is, the higher the price of sale, because quality process and R&D
technologies are expensive to implement.
By analysing the first plot, we can distinguish four main clusters. As it happens in
the previous comparisons, GM belongs to the biggest one. That is why its main
competitors in terms on innovation and model´s design are: Audi, Renault, Nissan,
Toyota, Seat, Volkswagen and Ford.
As a whole, after analysing the situation of GM in the Spanish market against
rivals for the success factor mentioned above, we can conclude that GM should consider
the following competitors: Renault, Nissan, Toyota, Seat, Volkswagen; as all of them
belong to the same cluster for almost all the factors considered in the market, offering
similar vehicles characteristics, quality and distribution channels.
MARKET SEGMENTS Now, we can go ahead and analyse the customers. We are going to try to classify
all the customers in the automotive market based on some differenced factors.
1) FACTOR 1: AGE
This factor highly influences the car the customer is looking for. In fact, in the last
years some brands have worked hard in order to change their image and attract new
customers. For example, Mercedes was a brand which stood out for being known as “a
brand for old wealthy people”. However, nowadays, there are a lot of models oriented to
young folks.
Opel has focused on attracting new customers as well. Specially, the Opel Corsa
has been re-designed to achieve a “modern look”. Besides, a lot of new options and
packages are available so customers can customize the car as they wish.
2) FACTOR 2: WORKING PATTERNS
This factor is related to the fact that business today requires movement. An
important rate of the working population needs a car to work. In this sense, the car not
only represents a transportation method, but also the business status within and without
the company. People will be classified by the car they have, and will be willing to buy an
expensive car only to increase their status.
Opel developed a business car for this purpose called Opel Insignia. It represents
the “high level” model of the company being the more comfortable and powerful of the
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brand. They were pretty successful in that way, to the point that politic official cars in
Spain are mostly Insignia and Volkswagen phaeton, its direct competitor.
3) FACTOR 3: MOBILITY NEEDS
Some people also need particular features in cars due to climate conditions and
road conditions. For example, people that live in small towns or villages might prefer a
SUV model to be able to drive through tough road conditions. Besides, People who like
to sky will probably choose AWD traction. And last, families with kids may set comfort
above any other feature to travel.
Opel takes all this into account. The Opel Mokka is an SUV designed for mountain
roads, but it also has a desirable size for the city, so people don’t have to choose between
safety and practicality. Furthermore, the Opel Insignia has a family version that increases
internal size. And in addition, almost all their models include an AWD option.
COMPETITOR ANALYSIS AND “BLUE OCEANS”
Lastly, in this part we will continue comparing GM with the competitors in the
automotive Spanish market by developing a strategy canvas. The strategy canvas permits
to compare competitors according to their perceived performance on a range of success
factors. This will lead us to emphasize those factors that differentiate the company. We
continue considering the critical success factor explained in the beginning of this
document, involving price, power, market share, number of models, innovation and
exclusive design.
The strategy canvas for automotive companies, including each firm´s value
curves, in the Spanish market is:
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Figure 22. Spanish market
Figure 23. Spanish market (II)
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Mercedes BMW Audi Ferrari Lamborghini
Bugatti PSA Renault Opel Nissan
Toyota Seat Volkswaggen Ford
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Mercedes BMW Audi Ferrari Lamborghini
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According to the strategy canvas, we can observe that there is almost a “blue
ocean” or a market space for GM related to the number of models, because there are only
two competitors (Audi and Mercedes) which are perceived better than us in this aspect.
GM ought to carry out some measures in order to turn this market opportunity into an
advantage. In theory, GM could be more competitive by increasing the number of models
offered, but in practice it contradicts one of the main GM´s strategies which is, in fact,
reducing those models. To conclude, GM should maintain its current number of models
in order to keep its position in the market and accomplish its strategy plan.
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ASSIGNMENT 5 In this section, main GM´s resources and competences are going to be identified.
Then, those resources and competences have been classified as threshold or distinctive
capabilities. Finally, the most relevant capabilities have been assessed according to
VRIO´s four key criteria (value, rarity, inimitability and organizational support), what
allows them to be distinguish as temporary/sustained advantages or disadvantages for
GM.
RESOURCES, COMPETENCES, THRESHOLD AND DISTINTIVE
CAPABILITIES
In order to study General Motor's portfolio, a brainstorming session was made. All
the ideas for the resources and competences were studied and some have been examined
more carefully. The resources and competences were classed in threshold (in green in
the list) and distinctive (in red).
Threshold capabilities refer to those which are necessary for GM so as to compete
against competitors in parity conditions, but they are not distinctive. Distinctive
capabilities were selected to make GM successful nowadays, although maybe not in the
forthcoming future.
General Motor´s resources (what it has) as well as its competences (what Gm does
well) are presented as follows:
RESOURCES
Product development technologies (e.g. pilot program with Mapquest, OnStar
Stolen Vehicle Slowdown Service, standardized computer-aided design system)
Management technologies (e.g. streamline and control of supply chain)
Brand image
International networks
Innovative and highly developed manufacturing plants
Financial resources
Customer database
Strong brand portfolio
Company’s culture (competitive spirit but also diversity, inclusion, mutual
respect, and responsibility)
Patents
Strategic alliances: Common groups to develop and launch projects faster and
easily penetrate the market
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Multiple brand commitment
International experience
COMPETENCES
Ability to efficiently manage supply chain
Leadership in vehicle electrification with advancements in batteries, electric motors and power controls
International experience
Industrial involvement since its beginnings: fourth brand in automotive history (1862).
Team alignment: interests align among workers and shareholders in order to
accomplish best performance (60% of shares own by GM personnel).
Ability to develop new IT solutions (products and management software e.g. supply
chain management - algorithms for estimating throughput performance, identifying bottlenecks, and optimizing buffer allocation)
Ability to efficiently manage cooperation with suppliers: high requirements for suppliers for the sake of continuous improvement.
Internal rotation: employees moving throughout different areas to get an overall view of the company in order to promote the management levels.
Interdepartmental grouping: ability to assign people from different departments to
manage the launch of new models in short periods of time.
Ability to efficiently manage marketing operations (eg. limiting product portfolio)
Threshold activities (color green) were classified as so if they met following
criteria:
they need to be met so as a GM is able to survive and compete in automobile
industry.
And therefore due to high level of competition in automobile industry, lack of
product development would result in staying behind, not meeting constantly raising
customers’ expectations and therefore higher risk of failure or loses. Furthermore,
economy of scale plays an important role in creating competitive position in a car market.
Therefore, international networks are a key factor that allow to compete in globalization
era. Financial resources are a muscle that also supports the economy of scale. Ability to
enter new markets and grow is a key to achieve parity in with competitors in the market.
Moreover, as car manufacturing companies need a lot of resources as inputs like
labor, parts and raw materials. Profitability of GM is dependent on bargaining power of
suppliers. That is why efficient supplier management was classified also as a threshold
activity. Also, marketing strategy plays one of the most important roles in achieving
General Motor’s goals and objectives. Without constantly reminding customers of its
presence a company wouldn’t survive in intense competitive environment.
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In contrast, distinctive capabilities (color red) are those that:
are required to gain competitive advantage.
Database of customers helps to understand purchasers better. It allows to develop
products accordingly to their preferences and needs and build better relationship with
them. Strategic alliances give GM competitive advantage because it allows to launch
projects faster and penetrate new markets more easily and quickly. Thanks to
international experience company has more knowledge that can be applied during
entering new markets or improving in ones that it already exists in. Combination of
capabilities like team alignment, company’s culture, internal rotation and
interdepartmental grouping help to accomplish high level of performance that raises
probability of gaining leading position in the market.
DYNAMIC CAPABILITIES
Then the ability of the company to renew and recreate its strategic capabilities has
been examined. These dynamic capabilities are necessary for efficient operations. GM´s
dynamic capabilities are those which allow GM to survive in the future. So, GM would
be successful in the future if the company:
Ability to reconfigure, invest in technologies, plants, markets so as to meet
demand due to strong finance muscle, international experience and
development departments
Ability to measure and predict customer preferences due to well-developed
database of customers
Seizing through product development (e.g. Mapquest, OnStar Stolen Vehicle
Slowdown Service)
VRIO To conclude, the most important GM´s capabilities considered above (comprising
threshold and distinctive capabilities) are examined according to VRIO´s four key
criteria. VRIO takes into account if GM´s capabilities add value to customers (value), are
uniquely possessed by GM (rarity), are highly difficult to copy (inimitable) and are
supported by the whole organisation. This analysis will lead to classify those capabilities,
in comparison with competitors´ ones, as competitive advantages (temporary or
sustained), competitive parity or competitive disadvantages.
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Capability Valuable? Rare? Inimitable? Organisation? Competitive implications
Adapt to changing market
Y N N N Competitive parity
Reconfiguration
Y N N N Competitive parity
Adapt to new customer
preferences
Y N N Y Competitive parity
Environmental sustainability
N Y N Y Competitive parity
Use of technologies
Y N N N Competitive parity
International networks
Y N N Y Temporary competitive advantage
Customer data base
Y N N N Competitive parity
Logistics N N N Y Competitive parity
Strategic alliances N Y Y Y Temporary competitive advantage
Multiple brand commitment
Y Y Y Y Sustained competitive advantage
International experience
Y N N N Competitive advantage
Industrial involvement since
its beginnings
N Y Y N Competitive advantage
Team alignment N Y Y N Competitive advantage
Supplier management
N N N Y Competitive parity
Internal rotation N N N Y Competitive parity
Interdepartmental grouping
N Y N Y Temporary competitive advantage
Marketing skills Y N N N Competitive disadvantage
Figure 24. VRIO
As it can be subtracted from the table above, not all the capabilities considered are
supposed to be competitive advantages for the company.
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To sum up, most important GM´s capabilities which imply competitive
advantages are the following ones:
1. Multiple brand commitment
2. Team alignment
On the other hand, weakest capabilities which imply competitive disadvantages for
GM compared to competitors’ capabilities are listed below:
1. Marketing skills
2. Reconfiguration
How can we identify the reason why the two first ones are sources of competitive
advantage in opposition to the latest ones?
The answer to this is again the VRIO analysis performed above. As it can be observed,
there is a strong correlation between the number of affirmatives obtained and the
competitive advantage it involves. Besides, it does not seem to be random that the two
first ones that bring competitive advantage are distinctive capabilities and the other two
are not. This can be interpreted as the VRIO being a measure of the uniqueness of our
competences and also an indicator of how these capabilities can help us survive in the
future. However, this fact does not mean that the others are dispensable. In fact, they
might be extremely necessary to guaranty our future sustainability, but they do not mean
a significant advantage against our competitors.
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ASSIGNMENT 6
VALUE CHAIN
The value chain of GM España represents the activity of manufacturing some
vehicle´s parts and assembling all of them so as to build cars.
First of all, main GM España operational activities should be explained. GM
España is composed by four production modules. Three of these centres are related to
manufacturing whereas the last one refers to the assembly process.
The first centre is dedicated to the pressing process. GM España produces steel
sheets, and shapes them into finally car´s parts, such as the hood, car body, the roof of the
car, and so on.
Besides, there is a second centre or module where different parts, which have been
manufactured by GM España, are welding.
In addition, the third module comprises painting activities. This is the place where
different parts which composed the car (steel sheets and the rest of source-produced parts)
are painted.
Finally, the last centre refers to the assembly process. Not only manufactured parts
are assembled, but also outsourced parts which are distributed to Spain, for example,
plastics parts, wheel, engine, car windows, and so on.
Regarding the information above about the manufacturing process, the value chain
for GM España has been drawn up. The following figure describes the primary and
support activities which composed the value chain of the company.
Then, different primaries and support activities are explained:
Primary activities
Inbound logistics:
- Inputs are distributed in two main hubs. The first one contains roughly 90% of the
overall input and is dedicated to store the required parts for models which are
manufactured at regular production. In other words, it is destined to those models´
components which have already achieved optimal efficiency allowing to reduce
inventory levels to a minimum. The second one stores parts destined to new
models. Those models are still now developing, so as new pieces should be
changed, high levels of inventory are required.
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- A railway indoor distribution system has been implemented to transport inputs
inside the warehouse. It consists of little trains which distribute and allocate input
parts through its huge facilities.
- Supplier Quality Assurance (SQA). It is a department which is exclusively
dedicated to control the quality of the input parts and raw materials, as they are
crucial for the manufacturing process.
- Supplier´s testing. Suppliers are invited to attend the production plants so as them
to show how their products work and fit in the processing line. In this sense,
suppliers can notice if their parts have the necessary quality or need to be
improved. For example, they can observe if several coating layers should be added
to the final product or if a glue final layer is required.
Operations:
- Pressing process. It is the one which is carried out in the first hub, where steel
sheets are manufactured.
- Welding process. Manufactured pieces are welded in the second center.
- Painting process. Manufactured parts are painted and coating in order to achieve
the final esthetic.
- Assembly process. Outsourced and manufactured parts are assembled so as to
build a car.
- Testing. Not only during the line process because this sort of processes required a
lot of time, but also testing is made once the product has abandoned the line
process.
Outbound logistics:
- Outdoor parking. GM España facilities comprise an outdoor parking so as to keep
cars before they are sent to dealers. This parking does not need to have huge
dimensions because mostly cars are produced to order (following a Just In Time
technique (JIT)).
- Car´s reserve. A small segment of the produced cars are kept in order to show
them in Opel exhibitions.
- Matching. Best finish cars are kept inside the company as a calibration standard.
Marketing and Sales:
- Solid network of dealers.
- Long term contracts with dealers.
- Firm advertising. Opel cars are associated with the German engineering, as an
icon of reliability.
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Services:
- Customization system. An online personalization system allows customers to
customize its own car parts.
- Guarantee. GM España includes a two years guarantee for new vehicles regardless
its kilometer limitation. Moreover, they comprise the repair and replacement of
different parts in an official Opel dealer without any fee.
Support activities:
Infrastructure: including the four processing centers and its indoor warehouses,
the outdoor parking, offices, Figueruelas plant (Zaragoza).
Technology development: GM España is trying to implement highly advanced
technology to the production lines in order to increase productivity and reduce
personnel. For example, windshields are now added by robots instead as part of
the automatic line instead of by workers.
Human Resource Management:
- GM España promotes internship programs so as to renew employees and give
them the opportunity to get to know the business.
- An internal promotion model is implemented. Most of the jobs offered to external
applicants are entry-level. From there, they base their promotion system on
experience and academic background.
Procurement. Some exclusive plastic devices are designed by GM engineers in
Germany and GM España is in charge of bidding the design. This fact increasing
the competition among molding companies.
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VALUE SYSTEM
In order to observe the interconnection among categories within the organization
which are required to create a car, the value system of the company has been described.
Inbound Logistics Operations Outbound
Logistics
Services Marketing and Sales
Railway
distribution
system
Differentiation
warehouse model
Pressing
Welding
Painting
Assembly
Testing
Outdoor parking
Cars´ reserve
Solid network of
dealers
LT contracts with
dealers
Firm advertising
Customization
system
Guarantee
Infrastructure: 4 processing centers& indoor warehouses, outdoor parking, offices, Figueruelas plant
(Zaragoza).
Technology development: highly advanced technology: robots, automatic lines
Human Resource Management: internship programs, internal promotion
Procurement: bidding manufactured parts
Figure 25. Value chain
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According to the value system diagram plotted above, the interconnection among
different organizations can be seen. It can be observed that the value chain of the GM
España starts where the suppliers´ value chain finishes. In this sense, the end of GM
España value chain corresponds with the beginning of the dealers´ one.
Moreover, it is figured out that some of the big suppliers such as Volkswagen
(main rival in the Spanish market) and PSA. For instance, Brigstone provides tires to GM
España, Volkswagen and PSA. Additionally, BASF delivers plastic parts to PSA and GM
España.
Strategic implications
Figure 26. Value system
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Regarding strategic implications, it can be observed that if GM España does not
receive required materials or parts on time from its suppliers, production will be stopped.
For this reason, GM España could not be possible to deliver its car on time to dealers, and
as a consequence clients cannot get access to that product.
A possible solution could be reinforcing the long term contracts with those
companies which provide essential parts that few businesses have, with the objective of
production will never stop. On the other hand, another alternative could be diversifying
the number of suppliers which provide common parts or materials that most supplier
companies have. As a result, GM España could classify its suppliers into three levels (A,
B and C) and buy the required materials and parts from the one which offers best quality-
priced pieces. For example, supposing that there are three main suppliers A (60%), B
(30%) and C (%) and A gives GM España the best offer. But next year if supplier C gives
GM España a better offer, it will go to A (70%), so the competition among suppliers is
increased what it benefits to the company.
SWOT ANALYSIS
Strengths
Figure 27. SWOT analysis
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One of the main strengths General Motors has as a company, is the wide variety
of brand names. It is present in many different countries with different brand names:
Buick, Cadillac, Daewoo, Opel, Chevrolet…. This is a strength because if one of the
subsidiaries has problems, the company as whole will suffer a smaller impact. Besides if
General Motors España has liquidity problems, with the revenue from other subsidiaries
the problem can be solved.
As GM has a worldwide presence, they can export and import their products from
one country to another. This helps GM reduce its costs of production giving them the
ability to be more competitive. In Spain 95% of the vehicles manufactured by GM are
exported to countries such as the UK or France, where the production costs are higher.
This way GM will try to produce their cars and components in countries where production
costs are lower and they will export them.
When customers start looking for a new car, they search for the car companies
they known. That’s why having a good brand name will give the company more potential
clients. GM has a world brand name which will makes them a strong competitor.
As we can see in the graph, GM is one of the car-manufacturers with higher
investment in research and development, with around 7000 million dollars per year. These
research investments are very important because they can improve the quality their
products and reduce their costs.
Figure 28. Investment in R&D
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In Spain there are 3 vehicle models produced: Opel Corsa, Meriva and Mokka,
but all Opel models are available. General Motors has a very wide range of products,
which helps cover a larger target market.
GM is working on a new alliance with PSA, which will give the company more
efficiency, security and speed, and will reduce their costs. Both companies will work
together so their strengths will be higher and their threats smaller. This gives them a
strategic advantage towards their competitors.
Weaknesses
GM has recently faced some liquidity problems in Europe due to a reduction on
sales of 16%. They have therefore reduced by 20% their production, which affects their
brand image and will certainly reduce their revenues. Employees have faced a reduction
in their working hours and their salaries. This type of problems weakens the company’s
image and must be solved to avoid bankruptcy.
Even if GM has many subsidiaries, most of their revenues come from the sales in
the United States. This could be a problem, because if they have a problem in the United
States it could affect the other subsidiaries.
As we can see in the new TV advert, GM España has had some problems with bad
marketing investments. Being in a very competitive sector such as the car-manufacturing
means there is no place for mistakes. All marketing is very important, and must be done
correctly. GM España’s last commercial has created a bad image of the company in Spain
and sales will be affected for sure.
Being a very vertical integrated Company can be a weakness for GM. If there is a
problem with the production of the components they will have to pay for it and all the
production chain will be affected. The complexity of the distribution channel due to the
exportations can have a negative impact on the company.
As said before, GM has many subsidiaries and this can also be a weakness because
people may know the subsidiary’s name but may not associate them to GM. This brands
are especially difficult to associate to GM as their names differ a lot and have no relation
with the brand name General Motors. This will lower the brand awareness.
Opportunities
Nowadays, people are more aware of the need to reduce gas emission and become
more environmentally friendly. They therefore search for hybrid or electrical cars. GM
has started to research in this sector and the first environmentally friendly cars have been
produced. This a very important advantage as this market will be crucial in several years.
They have created the same car model in two versions, a normal one and one that uses
GLP which pollutes less. GM España has a very big share of this market.
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Furthermore, investment in R&D has made it possible to launch the new models.
This models satisfy the customer’s needs as they can choose how they want their car to
be. As competition is very high It is important to keep updated and to meet the client’s
needs.
Internet is a key factor in this industry. Companies have access to a huge amount
of information, from the customer’s tastes, to opinions of the company or trends. GM
must have a good data analysis department to gain the biggest market share possible.
Moreover, Internet is a good selling point. Clients must be able to see their cars and
customize it before buying it.
GM must reduce their costs as they are one of the companies with a higher
cost/revenue ratio. In order to reduce costs, they must deal with their suppliers to get
economies of scale. This can be done because in this industry the suppliers have a low
negotiation power. They must analyse the market as too adequate the price of their
vehicles to the market demand.
GM has already grown through acquisitions in the past, and it has had good results.
They should continue like this because the company will grow and competitors are
reduced.
Threats
Although global recession periods affect the whole economy, the car
manufacturing business is one of the most affected when people reduce their expenses.
This factor cannot be controlled or predicted and is a great threat for GM.
The fuel prices vary constantly with factors external to GM. When the price
increases the customers start getting interested in electrical car which are cheaper to use
as they use no fuel. When the price of fuel drops customers omit the electrical car and
focus on fuel cars because they are cheaper. This creates a great uncertainty in the sector
and will affect all GM’s subsidiaries.
Laws and regulations are becoming more important every day. This obliges the
companies in the sector to have additional costs. In addition to the laws all GM’s vehicles
must undertake, their factories must also be regulated to obey all the regulations. This
will increase GM’s costs as renovation of the plants and equipment must be done
regularly.
The prices of the raw materials needed to manufacture cars are constantly
fluctuating. This with increase the production cost of GM. An example of this is the price
of the steel in Spain. As we can see in the graph prices vary monthly and this will change
the margins of GM España.
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Figure 29. Steel price index
As GM España exports 95% of their manufactured vehicles, exchanges rates are
a very important threat. The company must take into account this rates to avoid incurring
into additional costs. This rates change due to factors external to the company, but are a
great threat for them.
Competitors worldwide affect GM España, as much in the country of production
as in the country where they are selling the final product. Nowadays, market such as the
south Korean or the Japanese are increasing their market share, as they offer a high quality
product at a low price. GM España must reduce their costs and margins as much as
possible in order to avoid losing clients.
New technologies are also a threat for GM. Businesses such as car2go in Spain
are a threat for the automobile sector because the population will start using the
application and stop buying cars. In addition, improvements in the public transports in
Spain will decrease the demand for new vehicles.
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CONCLUSIONS
In this project, we have studied General Motors, putting special attention in GM
España. We have analysed its position, its implementation systems and the decisions the
company takes, affecting the short and the long run. Summarizing, we can see that the
overall GM strategic planning is based in strong principles and values. The decisions they
take seem to be the outcome of studying and understanding the environment that
surrounds the company. This includes an internal and external analysis of the enterprise.
They try to maximize strengths by taking advantage of opportunities and minimize threats
by avoiding risks. We can say that this company looks at the long term, being able to
sacrifice short-term goals in order to accomplish more sustainable objectives. We can say
that they seek to be leaders in the industry they are in, as they state in the vision, but they
also care about doing it respecting their core values. General Motors cares about the
quality of their products and the welfare of the people that works for them.
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BIBLIOGRAPHY
http://www.gmsustainability.com/reporting/reports/MEMORIA_DE_RSC_2014.pdf
Ministry statistics and ANFAC.
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2013/2014, Universidad del País Vasco.
Tesina: “Aportación de la industria del automóvil al crecimiento económico de España e
impacto de las tendencias actuales en el sector”, Marina Bordacheva, 2014/2015,
Universidad de Barcelona.
GM Corporative Social Responsibility report, June 2015.
Slide Share “GM Global Strategy” article.
GM España employees.
http://autoproyecto.com/2014/01/los-fabricantes-de-autos-que-mas-invierten-en-
investigacion.html
https://www.opel.es/content/dam/Opel/Europe/spain/hq/es/02_Experience/MEMORIA_
DE_RSC_GENERAL_MOTORS_ESPA%C3%91A_2014.pdf
http://www.camara.es/relaciones-institucionales/estudios-especificos/indice-de-precios-
de-acero-corrugado-en-espana
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autogas-glp-de-fabrica
http://www.elmundo.es/mundodinero/2008/11/12/economia/1226492872.html
https://es.wikipedia.org/wiki/Opel
