Macro Environment Analysis of General Motors (GM)

Macro Environment Analysis of General Motors (GM) In reflecting the macro environment, it is vital for us to identify the factors that might affect the number of variables which can influence the organizations supply and demand levels and the costs as well. The drastic changes in society day by day will create an impact on the function of the whole organization (Allaya, 2008). The political environment is basically the laws and regulations that a particular business has to follow in order to make sure the business owners do not get arrested or being fined for not following the regulations. The domestic market of General Motors in USA has played an important in the political environment of the country. In the last election, the company has contributed almost $802,500 dollars with 52% of that amount given to the Democrats. The company congratulated President Barack Obama on his election by displaying the Detroit Auto Show 2009 as the first African- American president of the United States (Hardigree, 2009). This contribution has improved the reputation of the company. However, the company were declared bankrupt in 2009 and has affected thousands of jobs, shuttering dozens of assembly and parts plants and closing more than 1000 car dealerships worldwide (White, 2010) But with the help of the new President, he promised that these company will not face such problem in the future and the government will contribute almost $30 billion to reorganized the company. 1.2 Economical Environment The domestic economic environment in each country is highly integrated with other countries as well. The understanding of economic environments of foreign countries and markets may help the managers in your company to predict how the trends and events in their environment can take effect of the respective companies future performance (Witiger, 2010). Due to the recent bankruptcy issue, the new Obama policy has caused the company to fall into the governments hand with 62% of ownership. Besides that, the company is making a drastic change which is affecting at least 20% of the salaried workforce to be cut off. Moreover, assets are sold at $4 to $7 billion and halting its quarterly dividend payout (Chubb, 2008). In a recent research, the first quarter of 2009, the Gross Domestic Product (GDP) decline of -5.7% which is considered as the worst performance of the company in 60 years of business. But personal consumption expenditures offered a positive contribution. It increased 1.5% in quarter compared to 4.3% in quarter four (Wall Street, 2009). 1.3 Socio-cultural environment The social and cultural differences can influence the business from country to country. General Motors creates environmental principles to serve the society in United States by dedicating protection for human health, natural resources and global environment. The company is aware of the impact on the products and manufacturing facilities when integrating with environment. In order to follow the trend, the company is constantly improving the performance of the new vehicles and also the processes used to manufacture those vehicles. The initiatives to help the environment are fuel economy, reduction of green house gas emission, recycling and reduce air pollution. Moreover, contributions in monetary and intellectual to the education community are one of the socio-cultural as well. This initiative is designed to help the young people to ensure their involvement in thinking smart and provide workable solution for their future challenges (GM, 2010). 1.4 Technological Environment Technology is highly reputable amongst various sources on strategic management. It is widely used in organizations and industry part of model which creates competitive advantage. Currently, technology that is creating impact in the US market is electric cars. These cars are expected to have major impact in the present and future auto industry as it can provide reduction in city pollution, less dependence on oil and expected rise in gasoline prices (Macalister, 2010) The company have launched the latest Chevrolet Volt which is an electric car that can operate under the range of weather climates and driving conditions which will not cause problem by a minimal battery level (GM, 2010) This new advanced technology innovate consumers to purchase one because it will help to improve the environment and to live a healthy lifestyle. Moreover, spending more money on research and development can help the company to provide the latest product for their consumers base on the new trends and brand type. 2.0 International Consideration General Motors is a company with diverse brands and choices. The company sells over 7.5 million vehicles in over 120 countries worldwide and are confident to be the number one choice for the consumers and able to provide the latest technology that can benefit their customers. 2.1 Operations General Motors have expanded their business to international market in North America, South America, Europe, Africa, Australia, and Asia/ Middle East as well. As we know, General Motors do not only manufacture and sell vehicles but the company also provide other product and services such as GM mobility which can help those people with special needs and disabilities, GM OnStar provide a comprehensive in-vehicle safety, security and communication service, and GM Cardmember Services. Besides that, genuine parts and accessories of General Motors are sold through GM Goodwrench and AcDelco brands to suppliers which is authorised by General Motors itself and to be distributed worldwide (GM, 2010). 2.2 Involvement in international business The companys recent involvement in global market is with South Korea with majority shareholders investing in GM Daewoo Auto and Technology Co. of South Korea. The GM Powertrain product has a purchasing collaboration with Suzuki Motors Corp, and Isuzu Motors of Japan. Big giants such as Toyota, Daimler, Chrysler and BMW collaborate with General Motors for its advanced technology in manufacturing vehicles (GM, 2010). As one of the top automotive manufacturer, it is best for us to have a better relationship with other countries because it will help to expand the companys business and brand reputation. In order to expand our business internationally, we need to consider about the country that the company want to export or start a business, the cost, type of customers, and the competitors in that country which will be our rivals. It will not be an easy task for the company to globalise their business because we need to get licence from the government to start the business and we need to m eet their requirement in order to sell our products. 2.3 Internationalization Method There are several internationalization methods the company used in international business which are by export based consists of direct exporting and indirect exporting, acquisitions, joint ventures and strategic alliances . We are already exporting our products to China. Base on pass results, the company have managed to export $ 1billion worth of vehicles, component kits, machinery and equipments (Chinadaily, 2008). Besides that, General Motors have acquisition with AmeriCredit Corp and it is named as General Motors Financial Company. This acquisition is formed to help customers on their vehicle financing especially in US and Canada (GM, 2010). On the other hand, General Motors acquisition with Chrysler worth $5 billion turned into disaster as there were no sales to raise cash and the company lost $2.5 billion. New United Motor Manufacturing Inc(NUMMI) was once run by General Motors, due to internal problems such sex, drugs and well known for producing defective vehicles, Toyota agreed to joint venture with General Motors to solve these problems. There were misunderstandings occurred between the Japanese and American because of differences in culture and behaviour. Some of our employees at NUMMI were not happy with the management, they sabotaged the vehicles, and they put coke bottles into the door panels to annoy customers. The reason why Toyota agreed to joint venture with our company is because they were facing import restrictions from US Congress and with this help they can start building small cars in US. But they decided to terminate the agreement due to lack of improvement in our management (Langfitt, 2010). 3.0 The Growth of Business To potray alternative corporate growth strategies, Igor Ansoff created a market matrix that focuses on the companys present and future products in the market. There are several ways to grow the firms existing product and new products along with existing markets and new markets. In order to achieve this strategy, there are four product market combinations in Ansoff Matrix which can help to establish the growth of business of General Motors. 3.1 Market Penetration The first growth strategy the company should use is market penetration. This strategy is used to achieve growth in our existing products in our current market segment in order to increase the market share of this company. By maintaining the market share in a growing market will improve the growth of the product and we may have opportunities to increase our market share when our competitors have reach their capacity limits in the market (Botten, 2009). In todays world, more people are conscious about the environment therefore we should produce hybrid vehicles to meet the current market and increase our market share as well. As consumers are more concern about the rising of fuel prices that lead them to require alternative fuel sources, we should create a variety of hybrid cars base on consumers affordability (Gray and Pawlovski, 2007). In our current market, there are several hybrid vehicles which allow consumers to choose what type of vehicle they require. They can either choose Buick Lacrosse Hybrid, GMC Yukon Denali Hybrid, Cadillac Escalade Hybrid, Chevrolet Silverado Hybrid, Chevrolet Tahoe Hybrid, GMC Sierra Hybrid or GMC Yukon Hybrid. These vehicles are designed to efficiently boost their travels in busy city, streets or open highway (GM, 2010). 3.2 Market Development Market development is the second growth strategy we should consider using. This strategy enables us to market our current existing products into a new market segment. Venturing this existing product into a new place will not be easy for us because we will have competitors in that new market. There are many possible ways in approaching to this strategy (Botten, 2009). One of the strategies is by exporting our products to our branch in Shanghai GM, China. Previously, our company have raised its stake in a joint venture with Wuling Group in China which is the manufacturer for small passengers vans in Chinese market. Raising its stake in this company has helped us to generate profit in China because commercial vehicles in that country have a lower unit of profit (Schepp, 2010). Shanghai GM sold almost 1.8 million cars and trucks in China alone which is just below what we have sold in USA during that year (Mucha, 2010). As the second top seller of General Motors Co., we should start selling hybrid vehicles in this country so that the Chinese citizen will start practising this culture to be an environmentally-friendly. The Buick Lacrosse will be the best choice to start our first hybrid vehicle. This vehicle will go into mass production of Shanghai GM plant and we should not expect a high volume of sales in short period of time but we are able to bring this new technology into Chinas new market that will support sustainable growth and lead consumers into the right direction to save the environment (Baker, 2008). 3.3 Product Development Product development will be our next strategy which is to market a new product into our existing market. This strategy will be appropriate to our existing customers and it will not be an easy task for the company because we are implementing a new product and we do not know whether this product will generate profit to this company (Botten, 2009). This new product will help us to have a better environment. Likewise, hybrid vehicles are created to save fuel and to have a cleaner environment. Chevrolet Volt will be the best option for us to market our new product. This car is powered by electricity and runs with gas and emission free. The advantage of having this car is it only commutes gas free on electric for an average of USD 1.50 per day. This product should be priced reasonably in order for us to impress our customers with our low price on electric cars (Evarts, 2009). If we set the price at a very high rate then it will damage the companys reputation and endanger our financial future by taking us far behind from our competition in the industry. 3.4 Diversification Finally, the fourth strategy is diversification and it is considered as the most risky among the four growth strategies of Ansoff matrix. This strategy requires us to create new products into a new market. However, diversification may tend to be less risky if we have the opportunity to generate high rate of return. As one of the top automotive manufacturers in the world, we should take advantage in any opportunity that we can get in this growing market (Botten, 2009). General Motors can expand business in South American countries such as Brazil, Argentina and Paraguay. We need to spend at least $500 million to finance the manufacturing and this centre will be responsible in developing small cars of General Motors in order to support and boost our operations in General Motors Daewoo in Korea (Klum, 2010). There are six latest car models that we can sell in the new market. The models are Celtic, Classic, Corsa, Prism, Malibu, and Agile (General Motors, 2010). We need to have promotion for these cars to impress consumers to buy our product. Our competitor Honda will be releasing their latest Honda Accord in the market so our best product that can compete with Accord is Malibu (Klum, 2010). 4.0 New Venture In order to venture our business in a country, we need to consider the economic strength of the country and whether the consumers have the capabilities in purchasing our products. As the new venture in the automotive industry, we might face risk in pure competition in rates of return across other firms and industries. To obtain a good business and strength we can use Porters Five Forces as our guideline to achieve this. 4.1 Rivalry There is rivalry in every business industry and it is the main hub of porters five forces. Although at times rivalry amongst companies brings many positive factors, the negative should not be looked upon lightly. Competition constantly influences prices of automobile to drop. However, in Brunei rivalry takes place amongst imported brands such as Toyota, Nissan and Proton where car are priced at a cheaper rate compared to neighbouring countries. Thus, quality control plays an important role in the sales of cars. Besides that, the elimination of taxes also ensures that prices of cars are cheap. (Too, 2007) The automobile industry in Brunei is a thriving industry because although it is populated by approximately 400,000 people, sales of cars average at a thousand passenger vehicle a month (Too, 2010). Thus, Brunei provides a suitable market for our company to market our products. 4.2 Threats of Substitutes Besides that, threats by new entry substitutes should also be considered. Generally, when a company starts up, they have price elasticity and this forces price down. However, this is only a small threat as entry barriers protect established companies. Buyers would always be inclined to purchase automobiles based on personal liking. Therefore, marketing of products play an important key in ensuring that sales of cars increase. The entry of Proton in the Brunei market for example, showed that buyers doesnt necessarily buy new products based on promotion but rather the quality of vehicle at hand (BruneiTimes, 2009). Thus, as new ventures ourselves, we need to ensure that promotion of our product runs smoothly without any glitch to ensure establishment of our firm. 4.3 Barriers to Entry Being a company interested in venturing our company into Brunei, barriers to entry must be taken into account. Barriers such as government policies, capital requirement and brand identity may hinder the set up of our company in Brunei. The government of Brunei will waive 20% of import duty however they would incur a 20% tax on excise duty (Brunei Times, 2008). In order for our company to venture in Brunei we would need a firm financial foundation. The capital requirement to start up the business must ensure that our operational cost to facilitate research and development, globalisation and flexible manufacturing is possible. (Beaudette, Fitzgeraldand and Morath, 2009) Lastly, the identity of our brand must be known to consumers. The attributes of a car is very important in promoting. The first attribute that is looked upon is the style and appearance of the vehicle. (Karolefski, 2003). Branding of our products should also concentrate on safety and performance of the vehicle to ensure satisfaction among users. 4.4 Buyer Power The buying power of consumers in Brunei should be analyze before a venture takes place. In a country with more than 400, 000 citizens it would appear that sales would not be as promising but according to statistics, the average of car sales in Brunei is at a thousand passenger a month. Besides that, Brunei is ranked one of the top in the world when it comes to the Gross income per capita at $26,325.00 per personin the year 2009 which is one of the highest in Asia. (World Bank, 2009) This shows that with the right marketing strategy, buyers would definitely purchase our cars. The amount of supplies must correspond with the amount of buyers. Being one of the smaller nations, this would probably be a setback in our set up. The product differentiation is also a factor when it comes to buyers. As some companies produce eco-friendly vehicles, our hybrid car would definitely be a competition to other companies. The first green car in Brunei which is Toyota Prius, would not be an issue if we can bring in a better product into Brunei such as Chevrolet Volt which is fully ran by electric compared to Prius which is only a Hybrid car. (Bahar, 2010) 4.5 Supplier Power Lastly, before venturing our business in Brunei we should consider the supply power to ensure that we could meet the demand. The demand for smaller car has definitely increased due to the increase in fuel prices. Thus, it is crucial that our company has the supply to meet the demand of the consumer in Brunei. (Henry, 2008) Our company would do well in Brunei by marketing an eco friendly car as the only car in the market are hybrid cars. The differentiation would boost business as most consumers are more eco friendly. The presence of substitute input also lowers the power of the suppliers. For example in the automotive industry fuelled powered cars can be substituted with hybrid cars. This lowers the power of the petrol fuelled cars (Simerly, 2002). The lack of substitutes in the eco-friendly environment would guarantee an increase in supply and hence an increase in demand. As consumers are more willing to purchase new vehicles, the supply should always be balanced with the demand of consumers (Cristello, 2009). The availability of credit as well as the low prices fixed would determine the amount of demand that is created and as a new venturing company; our supply should meet the target.