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General Motors is America's largest car supplier and one of the world's largest automotive companies. It designs, manufactures, markets, and distributes automotive and truck components, providing financial services with regional headquarters in Detroit's Renaissance Centre. William C. Durant founded the company in 1908. General Motors is ranked number 10 in the Fortune 500 list of the biggest U.S. companies by total revenue in 2018. It produces vehicles in 37 countries. Chevrolet, Buick, GMC and Cadillac are its main car models. It is divided into three divisions: GM North America (GMNA), GM International Operations (GMIO) and GM Financial.
“To create a future of zero crashes, zero emissions, and zero congestion, and we have committed ourselves to lead the way toward this future.” https://www.gm.com/our-company/about-gm.html
General Motors’ core values include “innovation, responsibility, teamwork, and continuous improvement.”
“to create an automotive (3) future of zero crashes, zero emissions, and zero congestion,(2) and we have committed ourselves to lead the way toward this future of global automotive customers (1) through innovation, responsibility, teamwork, and continuous improvement(4) .”
“to earn customers for life by building automotive brands(2) that inspire passion and loyalty(6,7,8) through not only breakthrough technologies(4) but also by serving and improving(5) the communities(1,9) in which we live and work around the world. (3)”
The EFEM for GMs presents major opportunities for the company in the near future. Small vehicles segment has a higher potential in emerging global markets. The technically knowledgeable young generation, pressure towards emission-free mobility and ongoing adaption of autonomous vehicles, open new business avenues for growth. Increased connectivity and accessibility, AI, ML and investing in multiple technologies are consistent with GMs strategies.
The General Motors EFEM also reveals major threats that it will face in the near future. A possible increase in import taxes would result in a drastic reduction in profits. Reducing electric vehicle manufacturing costs and adapting customers is already challenging. The predicted economic slowdown, US relations with other nations, and fuel price fluctuations are unfavorable to the industry.
Toyota is a Japanese multinational manufacturer of automobiles. In 2017, Toyota is the largest manufacturer of vehicles and its corporate structure has more than 350,000 employees worldwide. As of 2018, Toyota was the world's sixth largest revenue-based company. Toyota was the first car manufacturer in the world to produce more than 10 million vehicles per year. Toyota was Japan's largest listed company by market capitalization as of July 2014.
Toyota is the world's market leader in hybrid electric vehicle sales, and one of the largest companies to promote hybrid vehicle mass-market adoption around the globe. Toyota is also a leader in fuel-cell hydrogen vehicles. The 10 million milestones achieved in January 2017 were the cumulative global sales of Toyota and Lexus hybrid passenger car models. Its Prius family is the top-selling hybrid nameplate in the world with more than 6 million units sold worldwide in 2017.https://global.toyota/en/company/vision-and-philosophy/
A global leader in the automotive industry headquartered in Dearborn, Mich., Ford Motor Company produces and distributes vehicles across six continents. Ford has manufactured operations globally, including in the United States, Canada, Mexico, China, India, the United Kingdom, Germany, Turkey, Brazil, Australia, Argentina, and South Africa. Ford also has an agreement of cooperation with the Russian automaker GAZ. It was founded and incorporated in 1903 by Henry Ford. The company's car brands include Ford and Lincoln, with nearly 177,000 employees and 65 plants worldwide. The Ford Motor Credit Company provides financial services.
https://corporate.ford.com/company.html?gnav=footer-aboutford
According to Competitive Profile Matrix, General Motors ranked as the lowest among its two main rivals Ford and Toyota. The company’s low-ranking stems from falling behind in 6 out of 12 critical success factors and they are; Product Quality, Global Footprint Expansion, Financial Position, R&D, Automation/Technology and Top Management. However, company even ranks evenly with its competitors in areas such as Price Competitiveness, Hybrid/Fuel Efficient/Electric, Customer Loyalty, Reputation and Loyalty of Customers. Further, General Motors still dominates its two rivals over US Market Share.
Compared to 2017, General Motors significantly improved its net income in 2018. This was primarily due to the elimination of discontinued operation loss (European Business) and lower taxation due to favorable tax law changes.
In 2018, however, operating profit (EBIT) decreased dramatically by 26% due to inefficiencies in the cost of the goods sold and increased operating costs. Other than that, there is a 14% increase in interest expenses.
General Motors increased its asset investment by 7 percent in 2018 compared to 2017. Its asset investments have increased primarily in long-term assets and cash and equivalents. On the other hand, by lower inventory levels, lower debt credit to debtors, and increased current liabilities, the company has deteriorated its working capital position. An increase in assets was primarily financed by increasing liabilities, hence the company's exposure to debt financing increased by 9 percent in long-term debt and other current liabilities.
GM's financial performance (ROA percent and ROE percent) increased in 2018. For 2018, however, both the GP margin and the margin of operating profit are adverse.
The company's overall gearing rate has decreased as per the book values. However, the company's debt servicing capacity has decreased significantly (22 to 14 times) due to higher interest commitments and deteriorated operating profit margin from 8% to 6%.
The position of working capital in 2018 was weak. Current insufficient assets shown by lower current ratio. In contrast, spending in property was not justified by producing enough revenue. (FA Change and TA Change)
General Motors ' main strength is its market share leadership. In addition, the main advantages for the organization are strengths such as presence in China, strong R&D and electrification strategies. Other than that, the company's strengths are also addressed by global renewable energy initiatives, higher profit margins, comprehensive financial products, United Autoworkers, dealer network and fulfilment of financial goals.
General Motors ' high concentration in North America and China is a major weakness. In addition, the complexities of implementing autonomous vehicle strategy, poor marketing strategies, increased regulations and international threats, fragmented markets, increased labor costs, loss of supply chain, unsuitable customer mix and declining sales position have also undermined the competitive position of the business on the market.
This matrix shows possible strategies for the company. The condition was a comprehensive analysis of internal and external factors and their influence on the company.
General Motors is the US automotive industry's market leader. Therefore, General Motors divisions; GMNA, GMI, and GM Financial are competing for BCG matrix comparison purposes with General Motors itself.
Cash cow: GMI with a high market share in low-growth markets. The goal should therefore be to produce further revenue without compromising the company's long-term sustainability.
Stars: The market leadership position of both GMNA and GM Financial needs continued investment to maintain. Compared to other two divisions, they have higher ROI. The strategy should therefore be to finance subprime customers by investing more in GM Finance. This also increases the likelihood of GM Finance to become a cash cow for the organisation.
All GMNA and GMI are for all IFE and EFF with similar weighted scores. For these divisions, therefore, the prescription is to expand and develop. For these divisions, intensive (market penetration, market development, and product development) or integrative strategies (backward integration, forward integration, and horizontal integration) may be most suitable.
Nonetheless, for both EFE and High score for IFE, GM Financial has an average weighted ranking. Therefore, holding and maintaining the strategy should be. It is possible to consider market penetration and product development as possible solutions.
Through 'Aggressive Posture,' all three General Motors divisions show that the company can make full use of internal resources to take advantage of opportunities for international market share. Because the company has high financial resources, high position in the market, has a competitive advantage and is part of an attractive sector, working under relatively stable environmental conditions.
As described in Michael Porter's overall cost leadership generic strategy, this opens the way for cost leadership strategy. Cost Management is the approach aimed at making processes more effective and reducing costs wherever possible. It can come from productivity scale or range, overhead management, careful customer choice, automation, and standardization. The goal of cost leadership is to be at the market's lowest cost. This will allow the company to survive a price war and reach the highest margins in the absence of a price war.
This matrix has two dimensions: competitive position and market growth. It is a useful tool for a company to develop alternative strategies. All four General Motors models (Crossovers, SUVs, Vehicles, and Trucks) fall into Quadrant 1 according to our study.
General Motors therefore has a relatively strong strategic position, focusing on established competitive advantage and taking advantage of it as long as it allows it. Through implementing strategies for product development, business development, market penetration, the organization should concentrate on existing markets. The organization has already embarked on similar diversification strategy to minimize the risk of limited lines of goods. The organization can still retain its emphasis and follow a vertical, backward and forward set of strategies to reduce the possible challenges that may occur in the future market place.
The Quantitative Strategic Planning Matrix compares two different strategies that can be the best option for General Motors to pursue in the future. The first strategy involves General Motors improving its current products in the existing markets. The second strategy for the company focuses on entering into new markets with existing products. Both strategies are assigned a rating against each strength, weakness, opportunity, and the threat of the company on a scale of 1 (not attractive) to 4 (highly attractive). If the factors do not apply for the strategies, they are rated with 0. However, if one strategy was rated the other one needs a rating also.
General Motors should diversify with existing products into new markets instead of focusing on the markets of the US and China. The company should therefore invest outside of the US and China in new distribution channels and manufacturing facilities.
General Motors has been analysed through different matrixes to understand and determine the most suitable strategy for its future success. Accordingly, BCG, IE, SPACE, Grand Strategy and QSPM matrix have been applied for our study.
As per BCG matrix, GMI considered as a “Cash Cow” and GMNA identified as a “Star” that is going to be a “Cash Cow”. Therefore, it is important to use strategies relevant to a “Cash Cow” for both divisions. That generates more sales without affecting stability of the business.
Further, IE matrix prescribes to grow and build all divisions as they have average scores. Strategies recommended were market penetration, market development, product development, and integrative strategies. Grand Strategy matrix also prescribes similar results as all products fall into “Quadrant 1”.
Moreover, SPACE matrix identifies General Motors' ability to use its strength to capitalize on external opportunities.
Finally, QSPM matrix recommends a market development strategy instead of market penetration as a suitable strategy for growth.
The recommendations for improvements were derived from the SWOT and QSPM, which contains the weighted factors to support the importance of the recommendation.
It is recommended to use strong R&D skills to develop products with multiple technologies, AI and IoT capabilities and enhance the company’s Electrification strategy. Further, same strategy can be strengthened through global presence to cater the global emission-free requirements. Further, without being cost-effective in electric vehicles it is impractical to gain sustainable market growth in future. Therefore, it is encouraging to invest in mass production whenever possible.
On the other hand, it is important for the company to diversify into other markets (excluding US and China) to minimize the risks associated with concentration. Further, there is a possible hike in import tariffs. As a prevention measure, flexibility of international manufacturing facilities will be improved and investments made in local facilities for import substitution of components that are imported currently.
Furthermore, emerge into new markets will not be possible unless the company partners with new distribution channels and networks. Developing strong branding among youth would be beneficial in the short-run as well as in long run.
General Motors Company has a regional divisional organizational structure. Characteristics of General Motors’ organizational structure:
Corporate Functional Groups. General Motors Company’s corporate structure has corporate functional groups as a secondary feature. The company uses these groups as a means to integrate all business operations.
The organizational structure of General Motors provides limited support for international brand consistency. This leads to a lack of focus on regional markets, resulting in reduced branding and marketing consistency on the global automotive market.
It is therefore important to develop a suitable marketing campaign which will establish consistency in the branding of General Motors. This recommendation may improve the strength of the company's brand. For example, General Motors can build stronger brands that attract target customers around the world through a cohesive and effective marketing campaign.
The Perceptual Map focuses on four major vehicle categories and a comparison of their price (y-axis) and performance (x-axis). All products are in the high priced high-performance segment. From this, it should be very important for General Motors positioned close to each other are seen as similar to the relevant dimensions by the consumer.
General Motors ' EPS / EBIT Analysis can obtain the necessary capital from either stock or debt for the list of recommendations since the EPS for the two financing options has no difference under their EBIT ranges. In the future, the financing option for General Motors will be 60 to 40 debt versus stock financing, with more debt than stock to ensure that ownership is somewhat diluted and that interest on debt financing benefits from a tax shield.
The Company Valuation section presents the value of General Motors with Ford included under the four methods of corporate valuation which are the net worth method, the net income method, the method of price-earnings ratio, and the method of outstanding shares with the average method included. General Motors is extremely strong in revenue with $14 billion relative to its biggest rival Ford. It is vital that the company undertakes to maintain and enhance its value in the future. Compared to its top competitor Ford, General Motors is extremely strong in its value by over $14 billion. Moving forward, it is vital that the company commits to maintaining and enhancing its value.
With regard to the projected statement of income, General Motors will be in a good financial position with the implementation of the list of recommendations over the next three years. Operating profit is projected to grow by more than $4 billion over the next three years as a result of high revenue growth of $11 billion from marketing, brand improvement to increase sales and cost efficiency. This is better than in 2017 through 2018, where revenue grew by just over $3 billion and operating profit fell by over $3 billion.
Two key changes in the anticipated balance sheet are the $20 billion increase in cash and equivalents and the $20 billion retained earnings account over the next three years. Also, with General Motors pursuing a 40 percent equity to 60 percent debt ratio, $12 billion increase in liabilities and $20 billion in common stock over the next three years.
Compared to historical ratios, General Motors will have better liquidation over the next 3 years from the high growth of the current and quick ratios. Also, equity will grow more compared to debt as seen from the drop of the Debt-to-Assets and Debt-to-Equity Ratio caused by the major increase in the retained earnings account. Most importantly, company has been able to improve Gross profit, Operating profit and more consistency with high Return on Assets and Return on Equity. The company will experience some drops in a few of the ratio metrics such as Total assets turnover, fixed assets turnover, Times Interest Earned from 2019 to 2021. All in all, the metrics reveal that General Motors can successfully expand its operations and improve its global presence, brands, products, and systems.
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