Background of General Motors - Essay Example

? GM and FAW in China of the of the Table of Contents Introduction 3 A: Background of General Motors 3 B: Brief History of General Motors 4 Background of VOC Research for GM 7 C: Voice of Customers Methodology and Design 8 Methodology 8 Critical Evaluation 13 References 15 Introduction The automobile industry in all the nations contributes a large portion of a country’s gross national product. This segment of business industry not only enjoys the benefits of high economic surplus, but also generates large amount of employment opportunities for the workforce of a nation. At present many famous companies like Mercedes, BMW, Lexus, Renault, Tesla etc are successfully operating in the automobile industry. Moreover, the automobile industry spends large amount of money in research and development purposes. Like the modern electric or hybrid cars are the latest creation of the automobile industry (LOC, 2007). A: Background of General Motors General Motors (GM) is a popular automobile company based in America. The company is a giant multinational firm, with its headquarters in Detroit Michigan. The company manufactures and sells vehicles along with vehicle parts. The firm also engages in the trading of financial services. The company is a giant car manufacturer and provides its services in more than 37 countries across the world. Chevrolet, Cadillac, Opel etc ere the various brands under which GM sells its cars. The company employs more than 212000 individuals in the global economy. Right form 1931 to 2007 GM has been awarded as the leading car producer in America (GM, 2013). Wholly owned subsidiary companies sell the cars of GM in most of the economies outside America. However, it should be considered that the company sells its cars in the emerging market of China via joint ventures. The company claims in its vision that by enjoying the source of large financial base, it would offer best cars to its customers and would always provide utility to its partners, employees and shareholders. The cars and trucks manufactured and traded by GM are not only said to be of efficient in quality and cost, but are also fuel economic and safe. It makes sure that its manufactured vehicles are never subjected to recalls in the market. By providing good cars with modern unique designs, the company attempts to build lifelong relations with its customers. This helps the company park potential affluent clients, who tend to repeat their purchases in GM (Creswell, 1998). The company invests large sums of money in research and development purposes. This helps it to make more technologically advanced models of cars and invent new models of vehicles. GM provides long term value in investments to all its investors. The big business of the company continuously expands in terms of scale and scope, which gives complete confidence to the shareholders to invest in the shares of the company. Moreover, 212000 workers in the company, makes trading in more than 20 time zones in the globe possible, by acquiring the capability to communicate in more than 50 languages (Murphy, 2013). The company makes changes in its business operations according to the external business conditions in the global economy. It is empirically observed that since the last few years, the price of petrol is soaring significantly, moreover the extent of air pollution created by the traditional cars are also increasing rapidly. Since cars and petrol are complementary products, the demand for cars in the current market is falling due to the rise in price of petrol. Taking into consideration all such factors, GM has now started manufacturing electric cars that would run by battery or power. Such cars would not only be sustainable but would also avoid its dependence on petrol (Nieuwenhuis & Wells, 2003). B: Brief History of General Motors In July 13th 1956, China Central Committee along with the active support of Soviet Union established the first automobile manufacturing company in China named as First Automobile Works (FAW). Changchun China is the headquarters of FAW. Right from its inception, FAW have never ceased the growth of its scale and scope of business operations. At present the company not only manufactures varied models of cars, but also operates in more than 30 countries in the globe (Faw, 2013). Figure 1: Growing Demand for Cars in China (Source: PRLOG, 2013) The market demand for cars is rapidly increasing in China, as shown in the above bar diagram. China is considered to be one of the emerging economies in the world at present. With the growing level of Gross Domestic Product, the per capita income levels of China are also increasing with time. The rising middle income group in China has made the automobile companies more interested to expand their business in the country. GM have joined hands with the Chinese automobile company FAW to capture the growing demand for cars in China and win over a large customer base. On the other hand, it is also believed by FAW that joining its business with GM would enable it to expand its competences in future. Such a joint venture has helped FAW to overcome some amount of competition it faces in its domestic market against the other global business enterprises. The merged business firm of FAWand GM in China is named as FAW-GM Light Duty Commercial Vehicle Co. Ltd. The joint company in China is set with a 50-50 partnership (Just-auto, 2009). The company was established in August 2009 and is based in Jilin, Changchun. More than 55609 vehicles have been manufactured and sold by the company in 2012. The joint venture with FAW has helped GM have to won over the demand for a wide base of potential customers in China. Moreover, doing business with FAW has helped GM to implicitly analyze the internal market characteristics in China. The business operating cost that GM faces in China after getting in the joint venture is way less than what it would face if it would set up its own subsidiary in the nation. The joint venture has also helped GM to enjoy some demand from the traditional customers of FAW in China. Increased demand for cars in China has helped GM enjoy the benefits of economies of scale in production, with the help of which it has become successful in reducing it’s per unit cost of production (Schlossberg, 2008). Background of VOC Research for GM Business firms in the contemporary world primarily concentrate in the motto of ‘consumerism’. Voice of Customers (VOC) is the modern technique adopted by the business organizations to estimate the preferences, aversions and expectations of the consumers. GM gives substantial importance to VOC in its business. GM divided the SUV (sport utility vehicle) market in four segments in terms of vehicle size. The four segments are SUV-B, SUV-C, SUV-D, and SUV-E. SUV –B is the smallest and SUV-E is the largest segment among the four. GMC Envoy branded vehicles are categorized (internal code GMT 360) is in SUV-D segment. This segment has two subdivisions; the foreign SUV brands and the local SUV brands. The prices for the foreign SUV branded vehicles are more expensive than local SUV brands. GM-FAW in China has decided to use the platform of the last generation of GMC Envoy and create a new brand SUV access to the SUV-D local brand segment. There are two types of target customers in this segment. First type of customer is Private users in tier 3 and 4 cities who want an affordable SUV’s. Most of them are male small business men around 35 years old who have college background or above, their monthly income is around 11,000RMB (1800 dollars). They require SUV to meet their daily transport requirements and also can deliver the commercial cargo for their business from time to time. The second type of customer primarily works in government departments and special industries (mining, forestry, construction etc.). These customers expect to get reliable performances from their SUV (Cooper, 2012). However the demand features of U.S. and Chinese customers are different. So GM has realized its GMC Envoy brand, to be to meet the needs of the Chinese target customers. Therefore, GM-FAW decided to conduct a market research to find out the answer. There are two primary objectives of the GMC Envoy theme clinic. It wanted to assess the exterior and interior themes in reach, appeal, and brand image against key benchmarks and provide consumer insights to the design team to improve reach and appeal of the themes (Lamalfa & Caruso, 2000). C: Voice of Customers Methodology and Design The research and methodology will help to enumerate the ways in which GM has been benefited in its venture business in China after following the VOC principles in business. Methodology The methodology of GM-FAW’s market research has been done by combining quantitative and qualitative analysis tools together. Before the research, all the respondents were passed through screening and background survey. This was done by the researcher to make sure all the information from the respondents is qualified. For the quantitative part, the researcher used quantitative guide-administered survey with 2D images. There were 2 themes pictures for the exterior and interior phases and each of them comprised of 3 or 4 Benchmarks. The Respondents were taken in a room with theme pictures on the wall. The researcher asked them to see the pictures one by one and surveyed a questionnaire. The answer was filled out by researcher. For the qualitative part, there were four focus groups and each of them had 5-7 respondents per group. The quantitative survey was incurred to analyze the problems GM-FAW would face while altering its GMC Envoy design as per preferences of the Chinese customers. The qualitative analysis helped the company implicitly analyze the reasons behind the problems. The quantitative survey would help GM-FAW know the changes to be made for the product and the qualitative meeting would help the designer make the new product exceeds the expectation of customers in China (Burney, 2008). Design Sampling method and size Before the research, the market department made a customer analysis based on the data from vehicle administration office. The company pursued the demographic information from the customer analysis and the sample contained 82% of male customers and 18% of female customers. Among them about 82% were married, 98% were college graduates and above and 42% were entrepreneurs. The RMB 10,719 was their median income and their average was 36 years. The market department also did market analysis to confirm the benchmarks. The researcher chosen the competitors depend on the sales. Great Wall is the best sales brand under SUV-D local brand and it would be the main benchmark, and JMC Yusheng would be the secondary benchmark. There was also an inspirational yardstick from SUV-D foreign brand. The benchmarks helped the company analyze the preferences of the consumers (Denzin & Lincoln, 2011). Sample Details: 1. The individuals owned a SUV worth RMB 100,000 to 250,000 and OAL 4,500-5,000 mm. 2. The purchased vehicle was new in 2009 and 2010 and still owned. 3. The individuals who answered the questionnaire were the principal driver of vehicle. 4. The individuals significantly involved in the purchase decision. In the end, as per the budget of GM-FAW, the sample size included 254 respondents for the quantitative analysis and 48 respondents for the qualitative analysis. Location: For the location, researcher surveyed the questionnaire in two cities in China based on the vehicle registration data. The two cities were Chengdu and Weifang. Te two targeted location markets had certain special features. Chengdu was the traditional big market for SUV. SUV-C ranked 2nd and SUV-D ranked 6th in sales in Chengdu among more than 300 cities in China in 2010.The sales of Hover and Liebao were also high in this city. This proved that the city had many potential buyers of cars. Rather the location of the company in the South West of China away from the major markets of local SUV made the researcher analyze the consumer’s perceptions in an un-biased manner. The two selected cities were also more developed in China. Weifang was also the 3rd biggest market for Hover and Liebao cars in China. Thus the two markets chosen for the survey were not only good markets for the GM-FAW cars built were also good for the other car manufacturing companies. So analyzing the VOC of the consumers in such a market would surely help the company park more potential clients. Actual research instrument survey There were two sets of designs for FAW (internal code XL/NL) and GM (internal code XH/NH) GMC Envoy cars. The goal of the researcher was to provide a degree of perspective, without exaggeration, that could be perceived by the respondents as natural. The photos used were meant to provide clear analysis of the new designs to be made under the GMC Envoy brand. The color and background of the photos were also same. The researcher didn’t want the brand image to affect the respondents’ opinion. For example, some respondents don’t like Toyota and really are a big fan of Chrysler. When he would see an exactly same car with Toyota or Chrysler logo, he would get totally different opinion for it. Other Factors This whole research was conducted by IPSOS. The budget for this research was around 100,000 dollars. Every respondent who participated in both survey and focus group got 300 RMB as repay. The researcher spent two days for each city for the research. Outcome After the whole research, IPSOS did a report meeting for GM-FAW, and the key findings for this research were: Exterior: Both GMT 360 Themes received moderate very appealing ratings. The overall very appealing was comparable to the benchmarks, and to the inspirational Hyundai ix35 benchmark. Both GMT 360 Themes had similar levels of reach, which was somewhat lower than all the benchmarks, with the exception of the GreatwallHavalH3. Only the Hyundai ix35 meet the respondents Ideal Reach Level. Both themes peaked in Current or Classic. The Hyundai ix35 peaked in Fresh. Theme XH (and its XD derivative) was perceived to be younger, sporty and stylish, with more city SUV cues. Theme XL (and its XM derivative) was perceived to be suitable for business use, upscale, and with more off-road cues. XH: The front view was well received; however, most thought that the front/rear did not match. XL: Most respondents felt that the proportion was balanced, and front/rear matched. Interior: Both Interior Themes received higher Very Appealing ratings than the benchmarks, including the inspirational ix35 benchmark. Theme NL had the highest Very Appealing ratings. Both GMT360 Themes had high levels of Reach, just short the respondents Ideal Reach Level. None of the benchmarks approached the Ideal Reach Level. Both GMT360 Themes peaked in Fresh; NL peaked somewhat more clearly in Fresh. Theme NH was perceived to be more stable, and somewhat innovative. Theme NL was perceived to be more futuristic, and sporty. Both themes were better than most benchmarks and most of the respondents thought both themes were in the current and classic period. It meant that there was one serious risk for the new product. Customer may think the new product is out of style, when the new product would be launch in the market after three years (Richard, 2006). Considering the demand of the target customers and the limitation of GMT360, the designers in the engineer department worked with the market team to make the final decision. They selected XL + NL theme. For the interior design, it was more attractive to the customer and gave them a high sense of innovation. For the exterior design, there was a limitation by the platform; researcher tends to choose the classic theme and decided to lower the “out of style” risk for the new product Critical Evaluation The critical evaluation context of the essay will implicitly analyze the learnt from the empirical qualitative survey made for understanding the benefits of VOC in GM’s business operations in China. The resource left with the giant automobile producer GM was minimal at the time of the global financial crisis in 2009 (Szczeseny, 2013). However the company took the right initiative to augment its sales even in the crisis economic situations in the market. It is indeed true that at present the economic potentiality of the consumers in the emerging developing nations like China is way more than that of the developed economies in the world. Thus the decision taken by GM to merge its business with FAW was correct on this ground. Further it would never be possible for the company to park potential clients in China without following the principles of VOC in business. Sufficing the needs and preferences of the consumers helped GM to park potential Chinese customers. According to the research the GMC Envoy cars in China should be of specially design models that are similar to the best selling carts in the market. The company also should also constantly upgrade its product quality and style to minimize the risk of generating backdated models of cars (Gerbeau, 2002). References Burney, A. (2008). Inductive & deductive research approach. Retrieved from http://www.drburney.net/INDUCTIVE%20&%20DEDUCTIVE%20RESEARCH%20APPROACH%2006032008.pdf. Cooper, K. (2012). Qualitative Research in the Post-Modern Era: Contexts of Qualitative Research. Berlin: Springer. Creswell, J. (1998). Research design: Qualitative, quantitative, and mixed methods approaches. California: Sage. Denzin, N. K. & Lincoln, Y. S. (2011). The sage handbook of qualitative research. SAGE. Faw. (2013). About Faw. Retrieved from http://www.faw.com/aboutFaw/aboutFaw.jsp?pros=forward.jsp&phight=580&about=forword . Gerbeau, P. (2002). Lifecycle of the car industry. Retrieved from http://www.open.edu/openlearn/money-management/management/business-studies/lifecycle-the-car-industry. GM. (2013). General motors. Retrieved from http://www.gm.com/company/aboutGM.html. Just-auto. (2009). CHINA: New FAW-GM joint venture targets China’s lcv market. Retrieved from http://www.just-auto.com/news/new-faw-gm-joint-venture-targets-chinas-lcv-market_id100911.aspx . Lamalfa, K. & Caruso, B. (2000). The top 10 voice of the customer(voc) best practices. Retrieved from http://loyalty360.org/images/uploads/allegiance.pdf. LOC. (2007). Modern global automobile industry. Retrieved from http://www.loc.gov/rr/business/BERA/issue2/industry.html. Murphy, C. (2013, September 30). Germans think small in China. The Wall Street Journal. PRLOG. (2013). Global luxury car market: Trends & opportunities. Retrieved from http://www.prlog.org/12075334-global-luxury-car-market-trends-opportunities-2012-2017-new-report-by-daedal-research.html. Richard, G. M. (2006, April 9). Toyota, Ford, Mazda, GM: Using water-borne car paint. Treehugger. Schlossberg, R. S. (2008). Mergers and acquisitions: understanding the antitrust issues. Chicago: American Bar Association. Szczeseny, J. (2013, March 12). GM Using “Voice of Customer” to Transform Product Development Process. The Detroit Bureau. Read More