International Business Environment at General Motors Company - Case Study Example

?General Motors (GM) College General Motors (GM) General Motors Company is an American multinational enterprise and is headquarteredin Detroit Michigan. It delivers services in over 150 countries in the world. General Motors Company is a source of employment and employs thousands of jobless people across the world. It is the largest automaker company in the world. General motors operate outside of the United States through its subsidiaries. The company not only sells these vehicles but also services them and manufacture through regional branches (Hill, Gareth, & Jones, 2009). Since 2010, the company has been making profits that are annually reported. General motors however can reduce tax and pay for it in future dates by carrying forward the past losses and applying it on future dates. It was estimated by wall street journal in the past that the tax break that the company will enjoy in the next 20 years will be close to $45 billion including credits for pension costs (Hill, Gareth, & Jones, 2009). In 2010 alone, general motors reported an earning of 4.7 billion us dollars. In the same year 2010, the company was ranked the second in the list of companies that produce 8.5 million units across the world. In the following year 2011, it was ranked the first with production of 9.025 units that were sold globally (Gall, 2011). These units sold in 2011 command an 11.9% of the market share in the motor vehicle industry across the world (Gall, 2011). General motors performance was boosted by its brand called Chevrolet that recorded a global sale of 4.76 million in 2011. Cadillac, Chevrolet, Buick, and GMC are the four main divisions of gm products (Gall, 2011). The GM always do some restructuring and this have helped the company a lot to retain the quality of vehicles it produces and have also enabled the company to produce safe and fuel efficient cars. General motors products have done very well in Asian countries over the past decade. In china, it manufacture its products through shanghai GM which is a local manufacturer and in Japan it manufacture through GM Chevrolet shop. Its sales in China rose 28.8 percent to a record 2,351,610 units in 2010 (Mueller, 2008). To ensure that it keep up with the research, GM set up a research centre in shanghai to help develop electric vehicles and gasoline-hybrid cars engines and other fresh technologies. Since fuel prices skyrocketed in 2000 and 2010, general motors have shifted its interest to produce small capacity vehicles in the United States (Mueller, 2008). This program will help create thousands of jobs and help the company increase its sales. In 2008, the company made it public that it was considering phasing out some brands that includes Pontiac in an effort to get 25 billion dollar loan through the help of congress (Mueller, 2008). It also made other very serious proposals in 2009 that include the phasing out of Saturn, sale of Saab and either to phase out or sale Hummer. Pontiac was therefore to cut its model and possibly remain with one but had to shift to production of youthful and sporty models. General Motors would cut out another 7,000 to 8,000 factory jobs in the United States under a revised business plan set up by Obama administration (Kerzner, 2010). Fritz Henderson the CEO of the company said that Pontiac brand would be closed by 2010, terming it an “extremely personal decision.” In addition to speeding up decisions on Saturn, Saab and Hummer, GM will be left with four brands – Chevrolet, Buick, GMC and Cadillac (Kerzner, 2010). Shanghai General Motors' sales surpassed those of sister company Shanghai Volkswagen's in 2005 and was in that year China's top selling joint venture. Its sales keep going up in 2006 and 2007 but later in 2008 recorded slight reduction in its sales trailing shanghai VW, but it was later to return to number one slot in 2010 and have kept that position to today (Kerzner, 2010). Shanghai GM introduced Chevrolet brand in the country in 2005 and in that year it also started domestic production of the Cadillac CTS that set up the base for the three brand strategy it use today (Kerzner, 2010). In 2006, Shanghai GM brought over the Buick Lacrosse and Park Avenue. In the same year, the JV starts importing Saab vehicles. Shanghai GM's growth was inhibited by its inability to embrace diversity, not even one of JV’S models made to the top three slots of individual top sellers with Chevy and Buick Kaiyue Excelle being the exception (Kerzner, 2010). The joint venture's sales in 2008 fell by 8.3 percent, closing behind Shanghai VW and FAW-VW. The joint venture introduced new models over the next two years and also updated the already existing versions as a response to the fall in its sales, the measure help but back the companies’ sales to the previous position and exceeding it by 2009. General motors progress has however not been that smooth due to the factors outside the companies jurisdiction. These factors come from within the international business environment and it includes political social economic technological as well as legal factors (Date & Burns, 2005). GM is facing the challenge of pollution. The cars produced by the company emit carbon monoxide that everybody believes that it is not environmentally friendly. These trends have made the company to invest a lot of its money in research and development to possibly come up with technology that will make its cars environmentally friendly (Date & Burns, 2005). The pumping of huge sums of money into this research program has slowed the industry growth in the past decades. Politics have also impacted on the general motors progress. In the last few years, there was a debate on whether the company should be bailed out and this ignited a very fierce debate between the republicans and democrats and during the recent campaign, Obama hit out at Romney saying that the former Massachusetts governor is on record saying that the company should be left to go bankrupt. There has been also a political debate on whether to give general motors a tax break (Date & Burns, 2005). Many believe that it is true especially the democrats while the republicans who are opposed to big governments believe that the government should not play any role. The economic crisis that have hit European countries which has led to drop in the companies’ performance due to uncertainties in those markets. The economic crisis in European countries is pulling down the sale of the companies products in those countries because people are becoming poorer and poorer and can’t afford these cars (Date & Burns, 2005). Dealership program have also negatively affected the company. These have lead to low sales per leadership across the globe. In the recent years, the company has also been faced with challenges that have got to do with the changes in the customer preferences and perceptions rising fuel prices, growing legacy cost and losing its market share to foreign competitors (Crumm, 2010). The fastest growth in the foreign automobiles companies like the Toyota is also eating into the general motors market share. General motors sale in Europe have drastically dropped due to the penetration of other companies like Toyota in the region (Crumm, 2010). Toyota is preferred by consumers because of its low prices and models and the general economy of the engine. The bad relationship between United States and Arab countries has also eaten into companies’ expansion (Crumm, 2010). The politics of it is very bad because the Arab countries don’t like the united states as much as their products. Other companies who are mostly seen as politically neutral have their products booming in the region. The profits this other companies draw from these countries invest back beating general motors in terms of competitiveness. General Motors was able to build cars at a much cheaper cost than its rivals in the past as a result of its move to adopt vertically integrated cooperation. It was a good source of competitive advantage. The strategy however did not work for long in favor of the general motors but to the advantage of the competitors who manufactured cars by buying parts from other companies (Crumm, 2010). Social factors have also had share in the general fall on the general motors. A high population creates room for more if this population prefers general motor as their car of choice (Austin, 1998). Asian countries which fastest growing does not prefer general motors and this have affected companies’ sales in those regions pretty big. Life style changes have also affected the sales within the company as well as culture. Pension liabilities and health care for the employees have eaten down general motors. This benefit to the employees inhibits the companies’ growth and can not invest heavily in research and development putting it at a position to be surpassed by other companies that invest heavily on the same (Austin, 1998). Bureaucratic culture as well has effect because each unit markets to the same consumer separately and differently with almost the same products, this strategy cost the company dearly. The company also has been found that it underutilize its plant and technology. If these two components of production were utilized it will raise company revenue and its market share in general. The threat to this industry in the future includes the fact that in the future, the cost will be attached to both safety and environmental impact – US Federal Legislation and Regulations as well as Foreign Legislation and Regulation, deteriorating standard of the infrastructure in the country vast competition coming from domestic and foreign automakers that thrives at lower costs, uncertainties in Global economy and its impact on customers’ purchasing power of the customers, inflation, unemployment, interest rates and recession, the constant rise in oil prices push potential customers into buying motor vehicles that consume lesser fuel (Pelfrey, 2006). In conclusion it would be prudent for a company like Ford to shut down a number of plants and accept a limited fraction of the U.S. market this strategy will not do any good to GM because then GM would produce and sell lesser vehicles, meaning reduced income for those benefit to its employee in terms of pension and health. GM will continue to carry its heavy burden of paying the pension plan and healthcare to its employees until future date when majority of these elderly people die and that will be good news to general motors (Penrose, 2009). It also has to change and improve on its brand, efficiency and quality if it has to keep up with the competition within the sector. Japanese companies take fewer time to put their newer models into the market and GM seems to lag behind on these and even though it has cut down the number of hours it take to assemble a vehicle into finished products they still have to do something to be at same competing level with Japanese industries. These are various recommendations to help GM keep its market share, they can not just be trusted not unless they are put to test and results analyzed and room be given for adjustments where there is need and applicable. References Austin, E, 1998, Strategic Management in Developing Countries, Kentucky: Simon and Schuster Crumm, A, 2010, What Is Good for General Motors? Solving America's Industrial Conundrum, London: Algora Publishing Charles Hill, Gareth Jones, & Gareth R. Jones, 2009, Strategic Management Theory: An Integrated Approach Strategic Management Series, New York: Cengage Learning Date, C & Colin Date Mitch Burns, 2005, 101 Gm Muscle Car Performance Projects: Motorbooks Workshop Series, Ohio: MotorBooks International Grasso, D, 2012, High-Performance GM LS-Series Cylinder Head Guide, Texas: CarTech Inc Gall, T, 2011, General Motors: Life Inside the Factory: One Blue-Collar Worker's Journey. Maidenhead: AuthorHouse Harold Kerzner, 2010, International Institute for Learning, Project Management: Best Practices: Achieving Global Excellence, New York: John Wiley & Sons Mueller, M, 2008, the Complete Book of Classic GM Muscle: Buick, Chevrolet, Oldsmobile, Pontiac, New York: MBI Publishing Company Pelfrey, W, 2006, Billy, Alfred, and General Motors: The Story of Two Unique Men, a Legendary Company and a Remarkable Time in American History, Washington: AMACOM Div American Mgmt Assn Penrose, E, 2009, the Theory of the Growth of the Firm, London: Oxford University Press Read More