As a result, the market share of GM has been slipping over the years.
Like all North American and European car manufacturers, GM has also been outsourcing production facilities to low cost destinations in Latin America and Asia since the 1990s. This has enabled it to capture new markets as well as reduce costs to some extent. But, in North America, it remains straddled with high costs because of its legacy of high employee costs and strong trade unions that prevent shut down of loss-making plants.
Besides, GM has invested little in research and product development. Hence, its numerous brands are ageing and less competitive in comparison to the sleek models manufactured by Japanese and Korean manufacturers.
The automobile industry is one of the largest industries in the United States and contributes 5 percent of the private Gross Domestic Product (BERA, 2004). The country is also the largest manufacturer of automobiles in the world, having produced 12.2 million units in 2002. The "Big Three" US automobile manufacturers - General Motors (GM), Ford and Daimler-Chrysler - producers 76 percent of the vehicles sold in the US while 18 percent is contributed by Japanese manufacturers - Toyota, Honda, Nissan, Mitsubishi, Subaru, Isuzu - and 2 percent by European manufacturers - BMW and Mercedes (division of Daimler-Chrysler). While the Asian and European manufacturers rely on exports, the US is the principal global market of automobiles hence the demand for US manufacturers is generated mostly domestically and to a small extent from Canada.
II.A.1. Industry trends, conditions and key strategic factors
Historically, North American manufacturers have been major players in the global automobile industry and GM, since its formation by William C Durant in 1908, has been a name to reckon with (Jones, 2005). However, over the period of a hundred years, much has changed in the structure and pattern of the industry, forcing GM to diversify from high-end passenger cars alone to catering to different segments of customer demand as well as engage in strategic partnerships with global players and extend production facilities in foreign lands (BERA, 2004). Particularly since the last half of the 1990s, globalization of automobile manufacturing, primarily aimed to cut product costs, have resulted in multiple production facilities down the value chain in a number of countries across continents. All the major players have invested heavily in outsourced destinations in Latin America, China, Malaysia and other countries in south east Asia. The "big Three" of North American automobile manufacturers, GM, Ford and Chrysler have also engaged in strategic partnerships with European counterparts. The industry has seen consolidation along the three tiers, with the first tier being composed of GM, Ford, Toyota, Honda and Volkswagen while the lower two tiers initiating mergers among themselves in order to remain competitive.
II. A.2. Analysis of competitors
In the early years of the 20th