General Motors - Research Paper Example

The demise of General Motors (GM) and its root cause GM rose out of the shadows of Ford Motor Company from the mid-1920s by focusing on what the consumer wanted and being hawk-eyed over their competition. The company executives came up with a daring strategy that changed the organizational structure and culture to one that would support a vertically integrated, multi-product enterprise. However after gaining industry dominance, Nancy Koehn - Harvard’s James E. Robison Professor of Business Administration – points out at the same executive for leading the company to decline due to a failure of leadership (Staff 14).

Nancy Rottering, a former finance executive at GM, describes how GMs executives isolated themselves from the rest of the company (“The Rise and Fall of General Motors” 4). Management isolation slowed down GM’s ability to recognize and to adapt to a rapidly changing environment. The company failed to recognize the following: (1) that their American consumers’ wallets were getting tighter and that probably they needed smaller and more fuel-efficient vehicles like Toyotas; (2) they forgot to keep a close eye on their competition (Toyota beating them on economical cars and BMW beating them on luxury and coolness); (3) that their structure and culture was impeding them to compete effectively (Staff 14).

The US Government’s bailout Joseph Bower, Harvard’s Baker Foundation Professor of Business Administration, like many wondered whether it was right for the US government to support one competitor (GM) against a group of healthy rivals (Staff 16). Of course fears of government intervention have been justified through lessons from history demonstrating governments’ poor stewardship of industry. However, this time round Mr. Obama’s goal was to restore GM to health and to get out as soon as possible as has been evident through the reduction of its stake in GM from 61% to 37% (Cohan 5; “General Motors: Government Motors No More” 4).

On hindsight, it turns out that the US government’s bailout of GM was a good thing considering that costs of doing nothing would have been far greater than what American today will look at as expected losses (Cohan 1). Is GM now on the right track? At the moment GM still has a weak portfolio of products in comparison to its competitors and its future does not seem bright either. GM’s game changing strategy of fostering specialization within its subsidiaries around the world may now prove to be its undoing.

The reason for this is that GM’s North American plants have developed engineering competencies in large vehicles which surpass the 35.5 MPG standard that the Obama administration has promised to make obsolete by 2016 (Staff 6). This implies that GM North America has to develop new competencies in smaller vehicles within the next five years, while it battles with the incumbent automotive giants such as Toyota who have competencies in that area. We cannot forget that as it faces these challenges, the GM will continue to bear public pressure on issues such as domestic employment and compensation from a public that bailed it out.

This removes the option of offshore manufacturing from the possible strategies that the company could deploy. Works Cited Cohan, Peter. “Bailing Out GM and Wall Street: The Results Prove TARP Was the Right Move.” DailyFinance 18 Nov 2010. Web. 4 Apr 2011. “General Motors: Government Motors No More.” The Economist 19 Aug 2010. Web. 4 Apr 2011. Staff. “GM: What Went Wrong and What’s Next.” HBS Working Knowledge 15 June 2009. Web. 4 Apr 2011. “The Rise and Fall of General Motors.

” The Week 11 June 2009. Web. 4 Apr 2011.