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= “GM – General Motors Essay | Business”;
$description =”Business Essay – A General Motors business essay to critically analyse the competitive business environment”;
$subject = “Business”;
1. Describe and critically analyse the competitive business environment in which General Motors (GM) is operating
According to Johnson and Scholes (2002) competitive business environment can be assessed from both macro and micro points of view. Based on this the use of the PESTEL framework which incorporates political, economic, social, technological, environmental and legal factors in such an analysis is a useful one in understanding the competitive position of General Motors in the auto industry. Firstly based on the details of this case study the most important force may be defined as technological trends within the auto industry in terms of Internet related information systems particularly. It is critical to be aware that the rapid development in computer based technologies along with the generation of an emerging demand for e-commerce along with globalisation pose problems for organisations such as General Motors. As then not only have customers become global competition has become intensive resulting in global capital flows and international sourcing of labour and resources in order for firms to achieve cost advantages.
Secondly it must be noted that customers have became more environmentally aware and concerned which means that environment friendly designs and products have increasingly important in considering competitive capabilities for automotive companies. Additionally legal requirements for environmentally friendly automotives and production processes create significant challenges for GM especially in its R&D process. Thirdly the rapid adoption of the Internet by people in terms of usage and numbers not only provides opportunities for GM in terms of online abilities to assist in satisfying customers better but also in terms of business opportunities for online shopping in terms of a ‘build to order’ customer service and in the provision of relevant information on products. Research has demonstrated that car buying falls into a high involvement category in understanding customer behaviour which suggests that consumers will spend more time on the information search process as well as comparing related and similar products, (Foxall, Goldsmith & Brown, 1998).
Furthermore developments such as NADA’s (National Auto Dealers Association) guidelines for the online selling of vehicles generated significant opportunities for GM in developing its web site based shopping model. Related issues have also been the impacts of changing lifestyles in turning to alternative modes of transport for example along with a decline in national economic performance (along with higher oil prices) which resulted in a growing demand for economical cars in terms of flexibility, reliability and efficiency. At this stage sophisticated design solutions and effective cost control became essential for GM in gaining and holding onto its competitive position in the industry.
Porter’s competitive five force model provides a useful angle in examining corporate competitive positions bearing in mind the industrial environment they are situated within, (Porter, 1980). As mentioned before the increasing power of customers has put pressure on GM in terms of cost control and delivering more consumer orientated services and tailored products. Automotive dealers played a vital role in communicating between car manufacturers and consumers thus the increasing bargaining power of dealers in choosing styles and products they wished to display to customers continuously forced GM to be more cost concerned in terms of inventory and better quality products in terms of design and components compared to its competitors. GM as a global manufacturer could also defend itself against new entrants into the industry. Also any slight decline in the usage of public transportation system as substitutes to cars such as trains similarly generates opportunities for GM in terms of increased demand.
2. Critically discuss the relationship between GM’s organization and its information technology infrastructure
The characteristics of its information infrastructure in terms of computer centres and corporate intranet have shaped GM’s organisational behaviour as well as its strategic decision making processes. In the case of GM its IT systems were based on an inefficient computerised system which reflected GM’s bureaucratic organisational architecture. It was the case that management attitudes towards human resources, operational control, supplier and dealer communications and customer service all tended to be less effective than its competitors. Particularly these trends were resulting from the impacts of globalisation and technological developments such as e-commerce. Competition within the auto industry became more intensive which required GM as mentioned to be more cost and customer focused. In turn appropriate organisational structures are argued to be critical in shaping correct responsive organisational behaviour, (Mullins, 2005). According to Legg (2003) GM’s structural changes can be seen as an evolutionary change since the major components and processes changed were supported by design in terms of IT infrastructure. The first example can be seen as the integration and standardisation of networks within the organisation which linked sections like manufacturing, financial management and customer data together to create a more holistic functioning of these sections. It is reasonable to say that this integration process enabled GM to control its entire operations process in a more direct manner supported by a more comprehensive understanding of customers and provided a strong financial background upon which GM could build its responses to challenges.
Linked to this program the impact of e-GM was to push GM’s organisational changes into the next step in terms of influences at the strategic decision level. Bearing in mind the overall strategy was to enable GM to be a smarter, leaner and faster company the Internet technological infrastructure reduced both time sensitive processes within R&D but also provided cost benefits from a more efficient supply chain management. Additionally in order to achieve a customer focused strategy the IT system provided professional electronic services as well as online financing for customers to assist them in the purchase of a GM product. At this stage it is fair to say that the information system not only enhanced internal relationships and communication within the entire organisation but also enhanced and improved external relationships with suppliers, dealers and customers.
In addition in respect of the online selling informational web site for GM it drove the organisation to be a more flat one in terms of hierarchy and structure due to its creation of effective knowledge flows and communication. The vital role of dealers in this especially in the delivery of an online selling model required GM’s management of inventory to be more effective in order to reduce risks and costs and enable dealers to respond to customers’ requests as quickly as possible. The new types of partnerships this engendered between GM and its major dealers to a large degree were affected by the efficiency of these information technology structures. However due to the rising power of customers companies’ competitive advantages relies on better value products and services thus the impact of these consumer demands has also shaped the development of IT systems between manufacturers and dealers.
3. Evaluate GM’s current business strategy in response to its competitive environment. What is the role of Internet technology in that strategy?
In order to compete more effectively GM adopted an integrated and strategically minded information technology platform in response to the changing environment it found itself operating in. From an internal perspective the information system was built in order to encourage free information flows between different levels, divisions and to connect separate computer centres in such a way as that an integrated information model, for example, allowed people in the financial office to acquire information from the manufacturing office effectively and quickly. Also of importance was the fact that the human resource department was able to run and develop employee training programs globally. The technological developments which were occurring in the macro environment along an increasing impact of globalisation meant that the competition in the auto industry became particularly severe which forced car manufacturers like GM to focus much more on process control in order to reduce cost and maintain profit margins. The sheer size of GM had before generated inefficiency in both its control and communication processes and thus it is fair to say that the Internet based information system which was developed recreated competitive advantages for GM in terms of cost control and savings as well as resource management which was responsive to demands and needs of the organisation.
Responding to the trends of the adoption of the use of the Internet in the US and access to web sites necessitated that GM adapt its online retailing model by being supported by its information technology system. Firstly consumers in the global context have become more demanding than ever before and more technologically sensitive in that consumer behaviour is shaped by the technological development process. As mentioned before legal developments and requirements for online auto retailing gave GM opportunities to benefit from their new integrated and sophisticated Internet system and inventory control by initiating a ‘build to order’ strategy. In addition dealers as vital partners with GM in implementing this policy meant that the strategic relationship strategy was based on effective communication and information exchange systems. This resulted in increased pressure on GM in controlling costs and ensuring the quality of its products.
The combined requirement from consumers who are more technology concerned and major dealers who have rising power in relation to car manufacturers in selecting what they want to sell resulted for GM in innovation within the design and production process. In the context of this innovation its Internet and information technology contributed to a large extent to improvements in the R&D process such as a reduced design time from 24 months to 12 months as well as innovative factors involved in the designing process which benefited from shared technology, information, models and resources. The strategic goal for GM to become the world’s largest e-commerce company was primarily a response to threats in the external environment yet this response was a slow one given the bureaucracies in GM which required long term redesign and restructuring during the evolutionary change process.
4. Analyse the management, organization, and technology issues you think GM has had to face and will need to solve in implementing its Internet strategy
Internet strategies have been widely adopted by companies in the global competitive business environment. However the implementation of such strategies for existing organisations generally takes a long time and are associated with high initial costs in the construction of new information technology systems, (Turban, 2004). This is true in the particular case of GM which revealed that the investment for building and redesigning the IT infrastructure was much higher than its competitors such as Ford and Chrysler due to the inadequacy of its prior systems. This raised doubts as to whether profit margins for GM could be maintained in the long term. Another point of consideration is that the maintenance of IT systems was expected to increase this cost also along with the initial cost for GM. It also required GM to recruit and maintain a skilled work force involved in this process and frequent employee training programs to effectively use the new systems.
Similarly the logistic system which was based on the information system provided benefits for GM in controlling processes and costs. However potential conflicts here might arise between different functions in different divisions under different cultural environments especially in the context of GM operating in different countries. These cross cultural operations which GM was involved in forced the company to be aware of differences such as relationships with trade unions in different countries. Particularly as mentioned in the study due to the information technology based logistics system general skill level requirements for workers decreased which meant lower salaries for workers at this level which generated significant employee and employer conflicts. The bureaucracy of its organisational structure to some extent could be improved by the new information technology system but in the long term its beneficial aspects can be said to remain unclear since organisational culture tends to be one of the most important factors in shaping organisational behaviour and management styles, (Brown, 1998).
The online retailing form and the new subsidiary OnStar seems to create new competitive advantages for GM in adopting sophisticated IT systems. However there are problems related to technology. For example security concerns over e-shopping in particular in the case of expensive purchases such as cars can easily create barriers to trust from consumers in choosing which dealers they wish to purchase from. Also of concern here is that the influence of information in the delivery process remained limited simply due to the unclear future of automotive products.
5. Discuss how GM will have to redesign its business processes to be able to compete successfully and achieve a leading role in the new economy?
Technological development is a driving force for global companies like GM in the adoption of information technology strategies in order to enhance their competitive positions. Bearing in mind the external environment and Porter’s (1980) five forces model it is vital for GM to keep in line with this trend as its competitors will do. First of all the IT system based logistic process should be more closely linked with suppliers, manufacturers and dealers. Revolutionary change in the organisational architecture will also be able to help GM reduce its corporate bureaucracy and help it to achieve a flatter structure which will encourage better information flows and exchanges.
Professional customer services are especially vital in modern business contexts thus GM should seek to exploit sophisticated information systems in understanding and then satisfying their customers more effectively than competitors. Critical here also is the fact that Human Resources are suggested to be the most important strategic resource for any company and are vital resources in terms of the implementation of an Internet related strategy in GM, (Torrington, Hall & Taylor, 2002). The Sales force is the principal means of direct communication with consumers and highly skilled engineering people are major innovative factors in the design and production process while management people aim to improve corporate performance by communicating. From this perspective it will be useful for GM to exploit an overall human resource strategy in supporting its information technology strategies and its relationship with the performance of other core business functions in the organisation.
6. In GM’s drive to sell cars on-line and to build-to-order, identify and analyse some of the problems that technology cannot address
According to Eagan (2001) relationship management principles have become more important in today’s business environment in that relationships among manufacturers, suppliers, retailers and customers plays vital roles in generating competitive advantages for companies. It is obvious that internet based information systems in GM allow better communication with suppliers and dealers as well as more effective customer data analysis and research. However the sales force plays an important role in the relationship building process through namely face to face communication being a critical factor in setting up long term relationships both with dealers and customers.
It can also be argued that viral marketing has become increasingly important in terms of online retailing and advertising. However due to security concerns barriers to selling cars online might rise. Previous study suggest that one of the most important barrier for customers in purchasing online is security concerns and this would seem to be particularly true in the case of car buying, (Solomon, Bamossy & Askegaard, 2002). Additionally in terms of high involvement purchasing behaviour customers require professional services and advice in considering functional characteristics related to cars. Whether the Internet can provide useful data for this information searching and gathering for customers requires effective web design and delivery of content.
It is obvious that the introduction of the policy of building to order forced GM to be more cost focused as well as have a higher quality customer service. The benefits from the shared information system means that in GM information flows as well as process control have been more effective. However standardisation might be challenged by diversified national, cultural as well as customer requirements which in turn mean adjustment in relation to computerised systems tends to create extra costs during this process.
GM Essay – References
Brown, A.D. (1998) Organisational Culture and Organisational Analysis, London UK, Financial Times Management.
Egan, J. (2001) Relationship Marketing: Exploring Relational Strategies in Marketing, London UK, FT Prentice Hall.
Foxall, G.R., Goldsmith, R.E. & Brown, S. (1998) Consumer Psychology for Marketing 2nd edition, London UK, Thomson Business Press.
Johnson, G. & Scholes, K. (2002) Exploring Corporate Strategy: Text and Cases 6th edition, Harlow UK, FT Prentice Hall.
Legge, K. (2003) Critical Perspectives on Organisational Change, Basingstoke, Paulgrave.
Mullins, L.J. (2005) Management and Organisational Behaviour, Harlow UK, FT Prentice Hall.
Porter, M. (1980) Competitive Strategy: Techniques for Analyzing Industrial and Competitors, New York, The Free Press.
Solomon, M., Bamossy, G. &Askegaard S. (2002) Consumer Behaviour: a European Perspective, Harlow UK, FT Prentice Hall.
Torrington, D., Hall, L. & Taylor, S. (2002) Human Resource Management 5th edition, Harlow UK, FT Prentice Hall.
Turban, E. (2004) Information Technology for Management: Transforming Organizations in the Digital Economy 4TH edition, New York USA, Wiley