GM’s Competitive Strategy Analysis



GM’s Competitive Strategy AnalysisGroup#1Info 6464/28/2014 TOC \o "1-4" \h \z \u PART 1. ANALYZE THE EXTENDED SUPPLY CHAIN PAGEREF _Toc386471697 \h 21.1 The Extended Supply Chain Analysis PAGEREF _Toc386471698 \h 21.1.1 General Motors’ Extended Supply Chain Model PAGEREF _Toc386471699 \h 21.1.2 General Motors’ Upstream Suppliers PAGEREF _Toc386471700 \h 21.1.3 General Motors’ Downstream Distribution Channels PAGEREF _Toc386471701 \h 31.1.3.1 Penske PAGEREF _Toc386471702 \h 31.1.3.2 UPS PAGEREF _Toc386471703 \h 31.1.4 General Motors’ Distributors PAGEREF _Toc386471704 \h 41.1.4.1 Assembly Line in the US PAGEREF _Toc386471705 \h 41.1.5 General Motors’ Collaborators PAGEREF _Toc386471706 \h 41.1.5.1 Research Partnerships PAGEREF _Toc386471707 \h 41.1.5.2 Joint Ventures PAGEREF _Toc386471708 \h 41.2 Strategies to Manage Pressures PAGEREF _Toc386471709 \h 51.2.1 Pressures Faced by General Motors to Manage Supply Chain PAGEREF _Toc386471710 \h 51.2.1.2 Lack of Communication with Suppliers PAGEREF _Toc386471711 \h 51.2.1.3 Pressure to Localize Supply Chain PAGEREF _Toc386471712 \h 51.2.1.4 Need for Greater Supply Chain Efficiency PAGEREF _Toc386471713 \h 51.2.2 Competitive Pressures Critical Success Factors PAGEREF _Toc386471714 \h 61.2.2.1 Localize Supply Chain in Emerging Markets PAGEREF _Toc386471715 \h 61.2.2.2 Improve Communication for Better Supplier Relations PAGEREF _Toc386471716 \h 61.2.2.3 Improve Logistics and Reduce Costs in Supply Chain PAGEREF _Toc386471717 \h 61.2.2.4 Increase Distribution Efficiency PAGEREF _Toc386471718 \h 61.3 General Motors’ Extended Supply Chain Conclusions PAGEREF _Toc386471719 \h 6PART 2. ANALYZE THE FIRM'S COMPETITIVE POSITION PAGEREF _Toc386471720 \h 82.1 Automobile Industry Competitive 5-force Analysis PAGEREF _Toc386471721 \h 82.1.1 Rivalry between existing competitors PAGEREF _Toc386471722 \h 82.1.2 Threat of entry by new entrants PAGEREF _Toc386471723 \h 82.1.3 Threat of substitute products PAGEREF _Toc386471724 \h 82.1.4 Bargaining power of buyers PAGEREF _Toc386471725 \h 92.1.5 Bargaining power of suppliers PAGEREF _Toc386471726 \h 92.2 General Motors’ Competitive Position Business Strategy. PAGEREF _Toc386471727 \h 92.2.1 General Motors’ Competitive Forces Summary PAGEREF _Toc386471728 \h 92.2.2 General Motors’ Competitive Forces Action Plan PAGEREF _Toc386471729 \h 102.3 General Motors’ Competitive Position Conclusion PAGEREF _Toc386471730 \h 102.3.1 Business-Oriented Critical Success Factors PAGEREF _Toc386471731 \h 102.3.2 Technology Strategy PAGEREF _Toc386471732 \h 10PART 3. DERIVE AND PRIORITIZE CRITICAL SUCCESS FACTORS PAGEREF _Toc386471733 \h 123.1 Competitive Strategy and Key Business Goals PAGEREF _Toc386471734 \h 123.1.1 General Motors’ Main Opportunities and Threats PAGEREF _Toc386471735 \h 123.1.2 General Motors’ Main Pressures and Threats PAGEREF _Toc386471736 \h 123.1.3 General Motors’ New Competitive Strategy PAGEREF _Toc386471737 \h 123.1.4 General Motors’ Main Business Goals PAGEREF _Toc386471738 \h 133.2 Critical Success Factors and KPIs PAGEREF _Toc386471739 \h 133.3 GM’s IT Strategy Implications PAGEREF _Toc386471740 \h 134. Works Cited PAGEREF _Toc386471741 \h 14PART 1. ANALYZE THE EXTENDED SUPPLY CHAIN 1.1 The Extended Supply Chain Analysis1.1.1 General Motors’ Extended Supply Chain ModelFigure 1 above shows General Motors’ extended supply chain. General Motors operates in an industry with a large number of small suppliers, separated across several tiers. Some of these suppliers supply several large automakers, while others are locked into supplying one firm. GM competes with a small number of large domestic and foreign automakers. It also collaborates with these automakers on joint ventures and research initiatives. These interactions are described in more detail in the following analysis. 1.1.2 General Motors’ Upstream SuppliersGeneral Motors’ upstream supply chain consists of many small firms, none of which are big enough to have significant individual bargaining power. GM works with 2,700 direct-materials suppliers, of which the 400 largest firms account for 90% of GM’s annual purchasing spending. (Sedgwick) In 2012, GM’s annual spending on direct purchase from suppliers was estimated to be $77 billion.Table 1 shows total sales in 2009 (the most recent year for which accurate data is available) for the 10 largest suppliers in the North American auto industry. Taking into consideration that most of these firms supply parts to other firms in addition to GM – primarily Ford and Chrysler – even the largest suppliers only account for a small fraction of GM’s panyLocationTotal North American OEM automotive parts sales (dollars in millions) 2009Magna International Inc.Aurora, ON$8,162Johnson Controls Inc.Plymouth, MI$4,992Delphi Corp.Troy, MI$3,762Denso International America Inc.Southfield, MI$3,448Continental AGAuburn Hills, MI$3,374Robert Bosch LLCFarmington Hills, MI$3,330TRW Automotive Inc.Livonia, MI$2,970Lear Corp.Southfield, MI$2,910Dana Holding Corp.Maumee, OH$2,666Aisin World Corp. of AmericaPlymouth, MI$2,532Table 1. Total sales in 2009 by the 10 largest suppliers to North American auto firms. Adapted from Automotive News, 2010.The abundance of suppliers in the market, and absence of any large players has historically allowed GM to leverage a large amount of power over its supply chain. For example, GM is able to encourage competition and improved performance among its suppliers by grading suppliers on several key metrics and offering incentives to the highest-scoring firms. These incentives include “better access to GM’s purchasing brass, earlier looks at GM’s product and technology plant, and training,” and are geared toward helping GM identify and strengthen its relationships with the most innovative suppliers. (Sedgwick 2014)Despite the power that GM has over upstream firms, there is reason for the company to be concerned about losing its ability to attract the best and most innovative suppliers as partners. A survey conducted by Automotive News in 2013 ranked GM 9th out of 14 firms in supporting supplier innovations. By comparison, Ford was 2nd. (Sedgwick 2014) GM will be at a disadvantage in competing with other firms to innovate in fields such as greater fuel efficiency and connectivity, which are likely to be in high demand in the coming years.One recent event that demonstrates GM’s tenuous relationship with suppliers is its introduction, and eventual retraction of more restrictive terms in its supplier contracts. In July 2013, GM made some changes to its standard terms and conditions, which many suppliers saw as a way for GM to “recover warranty and safety-recall costs, take over suppliers’ intellectual property rights and access their financial information” (Walsh 2014). A general uproar among GM’s suppliers – led about a dozen firms that make up GM’s supplier advisory council – caused GM to backpedal and remove some of the contentious terms from its agreement. The episode underscored the suppliers’ bargaining power when united by common demands, as well as GM’s general disconnect from the needs and expectations of its supplier base. As the president of one auto industry analytics firm puts it, “GM, historically, has never looked to suppliers before they did anything, but they realized quickly this was not… the sort of relationship they want with suppliers” (Walsh 2014). While GM may not stand to lose as much from supplier discontent from firms in other industries – “few, if any suppliers chose to forgo GM’s business because of their concerns” (Colias 02/17/2014) – the company is at a disadvantage if suppliers do not see it as amenable as competing firms.1.1.3 General Motors’ Downstream Distribution ChannelsGM has faced many challenges in keeping track of its supplies. In order to resolve this issue, GM has hired two firms Penske and UPS to evaluate its distribution line and make changes which will benefit the company. 1.1.3.1 PenskeGMM works with more than 1700 suppliers that produce approximately 13000 parts a day. GM has selected Penske logistic to maintain its transportation network.Challenges:According to Penske’s analysis of GMM’s supply chain, it was concluded that GMM did not have overall supply chain visibility in addition GMM lacked quality control. Furthermore, GMM could not accurately predict inventory needs at the plants or monitor carrier progress. In addition to the challenges facing GM, the carriers could not effectively communicate their status to GM, which in turn resulted in plant managers to allocate a significant amount of time in the tracking of shipments.Solutions and Results:In order to resolve these challenges which GM has been facing, Penske has implemented and developed software which would provide carriers with a precise route and schedule on a daily basis while tracking exact car numbers and pickup quantities. The software developed by Penske, has allowed plant managers to be aware of possible delays from carriers. Equipped with this information, plant managers can actively plan and create alternatives. The implementation of this software has reduced GMM’s transportation cost by 15% and increase the carrier pickup time by 98% and the delivery rate by 99%. [1]1.1.3.2 UPSChallenge:GM engineers closely monitor the trends of warranty parts repairs in order to make crucial decisions about parts requiring analysis. The logistics are challenging—GM receives parts from approximately 9,000 dealers in the United States and Canada as well as additional parts from other countries. Previously, GM dealers had to package the parts, address them to the designated supplier at one of more than 200 locations, take them to a post office and pay the shipping costs up-front. This process required GM to repeatedly call the dealers to determine if they had shipped the parts, and then contact the suppliers to verify the parts had been received.Solutions:1. ???UPS Supply Chain Solutions offered GM a total material recovery solution--from door-to-door package delivery to inventory management, and the advanced technology needed to streamline and control the GM supply chain2. ???Established a warranty parts center in Lake Orion Michigan- Working closely with GM engineers, UPS was able to establish a center where parts can be shipped. This is very convenient for GM engineers, as well as GM’s suppliers.3. ???Dealers can ship parts to repair station at no cost to dealership- When a GM engineer selects parts for analysis from a database of dealer warranty claims, the dealers involved are notified electronically to ship the parts to Orion. The dealers package the parts and apply a pre-printed UPS return service label. The regularly scheduled UPS driver then picks up the part at no cost to the dealership. [2]1.1.4 General Motors’ Distributors1.1.4.1 Assembly Line in the USAs previously stated, GM operates in many countries. And in these countries, GM operates several production and distribution plants. ?In the UK GM operates two plants, ?Spain one plant, Austria one plant, Poland two plants, Germany four plants, Australia two plants, Canada four plants, Thailand one plant, India two plants, South Korea four plants, Vietnam one plant, Russia three plants, Mexico four plants, China six plants and Indonesia one plant. In this analysis, we only consider plants which are located in the United States where GM has most of its plants. In the US, GM owns and operates eleven plants: Lordstown, Wentzville, Fairfax, Orion, Flint Assembly, Arlington, Bowling Green, Detroit-Hamtrack, Fort Wayne, Lansing Grand River, Lansing Delta, Township. [3]The extended supply chain feeding a GM assembly plant has many tiers and intermediaries that could be local or overseas. ?Several GM assembly plants concurrently build the same global vehicle platforms with common parts from a shared global supply base. [4]1.1.5 General Motors’ CollaboratorsGeneral Motors collaborates in several ways with competing firms at home and abroad, as well universities and private laboratories. Much of GM’s collaboration is focused on research into new technologies, which provide a competitive advantage to all involved parties. Additionally, joint ventures with other automotive companies provide GM with a cost-effective entry into emerging markets, including China.1.1.5.1 Research PartnershipsOne significant way in which GM collaborates with other automakers is the United States Council for Automotive Research (USCAR). USCAR is a collaboration between GM, Ford, and Chrysler to “advance important, socially responsible automotive issues related to energy, the environment, and safety” (USCAR 2014). This initiative strives to accelerate research that would be “more difficult, potentially redundant, and… impossible to achieve as quickly by individual companies.” USCAR is involved in a larger government-industry partnership called USDRIVE, in which the financial support of the U.S. Department of Energy provides GM and the other automotive firms with an incentive to conduct research in efficiency and energy sustainability.USCAR’s stated goal is to “strengthen the technology base of the domestic auto industry” (USCAR, 2). As such, participating automotive companies seek an advantage relative to foreign competitors. Collaborating with competing firms and receiving federal funding gives GM a greater incentive to invest in high-risk R&D that could potentially develop into turnaround technologies. These innovations will allow GM to anticipate future consumer demand and government regulations concerning more efficient vehicles.In addition to USCAR, General Motors strives to innovate through partnerships with universities and independent research facilities. The General Motors Collaborative Research Lab is a research institute in which GM collaborates with Carnegie Mellon University to develop “smart car” technology. (Carnegie Mellon University 2014) Another research institute, the Institute of Automotive Research and Education, was formed in partnership with the University of Michigan, and focuses on research in battery technology, engine systems, smart materials, and advanced manufacturing techniques. (Weinert 2010) These initiatives provide GM with the opportunity to develop new technologies quickly and efficiently, similar to the benefits provided by USCAR. At the same time, the participating universities are able to attract leading researchers and provide their students with exposure to advanced automotive engineering concepts, leading to benefits for both parties.1.1.5.2 Joint VenturesAs discussed in our previous report, one of the greatest opportunities that General Motors for General Motors in the coming years will be the potential of entry into emerging markets. Over the last few years, China has become the world’s largest auto market, and GM has been its largest foreign player, selling more cars there each year than in the US. (Terlep 2012)GM’s foray into China has been successful largely due to its formation of joint ventures with local automakers - the company has 12 joint ventures in the country. Most of these joint ventures are with Shanghai Automotive Industry Corp. Group (SAIC), the largest Chinese automotive company. The largest and most significant joint venture formed between GM and SAIC is Shanghai GM, a company supported by a full network of sales, aftersales, and parts centers in China. (General Motors 2013) In 2012, the company opened its fourth manufacturing base in China. The manufacturing bases and distribution network that Shanghai GM has set up in China allows General Motors to achieve the goal of localizing its supply chain in this country, leading to greater efficiency in production.1.2 Strategies to Manage Pressures1.2.1 Pressures Faced by General Motors to Manage Supply Chain1.2.1.2 Lack of Communication with SuppliersAs a company that is not known for good relations with suppliers and hasn’t been known to promote innovation, GM is in danger of losing some of the more innovative ideas generated by its upstream companies. While GM has shown steady improvement in its supplier relations over the past decade, it still has a reputation as a hard liner on pricing and costs, and is still considered to be below-average in supplier relations. (Colias 2/11/2014)GM’s Strategic Supplier Engagement program, which provides incentives for high-performing suppliers is one of the initiatives that the company is undertaking to correct this issue. Suppliers are assessed based on quality, cost containment, supply chain efficiency, effective communication, and innovation. (Sedgwick 2014) However, this program only includes GM’s largest suppliers, providing limited value to over 2,000 firms. It also passes the responsibility of innovation to firms in the supply chain.If General Motors is to improve its supplier relations, it needs to invest in improved communication channels – a goal with which IS can help. Many of GM’s current problems stem from an inability and unwillingness to gauge supplier attitudes toward current business relationships and proposed changes. An enterprise-wide system that GM could use to receive and analyze supplier feedback, and determine the needs of the 2,700 firms in its supply chain would benefit the business. Harmful events such as 2013’s dispute over contract terms could be avoided, and the company would have a better gauge for how it can foster supplier innovation.GM is already taking steps to address these issues by improving supplier relations with a monthly Supplier Business Meetings that is webcasted to a large number of its suppliers. The purpose of this meeting is to “gain input and a consensus approach on GM-specific topics,” and the participating firms account for 80% of GM’s annual purchasing. (General Motors 2012) However, a system that could solicit continuous, rather than monthly, feedback from suppliers would likely be more beneficial.1.2.1.3 Pressure to Localize Supply ChainAs General Motors expands into new markets, it’s faced with the reality of established supplier and distribution chains that do not geographically correspond to their new customer base. Grace Lieblein, GM’s Vice President of Global Purchasing has addressed the company’s commitment to “build where we sell and source where we build” ( 2014). GM’s purchasing and engineering teams constantly analyze customer requirements that will have to be met over the next five to ten years, and identify suppliers that have the right quality, cost structure, and technology.Sourcing from emerging markets often involves greater risk, including a lengthening of the supply chain. As a result of greater uncertainty, GM needs to modify its standard supply processes in these markets. In the short run, GM is able to mitigate some of this risk by holding extra inventory as buffer stock, which is a strategy that has been used in several markets, such as Brazil. ( 2014) Ultimately, however, keeping surplus inventory is inefficient, so GM would benefit from more accurate predictions for the amount of inventory that it needs to keep in stock at various stages of new supply chains.As GM operates in a greater number of diverse markets around the world, it also has the opportunity to benefit from standardized engineering and manufacturing platforms that can be collaboratively supported by engineers from different markets around the world. To achieve this goal, GM has partnered with Cisco to implement a Plant Floor Controls Network (PFCN) solution. The PFCN system is an integrated engineering and manufacturing platform that replaced many of GM’s legacy systems, which were often incompatible with each other, allowing for greater reliability, as well as improved communication and collaboration across different parts of the supply chain. By providing access to PFCN throughout different parts of its supply chain, GM is able to rapidly troubleshoot issues and devise solutions collaboratively. (Cisco 2014)1.2.1.4 Need for Greater Supply Chain EfficiencyA recent survey has found that the increasing global demand for vehicles has put strain on the suppliers currently in the market, pushing the suppliers’ production capacity. From the point of view of GM and other automakers, the major concern as a result of this development is the potential for breaks in the established supply chains. GM has stated its goal of “working with suppliers to take out waste” and implement lean concepts throughout the supply chain. () Although GM has stated its intention to work with suppliers on this issue, and has claimed to receive “outstanding suggestions and input” from its supply base, an apparent lack of effective feedback and communication channels between GM and its suppliers suggests that solutions to optimize the supply chain are not being located as effectively as possible.As GM works with a greater number of global suppliers, it has contracted with an increased number of third-party logistics companies (3PLs) to manage its extended supply chains. GM currently has agreements with 7 of the 25 largest 3PLs in the world. (Foster 2012) In order to be able to effectively manage such a large number of supply chains and 3PL relationships, GM benefits from a single point of contact for all of its outsourced logistics. For this reason, GM has formed a joint venture called Vector, which runs the company’s supply chain in the US and oversees operations that have been contracted to 3PLs. A central point of contact for its supply chain partnerships makes it easier for GM to locate and eliminate inefficiencies.1.2.2 Competitive Pressures Critical Success Factors1.2.2.1 Localize Supply Chain in Emerging MarketsGeneral Motors has effective supply and distribution chains serving its established markets, but is not as well equipped to efficiently serve its emerging markets. GM’s success in China shows that the formation of joint ventures with local automakers in emerging markets is instrumental to achieving this goal. As GM works with newly-established supply chains, it will also be able to benefit from analytics that would gauge the risk involved with each step in the supply chain, as well as a system that would provide effective communication between GM’s engineers and suppliers to troubleshoot issues.1.2.2.2 Improve Communication for Better Supplier RelationsGeneral Motors tends to score low in terms of supplier relations and promoting supplier innovation. This image puts it in danger of losing out on some of the more innovative suppliers whose technology could greatly improve GM’s products. GM currently has regular meetings with its supplier council, as well as monthly webcasts to its supplier base, but a system that could integrate communications and support for suppliers, as well as gather and analyze supplier feedback, would help GM’s reputation concerning supplier relations.1.2.2.3 Improve Logistics and Reduce Costs in Supply ChainInefficiencies in the supply chain not only pose a cost to GM, but can also lead to increased risk as suppliers are working to capacity. This is another area in which improved communication with suppliers, as discussed in the previous point, could benefit GM. A centralized point of contact to oversee the logistics companies tasked with managing GM’s supply chain benefits GM by making it easier to spot and correct inefficiencies. This is an issue GM addressed with its establishment of Vector.1.2.2.4 Increase Distribution EfficiencyGM has been spending a significant amount of resources in its distribution channels. In order be efficient GM has to learn from its mistake and continuously improve its distribution process. Using the Penske and UPS case studies as a reference, it can be said that GM has difficulty keeping track of its distribution and maintaining communication with its carriers. To avoid spending money, GM needs to take advantage of the IS/IT to keep track of its deliveries and pickups as they have have done in the Penske case study.1.3 General Motors’ Extended Supply Chain Conclusions From this analysis, we conclude that General Motors exerts a relatively high amount of power, relative to firms in its extended supply chain. However, the benefits of this power are diminished by GM’s reputation for poor supplier relations, as well as GM’s inability to foster innovations among its suppliers. Much of the supplier discontent that GM has had to address in recent years has stemmed from poor communication with suppliers. While GM is already taking steps to use IS to improve this situation, e.g. by involving suppliers in monthly webcasts to discuss upcoming initiatives, there is still room for improvement in this regard. GM could use a robust supply management system that could handle all of the company’s necessary eSourcing and eProcurement, as well as provide a repository for supplier feedback, which could be analyzed and acted upon by GM. The sheer size of General Motors’ supply chain would necessitate a highly customized system that would be different from anything currently on the market. To achieve this goal, GM would be able to work with SAP, Ariba, or another provider of similar software.Greater connectivity among GM and its suppliers would benefit GM by making its supply chain more efficient and diminishing some of the risk involved. GM’s partnership with Cisco to develop its Plant Floor Controls Network is an example of an improved IS replacing GM’s inefficient legacy systems and facilitating greater collaboration within the supply chain. In addition, a supply management system that fosters better communication would allow GM to work with its suppliers to eliminate waste and improve business processes. By itself, this system would be a key operational application, rather than a strategic or turnaround one, but an opportunity to cut costs while improving supplier relations is worth pursuing.Finally, we conclude that with GM’s increasing foray into global markets, the company will need to set up new supplier and distribution networks in emerging economies, where all business operations will involve a greater degree of uncertainty. Joint ventures, such as GM’s partnership with SAIC mitigates some of this risk. In addition, a supply chain management system with an effective forecasting component could help GM accurately evaluate the risks involved in the networks it establishes.PART 2. ANALYZE THE FIRM'S COMPETITIVE POSITION 2.1 Automobile Industry Competitive 5-force Analysis The execution of the competitive 5-force analysis provided a systematic and structured approach to assess the automobile industry’s microeconomics with respect to GM. Insights from the five factor analysis are as follows:2.1.1 Rivalry between existing competitorsThe automobile industry is a highly developed one and with GM competing in both, domestic and global markets, the threat from rivals is intense. Based on the maturity of the automobile industry and a supply chain consisting of a large number of suppliers largely shared by rivals, differentiation opportunities are very limited. Intra-industry rivalry is vicious with players competing on price discounting, new product introduction to gain first mover advantage, advertising campaigns, and customer service improvements which narrows down the profits. Add to those high exit barriers, the threat posed by competitors should be taken very seriously. With evidence suggesting a significant variance in the market share, it is important that GM moves swiftly identify new opportunities. The dense concentration and high intra-industry rivalry has pressured the already narrow margins of the traditional auto industry, eking out profits from the global business is more challenging than ever. This is where the rise of global knowledge economy and GM’s large global footprint can be leveraged. Operation in markets like China where innovation and commercialization move in parallel, can be provide crucial data to drive the global business.2.1.2 Threat of entry by new entrantsThe automobile industry has high barriers to entry some of which include economies of scale, large capital investment and government regulations. Recently, the automobile industry has faced something resembling a revolution. The 2008 recession caused many of the large automobile manufactures to downsize. This has allowed new entrants like Tesla to enter the industry and take advantage of the changing industry landscape. The green revolution and the introduction of electric cars have caused GM to lose some market share recently, despite their own efforts in that direction. The recession and new age start-up business models have made the threat from new entrants is a low to moderate threat.Today, Tesla is demonstrating that it can change and surmount needs and expectations. While it isn’t quite a part of the traditional market, it can expand and provide a superior solution to the emerging need of green cars and capture a niche. GM isn’t completely oblivious of that fact. There’s the Chevy Volt which is about half as expensive but without the features and performance of Tesla’s products. The low-end model, at $57,000, is only $17,000 – or over the MSRP (manufacturer’s suggested retail selling price) for a Volt. It is potentially comparable on affordability and can target untouched market segments to gain first mover advantage.This is not to say that Tesla has a firm grip on its market segment yet. Tesla is meeting unmet emerging needs for green powerful automobiles. Its common practice to simulate competitor technology, but to use advance technology developed internally can save time and enable GM to create a better battery technology sooner.2.1.3 Threat of substitute productsFor long public transport represented the only credible substitute to automobile industry products. Within the industry itself, players target and compete in overlapping segments. Product models are similar and prices are competitive making GM’s products to be easily substituted by close rivals. Environmental risks and the increase of oil price is forcing drastic environmental measures and development of new substitutes. The threat of substitutes is slightly greater with a number of different alternatives in development. In the burgeoning market of environment-friendly automobiles, product differentiation can be easily achieved. Price changes of complementary products represent a different threat. It has a direct impact on the demand for automobiles. Price changes in gasoline, tires and batteries could influence some firms more than others and GM is likely to have a considerable influence because some of its profitable models are energy inefficient pick-up trucks and sports utility vehicles. However, this influence is expected to decrease because of rapid shift to hybrid technology. All-in-all, the impact level of substitutes and compliments on industry can be considered as weak to moderate level due to uncertainty and the lack of options, at present, for alternative automobiles. 2.1.4 Bargaining power of buyersIn a crowded and competitive marketplace, customers have the ability to negotiate prices and demand better quality at the expense of industry profitability. This ability is, however, limited to a marketplace where customers represent significant portion of the sales. Individual customers can extend their influence only to dealerships but manufacturers remain inaccessible and vice versa. With complementary products accessible, switching was easy and low-cost in a traditional automobile market. IT plays a major role wherein it empowers customers to gain easy access to alternative offerings consequently increasing their bargaining power. Introduction of a disruptive technology such as electric vehicles could negatively impact the bargaining ability of customers. This is due to higher costs of switching and complementary products. Electric vehicles are indeed proving to be disruptive and strategically targeting market segments could potentially see a significant increase in profits. In order to do so, it is necessary to not only develop and perfect the battery technology but also identify target segments and specific needs of those segments. 2.1.5 Bargaining power of suppliersThe following image depicts a car’s end to end process from supplier to the customer. Source: Roland Berger/LazardThis image shows that the suppliers need the manufacturers and vice versa, however suppliers tend to be more reliant on manufactures. However the industry is highly-integrated and unless suppliers are under contract they can sell to multiple car manufactures, showing that they have some bargaining power due to their degree of diversification. Often time suppliers need financial support of manufactures to maintain their operations. GM collaborates with hundreds of suppliers which increase their bargaining power and level the playing field with suppliers. GM’s attempt to strong arm suppliers saw a strong retaliation from the suppliers. The contentious terms in the purchasing contract jeopardized relationships with its supplier network in a time where GM believes trust is a valuable asset. New technology could have a positive or negative impact on the existing suppliers. Introduction of electric vehicles could see a limited number suppliers hold a monopoly and exert even higher pressure on the manufacturers. On the other hand, self-driving cars could negatively impact established suppliers. This could see a change in the value networks wherein suppliers could be seen coordinated as a part of a bigger system as opposed to being coordinated directly by the manufacturers.2.2 General Motors’ Competitive Position Business Strategy.2.2.1 General Motors’ Competitive Forces SummaryThe following table summarizes the results of a five-force analysis of the automobile industry:Five – Force AnalysisForceCompetitive LevelReasonsCompetitive RivalryHigh-Major Competitors-High exit cost-Industry is saturated and mature-Customer loyalty-Company AcquisitionThreat of New EntryLow-Large Startup Capital-Established brands-Government Import taxes-Economies of scaleThreat of New Substitutes Low - Medium-Many transportation alternatives-Economically and environmentally friendly-Lack of convenience- Increase of Gas/Oil PricesBuyer PowerMedium- Many buyers-Low switching costs-Car brand alternatives-Price sensitive-Corporation and government purchase large fleets-Quality Products-Lack of backward integrationSupplier PowerLow - Medium-Large number of suppliers-Variation of materials used-Materials Accessible-Lack of forward integration-Innovative materials2.2.2 General Motors’ Competitive Forces Action PlanBased on the results of the five forces analysis, GM should focused on addressing, firstly competitive rivalry, secondly buyer powers of customers and thirdly the threat of new substitute.GM needs to implement a product development strategy to solve the aforementioned issues. The automobile-industry is matured and saturated with strong competition. However, focusing on product improvement gives GM the opportunities to reduce the pressures from all three of the main sources in the following ways:Competitive Rivalry: A product development strategy allows GM to find ways to differentiate their products from their main competitors. In turn they can increase their control in current and new segments. Buyer of Powers:Focusing on product improvement, enables GM to bring products to the market that move purchase decision away from price and add valued futures and incentives. As a result, GM will strengthen and increase customer loyalty.Threat of new substitute:To reduce the threat of substitutes GM can enter substitute markets and influence from within. One way GM can do that is by seeking and understanding the needs and preferences of their customers. Afterwards GM can take that feedback and implement it to produce a better product that is highly desirable. 2.3 General Motors’ Competitive Position Conclusion2.3.1 Business-Oriented Critical Success Factors2.3.1.1 Speed-up innovation: Increase turnaround of new innovations, by realization and commercialization in feasibility. In turn increase the speed to measure of impacts of innovations. Consequently, increase global market share by targeting new market segments.2.3.1.2 Respond quicker to changing automobile landscape: Restructure organization to sense and respond to the global market. This enables targeting local market segments and innovations and responds by leveraging global knowledge and economy of scale.2.3.1.3 Solicit and meet emerging and current customer needs: Localize customer feedback and predict current and emerging demands.2.3.2 Technology Strategy 2.3.2.1 Implement systems to leverage and widen global knowledge of new innovation:GM plants in different parts of the world is an important asset for improving innovation. An agile innovation approach in China is big opportunity for GM to sense market response to developing innovation. A low-cost economy enables innovation and commercialization in tandem that in turn increases the turnaround required to achieve a quick sense and response for a small market segment. An integrated system to reconcile GM’s global R&D could push the speed of innovation and possibly achieve first mover advantage in an industry with a changing landscape. Additionally, this can also increase the speed of problem resolution for existing products to help foresee and avoid global losses.2.3.2.2 Develop systems to support and monitor new research and development activitiesBesides in-house R&D facilities, suppliers coming up with innovative technologies need to be identified and leveraged. Currently, the disparity between identification and realization have led to losses due to false promises or failure to deliver. A new system to monitor investments in new technologies could help reduce this disparity. The system could support this by generating periodic reports for pre-defined metrics that could help not only prevent but also foresee and pull-out of bad investments. PART 3. DERIVE AND PRIORITIZE CRITICAL SUCCESS FACTORS 3.1 Competitive Strategy and Key Business Goals 3.1.1 General Motors’ Main Opportunities and ThreatsAs demonstrated in our analysis above, GM’s main opportunities in the coming years will include:Entry into profitable new markets, where localized supply chains will allow GM to increase profits by sourcing, producing, and selling their vehicles locally.Improving supplier relations to present GM as an attractive partner for the best and most innovative auto parts suppliers.Improving innovation and collaboration across the supply chain, including among the suppliers, and GM’s in-house manufacturing teams.3.1.2 General Motors’ Main Pressures and ThreatsGM’s main pressures and threats, also discussed above, include:Losing its innovative edge relative to other automakers, by becoming less attractive to innovative suppliers. Although individual suppliers do not have much bargaining power over GM, they potentially have alternatives regarding the automaker with which they would like to work. Suppliers’ production capacity, as well as the possibility of “captive supplier” contracts that lock suppliers into agreements with other automakers, could lock GM out of doing business with valued suppliers.Potential breaks in the supply chain. While GM enjoys relatively well-established supply chains in its established markets, some suppliers find themselves pushed up towards their capacity by rising demand. In addition, new supply chains established in emerging markets often come with inherent risk that must be accounted for.3.1.3 General Motors’ New Competitive StrategyOut of Porter’s three generic strategies, differentiation is most suitable for GM. GM can’t compete on overall cost leadership, since automotive consumers tend to value a vehicle that meets their unique needs over minor decreases in cost. Overall cost leadership is also not feasible, since very few of GM’s models are in the “budget” category. A focus strategy would be feasible in some cases, if GM could find a niche that isn’t currently served by any other automakers, but realistically, GM competes with other automakers in each of its submarkets. The challenge for GM is to find product attributes valued by the consumer in which it can be a market leader, and focus its business strategy appropriately.GM’s value discipline should be operational excellence. While some GM brands are targeted toward upscale consumers who are willing to pay a premium for customized or innovative products, the majority of GM’s revenue comes from relatively low-cost models sold to customers who expect quality, but not necessarily cutting-edge innovation. Product reliability and competitive pricing make up much of GM’s strategic focus, and effective supply chain management is a key focus area for its IS.In terms of IT strategic roles, GM could benefit from IT that supports empowerment, control, and collaboration. Control over its supply chains provides GM with greater efficiency and assurance that its products will be delivered as planned. Empowerment allows for greater sharing of information across all of GM’s teams that are involved with the supply chain. Collaboration, which could be brought about by the same systems that foster empowerment, allows GM to work closely with its suppliers to improve current business processes and promote innovation that could lead to new turnaround technologies.In addition to the generic strategy of differentiation, GM’s overall competitive strategy should include the following aspects:Growth. General Motors should increase market share, particularly in emerging markets where there are no established industry leaders at this time.Alliance. For many of the initiatives that it undertakes in the next 5-10 years, GM will benefit forming strategic partnerships with other companies. In some cases, this includes joint ventures, such as GM’s partnership with SAIC. In other cases, GM could work with other automakers and research institutions to conduct R&D into potentially disruptive technologies.Innovation. Like all other automakers, GM is constantly working to develop new vehicles, and add new features to their vehicles that would be attractive to customers.Operational effectiveness. GM stands to gain from supply chains and manufacturing processes that allow them to perform their core business functions more effectively than their rivals.3.1.4 General Motors’ Main Business GoalsOver the next five to ten years, one of GM’s main business goals will be to establish itself as a market leader in China and other emerging markets, and maintain this advantage over its competitors. As we discussed in our previous analysis, emerging markets provide far greater opportunity for growth than established markets in the US, Europe, and Japan. GM is faced with the challenge of creating products that meet consumer demand in these markets, as well as developing effective supply chain and manufacturing processes that will allow them to maximize profit in these markets.A second goal for GM is to introduce innovative technologies that serve emerging customer demand. As we had previously discussed, greater safety, energy efficiency, and “smart car” technology are all likely to be highly valued by consumers in the coming years. From a supply chain standpoint, GM could implement systems that foster innovation among its suppliers and collaborators, to create more innovative products than its competitors.These goals are supported by the competitive strategies proposed above3.2 Critical Success Factors and KPIsCritical success factors based on GM’s extended supply chain and competitive position PrioritiesCriticial Success FactorGeneric Measurements(KPIs)1Respond quicker to changing automobile landscapeIncrease market share in new market by 5% - 10% in the next 10years2Localize supply chain in emerging marketsIn emerging markets, increase localize supply chain relations by 20%-30% in next 5 to 10 years3Solicit and meet emerging and current customer needsIncorporate customer feedback by 5% - 10% of product design in next 5 - 10 years 4Speed-up innovationIncrease implementation of technology in products by 10 - 15% over next 5 years5Improve communication for better supplier relationsReduce errors on orders by 15% in the next 5 - 10 years6Increase distribution efficiencyIncrease the time of logistics performance by 15% in all GM distribution centers in next 10 years7Improve logistics and reduce costs in supply chainReduce supply chain cost by 20% in the next 10 - 20 years3.3 GM’s IT Strategy Implications In conclusion, we find that, consistent with our original analysis, GM’s most important business goal in the near future will be to detect and respond to changes in the automobile industry landscape. This includes determining emerging demand, both in new geographic markets, and with regard to the new features that will be demanded by consumers. Joint distribution ventures and research partnerships increase the likelihood of GM developing turnaround technologies that will allow it to increase its market share. GM’s IS should therefore broadly focus on developing innovative technologies and meeting market demand. Taking steps to promote greater efficiency in its supply and distribution networks would be an operational step, rather than a turnaround or strategic one, but also provides benefits that should be explored.4. Works CitedPenske. General Motors de Mexico: Driving Efficiency. (n.d.). Penske Logistics. Retrieved April 27, 2014, from , "GM Accelerates Warranty Parts Recovery with Specialized Logistics," UPS, 2004.General Motors Manufacturing Plants. (n.d.). GM Authority. Retrieved April 27, 2014, from . Hurles and N. Sridharan, "Strategic Role of Information Technology In General Motors’ Global Supply Chain Operations," General Motors, Orlando, 2011.General Motors. GM - 2012 Sustainability Report. Retrieved April 23, 2014, from , D., & Colias, M. (2014, March 3). General Motors steps up supplier outreach. Automotive News. Retrieved April 27, 2014, from , M. (2014, February 11). GM rolls back contentious terms in purchasing contract. Automotive News. Retrieved April 27, 2014, from , D. (2014, February 16). Suppliers curb 'revolt,' breathe easier after GM ends controversial pact terms. Crain's Detroit Business. Retrieved April 27, 2014, from , M. (2014, February 17). GM squeezes its suppliers -- gently. Automotive News. Retrieved April 27, 2014, from News. Top 150 Suppliers. (2010, May 24). Automotive News. Retrieved April 27, 2014, from ................
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