General Motors Brazil Service Part Business: A Case Study
Business Change in the Spare parts market by GM Brazil
General Motors started its business in Brazil in the year 1925 and has been growing ever since. GM had its spare parts business which has been highly profitable, but low on volume. This business constituted around US $ 250 million out of the overall income of US $ 3.2 billion a year. This is just about 7.8 % of the total income, but the margins in this business were much larger. The business of the spare parts was demand driven. The market situation worsened when liberalization attracted competitors like Toyota, Audi etc. This made GM tighten their costs further on the low profit margin, small car segment. Also the service parts business has serious strategic implications for the new car business because it can affect the level of serviceability (measured in time, speed, price, and dependability) of the car during its economic. Serviceability of the car was one of the decisive reasons for a customer to buy a car. The need to have spare parts available all the times took paramount importance. The competition and the consumer expectations in the form of economy and quality of service were the two main reasons for GM Brazil to rethink the way they did their business. Proposed changes in spare parts business
Once GM thought about bettering the serviceability of the product, they found that the cost of the authorized spare parts were high as compared to the ‘Grey’ markets thereby decreasing the total sales of the spare parts. GM maintained independent relations with the dealers and suppliers and has always been like the zero-sum game. This led to less cooperative relationships and to independent management systems with undesirable effects. One such effect was seen when despite of the periodic communication of small varying demands there was increasing large variation at the supplier end and eventually increased costs due to unpredictability at the...
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