General Motors Analysis
General Motors (GM) is a United States car manufacturer that was founded by William C. Durant in Flint, Michigan dating back to 1908. GM headquarters is located in Detroit, Michigan and is among one of the world’s largest automakers, conducting business in over one hundred and twenty countries with production facilities in thirty-seven of those. GM dominated the automaker industry for over seventy-seven years (1913-2007) through ownership of over twenty-five different companies, such as Chrysler, Buick, Chevrolet, Oldsmobile and Cadillac. During these seventy-seven years the company faced many challenges with their competitors but maintained their power over them. However in 2007, General Motors began to lose significant markets shares due to poor management and quality, ignoring customer expectations and preferences, and continued profit loss per vehicle (Wikipedia: General Motors).
General Motors competition, Ford Motors, was dominating the market with their lower cost production resulting in lower cost vehicles entering the market. Henry Ford developed a strategy of minimizing high labor and production costs through the development of assembly lines. Ford created facilities in which a system of conveyor belts in combination with lower cost streamlined parts could be moved quickly through the factory to workers who placed the parts together in sections. This provided Ford the ability to hire unskilled workers at lower costs while also increasing productivity. With the quick assembly and decreased costs in the production of the Model T, Ford was able to offer a low priced vehicle and enter the competitive market of auto manufacturing (Wikipedia: Ford). Though the strategy of quick assembly with unified parts and cheaper labor costs provided Ford the ability to enter the auto market there were downfalls to only providing one type of vehicle.
In an effort to combat this new opposition from Ford, General Motors had to develop new strategies in conducting their business. Alfred Sloan, CEO for GM, saw the void that Ford left in the marketplace from offering only the Model T to consumers. General Motors focused on larger vehicles marketed to wealthier customers and the Model T from Ford was aimed as the lower end of the marketplace. With the concentration on the lower and higher ends of the market share there was a void left in the middle market. GM reduced their twenty-five different car companies down to five major entities. Within each of these major divisions Sloan placed self-contained department for sales, manufacturing, engineering and finance. The five new departments included Pontiac, Oldsmobile, Chevrolet, Buick and Cadillac. This created for General Motors five separate independent markets with the ability to each have their own profitability versus being lumped all together.
Through the reduction of the twenty-five car companies into just five allowing each to be profitable on their own, gave GM the ability to decentralize the company. With each of the new divisions of GM, they no longer were dependent on one another for profit building. Each division was given their own management in which competition between the divisions which were to provide incentive to build their profit margins greater than the others. Each of these entities was no longer in conflict with one another for resources. While each of the departments was responsible for their own bottom dollar, Sloan was trying to streamline how management made decisions. He encouraged managers to push each individual in their own strengths to be asset for the company. Along with this Sloan wanted to empower managers to make decisions that would be best for the company and their respective car division. Changing and decentralizing how management made decisions what the structure behind Sloan’s changes.
During the 1980’s General Motors began to see the outside market was negatively influencing their large piece of the automaker...
Please join StudyMode to read the full document