SWOT Analysis and recommendations - General Motors

Mateus T.

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SWOT Analysis and recommendations - General Motors

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Themes

Automobile industry, oligopoly structure, economies of scale, regulatory processes, capital, debt, small margins, after-sale services, financing, profitability, net margins, collapse, overpricing, quality, truck-SUV market, rising oil prices, hybrid, BEV Battery electric vehicle program, competitiveness, Asian-based original equipment manufacturer, electrical vehicles, innovation, ecological alternative, growth, Tesla, value proposition, high-end eco-friendly vehicle, sales system, batteries Gigafactory, automated manufacturing, autonomous vehicles, strategic change, value chain, SWOT analysis, brand image, bankruptcy, electrical market, distribution channels, car-sharing systems, geographic diversification, ecological vehicles, research and development, General Motors

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Abstract

General Motors suffered from a collapse in 2009 (after the crisis), which was mainly driven by five factors: (i) retired employees had plenty of benefits (from when the sector was more profitable) (ii) GM overfocused on "overpricing and discounting," which drove the clients' attention away from quality and created an image of an expensive company to GM (iii) a bad response of the truck-SUV market, which drove big margins and sales to GM, to rising oil prices (iv) the destruction of their hybrid and BEV program (embarrassment to GM), and (v) the sector's competitiveness driving low margins, associated with Asian-based OEMs with access to lower costs.

What is GM's biggest strategic problem?
SWOT analysis
1. Strengths
2. Weaknesses
3. Opportunities
4. Threats
Recommendations for GM

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[...] SWOT Analysis and recommendations - General Motors The automobile industry structure hadn't changed significantly since earth 20th century (Ford & Sloan), only having incremental changes - electric vehicles would come to finally make big changes on it. Originally, this industry was organized in an oligopoly structure. Companies had to be big and profit from economies of scale (in regulatory processes and capital / debt) to tackle the problem of small margins within the sector. Most car parts were produced by tier 1 suppliers (of OEMs). [...]

[...] Electrical vehicles, an innovation somehow `ignored' by GM in 2002, have been always seen as an ecological alternative to ICEs, thus receiving government incentives, and as a simpler product for manufacturing. However, BEVs were also seen as "hard to produce," mostly due to the batteries' cost (and weight) and the dependence on a charging network, initially absent (versus 160k gas stations in the US). Recently, the sector experienced an enormous growth, driven by government incentives to BEVs (and bans to ICEs) and by Tesla's initial approach to tackle the two main problems forementioned. Innovation on this sector has pushed downwards both sales and profit margins for ICEs. [...]

[...] Within those innovations, GM tries to challenge Tesla with new profitable BEVs. Nowadays, their truck-SUV sector is well reestablished, even if the company has margins still a bit lower than the market's average (still an effect from bankruptcy). They must understand how to shape themselves to be profitable in this changing market. For that, it's fundamental to analyze the new structure and flows within the value chain - and eventually participate in remodeling some parts of it. What is GM's biggest strategic problem? [...]

[...] Finally, if after a more accurate analysis of those aspects, GM does decide for buying such a company, it's necessary to make estimates for the earnings with the forementioned synergies, to price the operation. Develop a service infrastructure for the "new" electrical/autonomous car market ; GM's expertise in services can be useful and have high demand in such a new market - it's necessary, though, to innovate on the services being sold. Such an infrastructure could be composed by a car reparation / `check-up' system (to be partially automatized thanks to R&D investments) and a car-sharing platform. In particular, the automatized check-up could be done while charging. [...]

[...] Tesla's business models focused on their value proposition (high-end eco-friendly vehicle, that's also electric), sales system (mostly online), main components (with their batteries Gigafactory), economies of scale (with that factory) and automated manufacturing. They are very integrated vertically, and sales are much more dependent on car sales. Another important innovation in the automotive market are autonomous vehicles. They should impact many other industries (taxis, trucking, delivery) and create big opportunities for ride-share companies. The market size is expected to be about $530Bi in 13 years. Autonomous (shared) cars may happen to be more usage-efficient, thus costing much more to OEMs. [...]

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