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General Motors; From Birth to Bankruptcy in 2009

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Strategic Management – General Motors; From Birth to Bankruptcy in 2009

Overview

General Motors started in 1908 as a holding company with twenty-five autonomous car firms. It recorded significant returns and popularity during its formative years. Ford, its biggest competitor, took over the market by producing a reasonably priced automobile for the middle class group unlike the General Motors’ products, which only the affluent individuals could afford. It had to borrow a huge advance from the government in order to prevent its closure. Moreover, it constantly reduced its workforce in all ranks by more than 60 % (Hill and Gareth 80). Over the years, it has not only suffered enormous losses, but also lost its influence in the car market. Despite its efforts to fabricate new products and change its managerial structure, the company went bankrupt in 2009.

Problem Statement

The lack of competent management in the reduction of its production cost is responsible for its bankruptcy.

SWOT Analysis

SWOTInternational market: in its formative years, it operated in more than 100 countriesElevated cost structure making it less competitiveNew car models will help the company meet the varying needs in the marketStiff competition from firms in different parts of the worldIt is well conversant with the local market with 18% control of the marketInappropriate leadership, which hinders effective changeMerging with other companies will provide new proficiency and a wider marketHigh cost of production because of the increase in prices of car-related raw materialsIt has popular brands such as Chevrolet and GMC especially in USA and ChinaImproper branding as only one of its brands bears its initials hence inefficiency in its marketingManufacture of hybrid cars will avert environmental pollution thus a wider market because of the customers caution on the environmentUnstable fuel prices since when low, hybrid cars have a lesser demand while high prices lower the demand of fuel-consuming vehicles

Alternative Strategies

One tactic that can help General Motors in solving its bankruptcy predicament is the brand specialization. This automobile firm had eight car models in America, in addition to other brands, in different parts of the world such as Korea. Specializing in a few numbers of brands would reduce the cost involved in production and marketing of its commodities. For example, Toyota has specialized in three categories of cars and has been recording massive returns (Hill and Gareth 86). Additionally, an appropriate strategy is the adaptation of equity, as opposed to stakes. The shareholders in this company should employ this strategy since it does not involve any forms of interest. With the company’s enormous debt from the government, the charges paid to its stakeholders in the form of interest, worth 3 billion dollars annually, would help it avoid bankruptcy (Hill and Gareth 90).

Recommended Strategy

The brand specialization strategy would be increasingly appropriate for the firm. The large number of brands owned by the company increases its costs in all sectors from production to marketing. This is because each variety requires different kinds of raw materials, most of which are imported. The marketing operations are also different, thus increasing the company’s expenditures. With its financially unstable condition, liquidating of some brands would help it settle its debts and reduce its cost structure. In order to accomplish this recommendation, the company should conduct deals with certain automobile firms such as Ford. These business transactions will ensure that the company gets high earnings, which will help it stabilize its operations. It can also consider business transactions with the government. This is by assigning certain brands to government-owned car dealers or selling some of its shares to the government. This will aid in settling the loan granted to it by the government.

Work Cited

Hill, Charles W. L, and Gareth R. Jones. Essentials of Strategic Management. Australia: South-Western/Cengage Learning, 2012. Print.

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