General Motors_Strategic Management


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  • Impact of External Environment parameters in an industry affect a firm more than the strategic decisions taken by the managers
  • General Motors_Strategic Management

    1. 1. General Motors Strategic Management-2 1 Group 5 Anand Kumar 12P127 Ankush Singla 12P129 Bhoomi Ashwin 12P131 Aditya Ram Chadha 12P132 Siddharth Bharadwaj 12P170 Soumyajit Sengupta 12P171 Asian Alliances
    2. 2. General Motors: Strategic Alliances Unified ownership for coordinated policy control of all operations throughout the world is essential for effective performance as a global organization Rationale General Motors Toyota Isuzu Suzuki NissanDaewoo Fanuc Ancillaries Joint Venture Equity Strategic Alliance Equity Strategic Alliance Non-Equity Strategic AllianceJoint Venture Joint Venture Hitachi, Nihon, Atsugi, Kyoritsu, Tachikawa, Akebono, NHK Backdrop Earnings Market Share 4.5  2.9 bil Below 40%
    3. 3. General Motors-Toyota Joint Venture: NUMMI General Motors • Gain access to a small car to help expand its portfolio • Learn about the famous Toyota Production System Toyota • Get around the Voluntary Export Restraints (VERs) agreed to by the Japanese government with USA • To familiarize itself with US Markets Parameter Description Cash Contribution $200 million ( $100 million each by Toyota & GM) Plant Fremont, California Board Independent Board Composition President, CEO & Top Officials (Toyota); 16 Executives (Maximum) (GM) Annual Production Capacity 200,000 Apparent Benefits
    4. 4. General Motors: Other Alliances GM paid $56 million for 34.2% stake at a period when ISUZU was struggling GM would assist in designing, developing, manufacturing and distribute through its global network GM made agreement with ISUZU for building R&D and supply of engines, parts NISSAN was the fourth largest auto maker & a large industrial group like Toyota Nissan was supplying Engines and Transmissions, while GM was supplying panels and Nissan was supplying Pulsar which was sold by GM under the name Astra GM paid $35 million for 5.3% stake in Suzuki, Suzuki was looking for an International Partner, while GM was looking for better technology, lower production costs DAEWOO – Korean conglomerate group, second largest automobile maker in Korea GM would take management control as Daewoo suffered heavy losses in preceding four years GM supplied Opel engines and formed JV for building parts R&D with Daewoo subsidiaries GM-Isuzu GM-Nissan GM-Daewoo GM-Suzuki
    5. 5. General Motors and FANUC each invested $5 million and created GM Fanuc Robotics Corporation (GMF) GM was the largest buyer of robotics systems in the United States, buying a full third of robots sold in the country, was dissatisfied with its present robotics vendors, GM wanted to sell their products & guard against losing personnel to competitors Fanuc was looking to build its robotics business at a period of economic slowdown, competition and was seeking intelligent robot technology present in U.S General Motors – Fanuc Joint Venture: GMF
    6. 6. General Motors’ Alliances with Ancillaries Manufacturers •Japanese equivalent of GE •Cooperative development and production in 5 areas •GM announced a long term agreement to buy electronic systems Hitachi •Joint venture to produce next gen compressors designed by GM •GM wanted to capture the Japanese Auto market •Nihon wanted to gain access to technology Nihon Radiator •Atsugi to supply parts and accessories •GM to provide technical assistance Atsugi •GM purchases 20% & shares Investor Kyoritsu •Supply seat cover technology to GM •Advanced technology not used at the time Tachikawa Spring •Owners were fierce rivals such as Toyota & Nissan. •Falling market share •Had world class technology that cost 20% less •GM to provide its electronics expertise and technology Akebono Brakes •Largest producer of auto spring in the world •No deep rooted affiliations with any auto makers •GM interested in its new Fibre Reinforced plastic springs cutting weight by 32 to 54 pounds NHK Spring
    7. 7. Analysis of External Industrial Parameters on Firm Industrial Organization Model External Environment Globalisation, Technological advances. The 70’s era was of technological innovations and improvements with increasing imports and U.S auto makers were suffering. Attractive Industry Imports were increasing and the BIG THREE were suffering with their engineering, manufacturing and marketing efforts Strategy Formulation U.S Auto firms to fight competition and to improve their positions were forming cooperative alliances with Asian companies Assets and Skills U.S Auto companies were looking for Cost Minimisation and Value Maximisation i.e. were acquiring low cost technologies, improvements and practices of industry Strategy Implementation Ford invested in Mazda, Chrysler invested in Mitsubishi & GM invested in Japanese and Korean companies Superior Returns Alliances formed joint R&D, supplied parts and engines and Japanese company cars were released under GM names – Opel, Pontiac etc.
    8. 8. Core Problem in General Motors’ Strategic Alliances • General Motors’ Asian business partners have often benefited from GM investments of effort, financing, and knowledge, and used this to compete with the company, either directly or indirectly. • The Fanuc partnership, which was undertaken in less than three months, is one example of a partnership which was undertaken too quickly. 0 5 10 15 20 25 30 35 40 45 50 1978 1980 1982 1984 1986 1987 GM Market Share in USA (%) % * Source :-VEHICLE CHOICE BEHAVIOR AND THE DECLINING MARKET SHARE OF U.S. AUTOMAKERS, INTERNATIONAL ECONOMIC REVIEW Vol. 48, No. 4, November 2007 Main Reasons • Loss of Control • Lack of Knowledge Protection • Short Term Growth Orientation • Declining In-House Product Development Capability
    9. 9. Probable Solutions Centralization Pros • Based on a tried & tested formula (Toyota) • Greater Discipline • Better Relationships • Better Supplier Monitoring Cons • Innovation Capability Limited • Hindered First Mover Advantage Effective Ownership Pros • Greater Management Leverage • Ability to Hinder Partners turning Probable Competitors Cons • Greater Costs Incurred • Flexibility with respect to Suppliers would be hindered • May lead to Disruptions caused by an Equity Partner, if any Decentralization Pros • Easier to Operate on a Global Scale • Better First Mover Opportunities • Greater Supplier Base • Would remain true to the Vision outlined Cons • Difficulty in managing wide- ranging alliances • Difficult to manage Distribution networks with Suppliers • Chances of Creating New Competitors
    10. 10. Thank You!