Gm Internet Marketing


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Gm Internet Marketing

  1. 1. Chapter 4 General Motors Case How Much Can the Internet Help GM?
  2. 2. General Motors Size <ul><li>World’s largest automaker </li></ul><ul><ul><li>386,000 </li></ul></ul><ul><ul><li>50 countries </li></ul></ul>
  3. 3. Vehicle Brands <ul><li>Chevrolet </li></ul><ul><li>Pontiac </li></ul><ul><li>Buick </li></ul><ul><li>Cadillac </li></ul><ul><li>Saturn </li></ul><ul><li>GMC Trucks </li></ul>
  4. 4. <ul><li>Many other production relationships </li></ul><ul><ul><li>Opel </li></ul></ul><ul><ul><li>Vauxhall </li></ul></ul><ul><ul><li>Subaru </li></ul></ul><ul><ul><li>Alfa Romeo </li></ul></ul><ul><li>Non-vehicle ventures </li></ul><ul><ul><li>Allison Transmission </li></ul></ul><ul><ul><li>GM Locomotives </li></ul></ul><ul><ul><li>35% share of Hughes Electronics </li></ul></ul><ul><li>GM’s subsidiary </li></ul><ul><ul><li>GM Acceptance Corp (GMAC) </li></ul></ul>
  5. 5. <ul><li>GM has been declining in sales </li></ul><ul><li>-used to own 60% of U.S. vehicle market in the 1970’s </li></ul><ul><li>- it’s only 28% at present </li></ul>
  6. 6. <ul><li>Main competition: </li></ul><ul><ul><li>Ford </li></ul></ul><ul><ul><li>Daimler Chrysler </li></ul></ul><ul><ul><li>Japanese </li></ul></ul><ul><ul><li>All of these competitors have a lower production cost along with better quality and style </li></ul></ul>
  7. 7. <ul><li>GM’s sheer size was one of it’s biggest burdens </li></ul><ul><ul><li>In the 1920’s CEO rescued the company from near bankruptcy by separating the company into 5 separate operating groups which made the company operate much smoother </li></ul></ul>
  8. 8. Manufacturing <ul><li>One of the greatest advantages in the past was they manufactured up to 70% of their own parts which enabled them to build cars at a lower cost than its rivals. </li></ul><ul><li>Over time it ended up hurting GM because competitors purchased parts for lower costs than outside vendors who specialized in those parts </li></ul>
  9. 9. <ul><li>GM began to lag behind Japanese and even U.S. rivals in styling and quality. </li></ul><ul><li>It took more time and money to produce their cars because the firm was saddled with a lumbering bureaucracy, inefficient production processes, thousands of outdated information systems which could not communicate with each other </li></ul>
  10. 10. New CEO <ul><li>February 2000, Rick Wagoner replaced Jack Smith </li></ul><ul><li>His major idea he brought to the firm was to include internet technology into all of its business processes. With that he was hoping to make the company smarter, leaner, faster, and more in tune with its customers. </li></ul>
  11. 11. <ul><li>By doing this he would hope to reduce the time needed to design, engineer, and manufacture a new vehicle. His goal was to change the time needed from 24 months to 12. </li></ul><ul><li>This would eliminate supply chain inefficiencies </li></ul>
  12. 12. eGM <ul><li>In 1999 GM set up the new division called eGM which was headed by Mark Hogan </li></ul><ul><li>In 2001, they dismantled eGM after the internet bubble had burst </li></ul><ul><li>The firm made it clear this was not a retreat from e-business, but rather e-business had been successfully integrated throughout the company and this separate business unit was no longer needed </li></ul>
  13. 13. Selling vehicles online <ul><li>Dealers are fundamental to selling cars. </li></ul><ul><li>Laws prohibit anyone other then a licensed dealer to sell vehicles. </li></ul>
  14. 14. Why are dealers so important? <ul><li>Close connection to customers. </li></ul><ul><li>Role in vehicle inventory. </li></ul><ul><li>Dealers decide what they think can and will sell. </li></ul><ul><li>Dealers assume most of the risk and expense of owning the car. </li></ul>
  15. 15. GM using the Internet to promote sales <ul><li>These websites are used by GM to assist customers in the automobile buying process, not to eliminate the dealers. </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li>GMAC Smartauction </li></ul>
  16. 16. <ul><li>Established in March of 1999. </li></ul><ul><li>Website where customers can search for GM cars. </li></ul><ul><li>Search by color, options and availability. </li></ul><ul><li>Indicates cars that dealers have in inventory. </li></ul><ul><li>Dealers are trained to work with customers who have done this research. </li></ul>
  17. 17. <ul><li>Since September, 2001 the site has generated 2000 leads per day </li></ul><ul><li>Over 20% converting to auto purchases. </li></ul>
  18. 18. <ul><li>Web portal featuring applications such as VIN (vehicle identification number). </li></ul><ul><li>Helps dealers determine which incentives a buyer qualifies for on a specific model. </li></ul>
  19. 19. GMAC SmartAuction <ul><li>Website where GM dealers can bid for leased vehicles that were returned to dealers. </li></ul><ul><li>Faster then live auctions and reduces the chances autos will be damaged while being transported to a physical auction site. </li></ul>
  20. 20. Building vehicles to order <ul><li>One major weakness in determining what to build occurs when manufacturers guess wrong on the demand of automobiles. </li></ul><ul><li>Incorrect decisions lead to higher costs and selling cars at a lower price to reduce high inventories. </li></ul>
  21. 21. Build to Order <ul><li>Originally created only for expensive cars, and had a long waiting period of 2-3 months. </li></ul><ul><li>Build to order greatly reduces inventory and now can be completed in less than a month. </li></ul><ul><li>Eliminates inventory costs and generates other production cost savings, saving GM around $20 billion a year </li></ul>
  22. 22. Build to Order <ul><li>Heavy reliance on GM’s Internet infrastructure and extensive organizational change. </li></ul><ul><li>GM must be able to take orders online, link its factories and suppliers online, change vehicle design, and greatly cut shipping times </li></ul>
  23. 23. Build to Order <ul><li>In order to link factories to suppliers GM and other auto manufacturers have established Covisint, a Net marketplace. </li></ul><ul><li>Covisint allows for multiple supply chains from the suppliers to the manufacturers to speed the entire process and reduce costs. </li></ul><ul><li>Covisint cuts the cost of producing each car by nearly $1000, and reduce delivery time from 45 days to 10 days. </li></ul>
  24. 24. Online Services <ul><li>OnStar </li></ul><ul><ul><li>Telematics system with onboard navigation, internet, safety, and communications capabilities accessed with three buttons located on the dashboard. </li></ul></ul><ul><ul><li>A Global Positioning System (GPS) constantly informs the system where the vehicle is located </li></ul></ul><ul><ul><li>Emergency road side assistance </li></ul></ul><ul><ul><li>Stolen Vehicle tracking </li></ul></ul><ul><ul><li>Concierge Support </li></ul></ul>
  25. 25. OnStar <ul><li>Personal calling enables drivers to receive hands free calls with voice activated phones </li></ul><ul><li>Virtual Advisor allows users to retrieve personal data from the web </li></ul><ul><li>Any OnStar user, whether standard or an option, must pay an annual subscription fee ranging from $17-$70 depending on service </li></ul>
  26. 26. OnStar <ul><li>Generates a continuous stream of high margin revenue from drivers downloading and paying by the minute for internet, data, and telecommunication services. </li></ul><ul><li>70% of wireless telephone minutes are used within vehicles </li></ul><ul><ul><li>Eventually GM could be the largest reseller of cellular minutes in the U.S. </li></ul></ul><ul><ul><li>Already 1 million subscribers </li></ul></ul><ul><li>Honda and Toyota also bought OnStar license from GM </li></ul>
  27. 27. OnStar Inefficiencies <ul><li>2 million subscribers but not yet profitable </li></ul><ul><li>Customers complain about monthly subscription fees being too high </li></ul><ul><li>Half of the subscribers do not renew their service after the first year </li></ul><ul><li>Getting customers to renew is critical because GM subsidizes some of the cost of its hardware and installation </li></ul>
  28. 28. Internal Uses <ul><li>GM once consisted of thousands of incompatible systems </li></ul><ul><li>This prevented GM from streamlining and coordinating production. </li></ul><ul><li>Since 1980’s GM has been trying to use IT to reduce these costs and increase efficiency </li></ul>
  29. 29. Teamcenter Engineer 7 <ul><li>GM’s most effective use of IT </li></ul><ul><li>An engineering system that allows employees to share design information, and coordinate their work on the same design. </li></ul><ul><li>More than 16,000 designers and workers use this system. </li></ul>
  30. 30. Internal Uses <ul><li>In the past synchronized design was time consuming and very costly to GM. </li></ul><ul><li>GM’s new system has cut the time to complete the production of a car from 12 weeks to 2 weeks. </li></ul>
  31. 31. Socrates <ul><li>An internet portal that allows users to search GM’s internal sites. </li></ul><ul><li>Today 100,000 GM employees can access more than 500 internal GM sites. </li></ul><ul><li>Employees can use this to access their HR information, and gain valuable training. </li></ul>
  32. 32. Changes at GM <ul><li>The time to develop and produce a car has been reduced from 48 months to 18 months. </li></ul><ul><li>Eliminated $1 billion in engineering costs. </li></ul><ul><li>Vast improvements in quality and efficiency of production. </li></ul><ul><li>#3 in quality ranking behind Toyota and Honda </li></ul>
  33. 33. Changes at GM <ul><li>IT had led to the removal of tens of thousands of jobs, cutting billions of dollars in expenses. Also eliminating models. </li></ul><ul><li>Still though GM is under pressure to increase their low profit margins </li></ul>
  34. 34. Question 1 <ul><li>Analyze GM using the competitive forces and value chain models. </li></ul>
  36. 36. Competitive Forces <ul><li>New Market Entrants </li></ul><ul><ul><li>Kia, Hyundai, Hybrid Cars, etc… </li></ul></ul><ul><li>Substitute Products and Services </li></ul><ul><ul><li>Motorcycles, Public Transportation </li></ul></ul><ul><li>Customers </li></ul><ul><ul><li>Preferences, Quality, Price, Service, etc… </li></ul></ul><ul><li>Suppliers </li></ul><ul><ul><li>Cost, Time of Shipment, Capacity, Quality </li></ul></ul>
  37. 37. Competitive Forces <ul><li>We feel GM has been distracted by trying to keep up with competitors and they might have overlooked the competitive forces model in some areas. They seem to only be concerned with the traditional industry competitors and acquiring new customers. </li></ul>
  39. 39. Value Chain Model <ul><li>GM’s build to order process eliminates stages in the manufacturing process which makes for a more efficient supply chain. </li></ul><ul><li>Internet technology will cut up to 10% of the cost in making new vehicles. </li></ul>
  40. 40. Question 2 <ul><li>Evaluate the current business strategy of GM in response to its competitive environment. What is the role of Internet technology in that strategy? How successful is that strategy? </li></ul>
  41. 41. <ul><li>GM is trying to regain their share of the market with order winning products and services which gives them a competitive advantage. OnStar and Build to Order rely heavily on IT which play a major role in their current strategies. So far costs have been cut and satisfaction has increased with the Build to Order process. As far as OnStar, just the opposite has happened. </li></ul>
  42. 42. Question 3 <ul><li>Evaluate each of GM’s e-commerce and e-business initiatives described in this case. How much value can they bring the company? </li></ul>
  43. 43. <ul><li>Covisint, which can be thought of as a net marketplace for suppliers, has cut costs of each vehicle by $1,000 and has reduced delivery times from 45 to 10 days. GM’s e-commerce and e-business brings significant value in terms of efficiency and customer satisfaction. Today’s customer expects a faster delivery time with higher quality products as well. Without e-business like this, companies such as GM might not survive. </li></ul>
  44. 44. Question 4 <ul><li>What management, organization, and technology issues do you think GM has had to face and will need to solve in implementing its internet strategy? </li></ul>
  45. 45. <ul><li>The management along with other employees had to become familiar with the new processes and programs. Technology is always evolving which might require GM to establish a department which will keep up new competitive advantages in technology. IT has cut thousands of jobs by replacing the demand for physical labor. </li></ul>
  46. 46. Question 5 <ul><li>How will GM have to redesign its business process to be able to compete successfully and achieve a leading role in the new economy? </li></ul>
  47. 47. <ul><li>GM might need to bring in younger and more qualified designers to appeal to the new tastes in the marketplace. The company might also want to improve their overall marketing and advertising to increase sales. </li></ul>
  48. 48. Question 6 <ul><li>In GM’s drive to sell cars online and to build-to-order, what are some of the problems that technology cannot address? </li></ul>
  49. 49. <ul><li>Buying a car online is impersonal and some customers might be discouraged after the delivery of their vehicle which is why GM offers the option of buying from a dealer as well. Payment options might be limited on the internet. </li></ul>