MANAGEMENT IN ACTION CASE STUDY

DON LYNN

1. In my opinion, the strategy type used by GM would fall under the reactors category. According to __ reactors make adjustments only when forced to by environmental pressures. In light of the recent economic downturn, GM was forced to make significant changes to avoiding being driven completely out of business. Because of significant sales losses and no doubt bad business practices, GM was forced to rely on the federal government for a bailout to keep from closing their doors. In an article in USA today, Sharon Carty wrote that there were systematic problems in GM for decades (may 13, 2009). In my opinion, the beginning of their downfall could have been following the 2001 terrorist attacks. At that time, GM was praised for responding quickly and precisely. They began offering many rebates with new car purchases and 0% financing on vehicles purchased. To compensate for the low interest rates and multiple rebate programs, GM was forced to raise its sticker prices. This rise in the sticker prices was occurring at a time when other vehicle companies were reducing prices. The end result was that their prices were much higher than the competition. Because of this, often shoppers wouldn’t even consider a GM vehicle. Because of the economic recession and the way they were conducting business, they were forced to consider bankruptcy. At this time, they became reactors to their current situation. This is a good example of the benefits of good strategic planning. Had this been more thought out and planned strategically we could have seen a much different outcome. While their low interest rates and multiple rebates no doubt increased immediate sales the impact it would have on GM in the years to come was astronomical.
2. GM has set a goal for itself of making more than 10 billion dollars a year. As a result of the government bailout, GM was able to write off nearly 40 billion dollars in obligations becoming debt free. Considering this write off, along with the fact that as of Feb 16th 2012, they were already seeing record profits. Taking this into account along with the recovering economy I don’t see any reason GM should not be able to achieve their goal of 10 billion dollars a year. As a matter of fact I think the probability of them achieving this goal is very likely. I can only assume that after going through the bankruptcy and having to be bailed out by the government, that a company of this size and magnitude has made some significant changes. Even though GM has been seeing a rise as of late, unless they have adopted a better long term planning strategy it will not last. This planning will have to include clear and precise direction as well as new ideas. There are many different opinions of strategic planning. Some believe that it can actually cause too much rigidity and leave little, if any room for change or new ideas. However, unless GM has a clear plan as well as outlined goals for the future they could easily fall into the same practices they had been used to. This is where the planning/control cycle becomes very important. While planning is the start of this cycle it is important that all four steps be followed to ensure that no changes need to be made. If changes are needed step four of the cycle will allow for those changes or give the opportunity to scrap the original plan and start over. If only the planning part of the cycle is followed and the control left out, it could most certainly result in GM being unable to attain their newly set goals.
3. The first of the two SMART goals for GM would be the goal of making more than 10 billion dollars a year. For the year 2011 GM almost doubled its growth, taking them to 8 billion dollars a year which is up from 4.7 billion in 2010. This is a significant increase and a sign that GM may be on the path to recovery. GM has also seen growth in China as well as strong profits in North America. These are some very promising achievements and if you couple these factors along with the current economic climate, one would have to believe that this first goal certainly looks attainable. The second SMART goal I see is the goal of having fewer auto “platforms”. In my opinion this is a very important goal. It would be a very effective tool in decreasing the cost it takes to build each vehicle. Not only would it substantially reduce General Motors cost when it comes to engineering all of the different types of vehicles as well as the application of each part, it would save them money in the production of each part as well. It stands to reason that if GM is able to cut their current 30 auto “platforms” to a mere 14 in 2018 it would cut their cost of making these parts in half. It would certainly seem that this is an attainable goal considering other auto makers are already below these numbers.
4. It appears that prior to the bailout GM had basically made and carried out the plan and really didn’t engage in the control cycle until they were forced to by economic pressures. If GM had been using the planning/control cycle properly they could have come through the recession more intact as did Ford. It seems the corrective action in step 4 of the control cycle was completely overlooked. Had they followed the control cycle they quite possibly could have gotten back on track before they were forced to bankruptcy. However, since the bailout GM has been using the planning/control cycle to the fullest extent. GM started by setting goals and making plans. These goals include making more money, raising its profit margin, and reducing its vehicle platforms. It seems to me that they have come through the control cycle and have started over. After experiencing the massive losses along with bankruptcy and government bailout, they seem to have completely restructured and formulated a new plan. Only time will tell if GM has learned from past mistakes.
5. Over the course of this case study of GM, I have learned the importance of the planning/control cycle. While there may be those that don’t see the importance of strategic planning and even those that believe it to be a strait jacket that doesn’t allow for change, I personally can see the importance and more than ever it is clear that the control cycle is pivotal and every bit as important as the planning itself. Many times there are decisions to be made and often not a lot of time to make them, if planned out correctly this scenario can be minimized and often can be completely avoided. Planning is a vital part of any project and should not be taken lightly. It is a major tool that allows us to keep focused on our progress. By following the planning/control cycle to the letter we can better coordinate all of our activities and stay on top of any changes that may pop up through the course of time. If we are able to keep surprises and unknowns to a minimum we stand a better chance of success. Overall, planning will help us cope with the many uncertainties that are faced each and every day.