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General Motors Case Study

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Case 34

General Motors

What are key forces in the general and industry environments that affect the U.S. auto industry, and General Motors?

General Motors (GM) has suffered different threats and difficulties that have put in risk the continuity of its production. Before the year 2000, GM has been going through different production, financial, and development problems. Wagoner has tried in different ways to address each problem in order to make GM more successful. Unfortunately GM had high losses that have made it very difficult to solve those problems. All this is due to a very competitive environment in each there were different forces that affect the development of the firm. According to Porter’s Five-Forces Model of the Industry, there are five aspects to analyze, the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and services, and the intensity of rivalry among competitors in an industry.

First, the threat of new entrants highly affected the firm. GM has so many divisions and units which made the firm weak in its integration. GM had 27 different units within the firm that purchase parts that made it difficult to achieve economies of scale. All those units worked independently and do not contribute each other. In other to solve that, Wagoner started working to integrate each unit, especially overseas. Also, he took the decision to reduce the number of units and divisions which helps to integrate a lower number of divisions. In addition, GM decided to change its products line. One way was reducing the numbers of divisions and the other was to change the division style by changing the product balance. Having a different product mix, GM increases its profits by having a larger margin with some models. One of these changes was the expansion of sporty models. Another...

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