Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Teaching Note: Case 32 – General Motors
Case Objectives
1. To examine how external and internal forces affect competitive strategy.
2. To investigate the choices of business, corporate-level and international strategies in a
highly turbulent industry.
See the table below to determine where to use this case:
NOTE: although this case is primarily indicated for chapter 3 internal analysis and chapter 5
Chapter Use Key Concepts Additional Reading and/or
Exercises
1: Strategy Concept Strategic management
2: External
Industry competition five forces;
NOTE financial info, web links
3: Internal Analysis Value-chain analysis; resource-based
5: Business Level
Strategy
Competitive strategy; generic strategies
6: Corporate-Level
Diversification; synergy; core
7: International
International strategies: multidomestic
Case Synopsis
In January 2015, CEO Mary T. Barra stated her intention to continue with the commitment to
build the best cars GM had ever produced. General Motors had finally begun to rebound from a
In 2013 GM had finally emerged from the government control mandated due to its 2009
bankruptcy, only to be faced with the gravest safety crisis in the company’s history. Barra had
acknowledged the lack of responsibility and accountability that lead to 42 deaths due to defective
Ex-CEO Richard Wagoner, originally hired in 2000 to start major restructuring, had been fired in
2009. Wagoner had carried out three major restructurings, eliminated dozens of plants and tens of
Although Henderson had initiated steps to negotiate with bondholders and the union for
concessions in an attempt to reduce GM’s bloated cost structure and had restructured senior
In addition to cost problems, worldwide, GM had been hampered by its multiple divisions,
multiple nameplates or brands, each doing its own design and marketing. To cut costs, GM began
to share designs and parts across divisions, leading to some loss of distinctiveness between the
Since cutting down its brands, GM had been able to reinvent Chevrolet as a global mass-market
brand. Its new small, fuel-efficient cars had been successful, with 60 percent of Chevy sales
GM was also attempting to address its product development process bottlenecks by pushing
designers and engineers to work together to address inefficiencies and listen to customers, while
reducing the number of executives overseeing a vehicle program. These new approaches were
In January 2014, GM was finally able to move past its bankruptcy as government-appointed
Ackerson was replaced by Barra, who had worked her way up within the firm and became the
first woman to ever run a big automobile company. She had been a rank-and-file engineer, a
CASE UPDATE
A source for continual updates on the General Motors story is this New York Times site:
http://topics.nytimes.com/top/news/business/companies/general_motors_corporation/index.html?
inline=nyt-org
Also see the interactive time line of GM’s “Road from Prosperity to Crisis” at
http://www.nytimes.com/interactive/2009/05/31/business/20090531_GM_TIMELINE.html?
ref=generalmotorscorporation&_r=0
Teaching Plan
The General Motors case can be used to discuss the challenges faced by a firm trying to compete
in an industry that’s undergoing substantial change. This is an easy case to use to establish the
effect of external environmental forces on an industry and an individual competitor, mostly
because the U.S. automobile industry had been in such turmoil since 2009. Many students will be
aware of the issues here. Therefore, this case can be assigned early in the course to demonstrate
the key concepts of strategic analysis.
Instructors may also wish to assign the companion case of Ford Motor Company, to follow
through on concepts of strategic formulation and implementation in the auto industry.
Before engaging in discussion, you might want to test student’s basic knowledge regarding the
case and the major concepts. Here are some multiple choice questions to use. (This will get the
student’s attention – they can’t answer these if they haven’t read the case!)
Which of the following statements is most true?
a. General Motors was one of the only firms that had NOT needed a government bailout
after the 2007-2008 economic downturn.
b. General Motors had to sell its Saab brand.
c. GM’s Cadillac brand was one of its best-selling vehicles in 2014.
d. In China, GM was gaining ground against Ford.
ANSWER: b. GM had not managed to post a profit since 2004, running up cumulative losses of
over $82 billion between 2005 and 2009. Having had to turn to the U.S. government for loans in
order to survive, GM finally agreed to cut out four of its brands— Pontiac, Saturn, Saab, and
The current CEO of General Motors is a woman.
a. Yes
b. No
ANSWER: a. Mary T. Barra, the CEO of General Motors, is the first woman to
Summary of Discussion Questions
Here is a list of the suggested discussion questions. You can decide which questions to assign,
and also which additional readings or exercises to include to augment each discussion. Refer
1. What are key forces in the general and industry environments that affect the U.S. auto
industry, and General Motors?
2. What internal resources and assets does General Motors have to help counter the external
forces?
3. What competitive strategy does General Motors use, and how might it position itself for
future growth?
Discussion Questions and Responses
Prior to answering the specific case questions, the instructor might want to position the
discussion by reviewing what strategic management really is:
Referencing Chapter 1: Strategic Management
Strategy is all about the ideas, decisions, and actions that enable a firm to succeed. See Chapter
1, Exhibit 01: Strategic management consists of the analyses, decisions, and actions an
organization undertakes in order to create and sustain competitive advantages:
●strategy directs the organization toward overall goals and objectives;
●includes multiple stakeholders in decision making;
Leaders face a large number of complex challenges. Leaders must be proactive, anticipate
change and continually refine changes to their strategies. This requires a certain level of
During strategic analysis, the leader does “advance work” to anticipate unforeseen
environmental developments, identify unanticipated resource constraints, assess changes in his or
In strategy implementation, depending on the type of organization structure, the leader might
include key individuals in a discussion around selecting which strategies might be best to
implement at which level within the organization. The leader must ensure proper strategic
The basic question strategic management tries to answer is: How can we create competitive
advantages in the marketplace that are not only unique and valuable but also difficult for
competitors to copy or substitute?
1. What are key forces in the general and industry environments that affect the U.S. auto
industry, and General Motors?
Referencing Chapter 2: Analyzing the External Environment of the Firm
Organizational leaders must become aware of factors in the overall environment that might affect
their ability to create a competitive advantage. So how do managers become environmentally
Environmental scanning involves surveillance of a firm’s external environment to predict
environmental changes and detect changes already under way. It is a BIG PICTURE viewpoint
Environmental monitoring is a firm’s analysis of the external environment that tracks the
evolution of environmental trends, sequences of events, or streams of activities. Leaders need to
What factors or trends might be most important to General Motors? To assess how the external
environment might affect GM’s strategy, it’s necessary to take a look at the factors in the general
Political-Legal: government intervention meant some firms lost flexibility, control; all needed to
Economic: the auto business was cyclical and demand for cars was strongly impacted by boom
Demographic: automakers needed to attract younger, more affluent buyers to high status vehicles
Sociocultural: first the SUV was a status symbol; then going green (hybrid/electric) became the
Technological: the electric/hybrid option was dependent on new technological developments.
Based on the general environmental forces, the industry was under pressure, but there were also
opportunities. Things were changing quickly, especially customer tastes, yet the auto industry’s
It’s also necessary to assess the segments of the external competitive environment that include
competitors, customers, and suppliers, substitutes and new entrants. Porter’s five forces model
allows strategists to anticipate where the industry might be most vulnerable. See Exhibit 2.7.
General Motors, like other automakers, was confronting two key threats:
●One was from the increased levels of rivalry.
●The second was the growing power of buyers such as corporate and government fleet
Clearly, there were a few large and equally balanced firms that were pitched in a battle for a
greater share of the global market. Slower industry growth was resulting in an increase in this
The other key threat was coming from the growing power of buyers. Most buyers (dealers, fleet
operators) were clearly beginning to see more viable choices in terms of the firms from which
they could buy. Although there is some difference between the major brands, customers do not
Rivalry
Very High
Buyers’
Power
Med-High
Suppliers’
Power
Low
Suggested: A few large
and equally balanced
competitors fighting for
global market share; slow
Suggested: Consumers do
not have much price
negotiating power, but do
Suggested: Low – do not
have much power, except
Suggested: No real
substitute for personal
automobile
Based on the external environmental factor analysis, the U.S. auto industry has many challenges
There was always the possibility for overcapacity and rivals were trying to attract customers
away from each other through price-cuts and incentives. That was the dangerous trend in this
Product differentiation was susceptible to quick imitation in this industry, and in the absence of
switching costs it was difficult to retain customers. Also, companies had high exit barriers as
NOTE – ADDITIONAL WEB LINKS TO FINANCIAL INFORMATION, EMBEDDED
VIDEO:
Since January of 2005, General Motors has reached out to the world through a blog:
http://fastlane.gmblogs.com/
After browsing to read the varied entries by GM engineers, and other VP’s, what does the focus
of recent posts tell you about GM’s response to various external environmental conditions
(global car design, reorganization, labor troubles, pollution & gas consumption issues, for
instance)?
An interactive time line of GM’s “Road from Prosperity to Crisis” can be viewed at
http://www.nytimes.com/interactive/2009/05/31/business/20090531_GM_TIMELINE.html?
ref=generalmotorscorporation&_r=0
View GM’s current financial picture compared to competitors at:
http://finance.yahoo.com/q?s=GM&ql=0
An analyst’s report from 2013 opines that although GM appears to have made “phenomenal
improvements over the past several years”, it’s still at the mercy of global demand, and “industry
trends” can still be “more powerful than strong management teams”:
http://www.fool.com/investing/general/2013/08/29/is-general-motors-a-better-investment-than-
its-pee.aspx
Does this tell the whole story? Now that GM has emerged from bankruptcy and Chrysler is
privately held and aligned with Fiat, investors have fewer options for investing in the traditional
U.S. auto market. See the following article from June 2009 that opined GM was “dead”:
http://www.fool.com/investing/general/2009/06/01/the-death-of-general-motors.aspx
