978-1259278211 Case 32 Solution Manual Part 2

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In 2011, some analysts were concerned about Ackerson’s decisions:

http://www.fool.com/investing/general/2011/01/31/strange-days-at-general-motors.aspx?

source=isesitlnk0000001&mrr=0.13

Several opinions existed for GM’s future prospects in July 2009. See these analyses:

http://money.cnn.com/2009/07/10/news/companies/new_gm_outlook/index.htm?

source=yahoo_quote

After emerging from bankruptcy, GM faced not only product redesign and quality issues, but

changes to the culture. See the article from July 2009 about reorganization:

http://www.nytimes.com/2009/07/11/business/11auto.html

For some history of the decisions GM made, see these news stories:

Given the highly competitive market for the big pickups in the years up to 2008, GM had to

The article mentioned pricing strategies along with truck redesign as potential incentives for

consumers. The entry of Toyota and Nissan into this market made it even more difficult for the

three U.S. automakers. Did GM do the right thing to try to “match Toyota’s deals” when GM’s

costs were still so much higher?

From February of 2006, here’s an article from Fortune predicting that GM will have to declare

bankruptcy, and that perhaps CEO Rick Wagoner will not be able to save the company:

http://money.cnn.com/magazines/fortune/fortune_archive/2006/02/20/8369111/index.htm

Yet, in 2007, GM once again topped the list of automakers on Fortune’s Global 500 list by barely

beating Toyota:

http://money.cnn.com/magazines/fortune/global500/2007/snapshots/175.html

and, even after bankruptcy, landed in 7th place in 2013:

http://money.cnn.com/magazines/fortune/fortune500/2013/snapshots/175.html

but by 2014 it had dropped to 21st overall http://fortune.com/global500/general-motors-21/

The union problems, and the contribution of labor to costs has been named as one of the reasons

at the Detroit companies’ plants:

http://online.wsj.com/article/SB10001424052748704083904576335501132396440.html

Another reason given for GM’s inability to compete was the large number of brands under

manufacture. With so many different brands to support, some have said GM has never fully

GM had only discontinued one brand, Oldsmobile. The rest continued to compete with

themselves:

http://www.brandingstrategyinsider.com/2007/10/of-branding-gm-.html

In 2013, after three years in the top job at GM, Akerson shared some of his leadership lessons

(see video):

http://www.usatoday.com/story/money/business/2013/08/05/breaking-through-gm-ceo-akerson-

leadership/2581041/

From May 2015, here is an interview, including a video, with new GM CEO Mary Barra:

http://www.cbsnews.com/news/what-drives-gm-ceo-mary-barra/ . Discussing the impact of the

Do you think new CEO Barra will succeed?

1. What internal resources and assets does General Motors have to help counter the

external forces?

Referencing Chapter 3: Analyzing the Internal Environment of the Firm

When one firm outperforms others by a wide margin over a long period of time, it’s important to

figure out how this could be. The answer may lie in how that firm arranges its activities and

Remember, value chain analysis is a strategic analysis of an organization that uses value-creating

activities. Value is the amount that buyers are willing to pay for what a firm provides them and is

measured by total revenue, a reflection of the price a firm’s product commands, and the quantity

Every activity should add value. Take a look at Exhibit 3.1 to see the value chain activities.

A sample value chain analysis is below:

Value chain activity How did General Motors create value for the

customer?

Primary:

Inbound logistics (distribution

facilities, material control

systems, warehouse layouts)

Assumed adequate.

Operations (efficient work flow

Historically poor quality, high costs, long assembly

Outbound logistics

(consolidation of goods, efficient

scheduling, finished goods

processing)

Assumed adequate.

Marketing and Sales (motivated

advertising & promotion,

effective pricing, proper ID of

customer segments &

distribution channels)

Poor image of most brands; engineers were ignorant of

Service (ability to solicit

customer feedback & respond)

Assumed adequate.

Secondary (or support):

Procurement (win-win

relationships with suppliers,

reduced dependence on single

supplier)

Assumed adequate.

Technology development (state

personnel)

Poor coordination between the functional areas on

Human resource management

(effective recruitment, incentive

& retention mechanisms)

Unhappy union workers, removal of key personnel

General Administration

(effective planning systems to

relationships with stakeholders)

Poor leadership (past leaders); bloated bureaucracy

raised overhead costs. Move to centralize decision-

Primary Activities

In terms of primary activities, although Barra appeared to be trying to fix operations, it’s hard to

Support Activities

With regards to support activities, a competitive advantage is achieved by developing a strong

general administration that is built around visionary leadership and a culture that pushes for

In addition, see the concept of the resource-based view of the firm, and the three key types of

resources: tangible resources, intangible resources, and organizational capabilities. A firm’s

strengths and capabilities – no matter how unique or impressive – do NOT necessarily lead to a

An important issue to focus on here is the importance of intangible resources like innovation and

reputation. In this consumer-based business, sustaining brand reputation is essential. Look at

resources to include:

Tangible Resources:

Financial: improving, but still uncertain

Physical: considerable, leading to overhead problems. Plants were closed.

Technological: although not mentioned in the case, GM engineers had to be aware of production

Organizational: extremely poor in the past. Change to a more centralized management structure

Intangible Resources:

Human: Union relationships were strained. Qualified engineers and designers were unable to

Innovation and creativity: uncertain ability to be innovative. Competency might have been

Reputation: unfortunately, very poor.

Organizational Capabilities:

Specific Competencies or Skills: considerable physical and human resources led to potential

Capacity to Combine Resources: existing bureaucracy made it difficult to combine any resources

It’s unclear what capabilities GM might be able to develop going forward.

Determining whether the internal resources are valuable, rare, difficult to imitate, or difficult to

substitute (VRIN) can help a firm sustain a competitive advantage. See Exhibit 3.6. Applying the

Wagoner, and then Henderson and Whitacre, then Akerson had taken the following steps:

●Management infrastructure: restructuring of autonomous global divisions.

●Human resource management: push for more union concessions to cover health care and

pension funding, and wage structure. (Not in the case: Layoffs and buyouts offered to

●R&D: oversight of new product development by central committee; adoption of practices

that cut costs and reduced time for new products. Increased coordination between the

●Operations: designers encouraged to make better use of the firm’s global resources by

●Manufacturing: sharing practices across divisions

●Marketing and sales: push to improve image through refocused marketing, especially in

It was clear that GM had lost its cache with customers. (Not in the case: With regards to design,

at one time Wagoner had remarked, “One critically bad thing at GM has been the subordination

Both Porter’s model and the value chain analysis pointed to a company that was out of sync with

the market. GM’s leadership had to address cultural issues – fiefdoms, old ways of doing things,

dysfunctional approach to accountability, not taking responsibility for decisions, etc. What GM

had not laid out any specific goals. Would she be able to return GM to its former leadership

position in the industry?

2. What competitive strategy does General Motors use, and how might it position itself for

future growth?

Referencing Chapter 5: Business-Level Strategy

A competitive strategy is linked to the value chain, and supported by intangible assets. GM had

historical lack of coordination across the value chain. Resources and assets should provide a firm

In order to achieve a sustainable competitive advantage, GM had to assess its ability to contend

with other automobile companies. The question of how to compete in a given business to attain

competitive advantage requires an assessment of the types of competitive strategies, including

However, there is the possibility of combining overall low-cost and differentiation strategies into

a combination strategy. This involves attention being paid to the following:

Mass customization, facilitated by advances in manufacturing technologies, would allow a firm

to manufacture unique products in small quantities at low cost. However, firms must maintain

awareness of the industry’s profit profile. The profit pool involves the total profits in an industry

at all points along the industry’s value chain. The structure of the profit pool can be complex.

It’s hard to see what competitive strategy would be best for General Motors. It had too many

legacy costs, so was unable to maintain parity on low cost, and it was not perceived as unique

enough to be truly differentiated. GM would need to be much more innovative to catch up to

Referencing Chapter 6: Corporate-Level Strategy

Corporate strategy focuses discussion on the questions of what businesses a corporation should

compete in, and how the businesses should be managed so they can create “synergy” – creating

Diversification is the process of firms expanding their operations by entering new businesses.

Some possibilities include:

●Mergers and acquisitions

●Strategic alliances

Whatever the choice, it should create value for all stakeholders – employees, suppliers,

Companies can achieve synergy through diversification in two ways:

Through related businesses (horizontal relationships)

●Sharing tangible resources

Or through unrelated businesses (hierarchical relationships)

●Value creation derives from corporate office

Core competencies reflect the collective learning in organizations—how to coordinate diverse

production skills, integrate multiple streams of technologies, and market diverse products and

In the past, General Motors had pursued too much diversification into unrelated businesses.

Attempts to leverage shared support activities had not worked – for instance, GM had had 27

Referencing Chapter 7: International Strategy

International expansion is a viable diversification strategy, however before pursuing this, a firm

needs to determine why an industry in a given country is more (or less) successful than the same

industry in another country. When choosing a country to expand into, firms must assess the

There are two opposing forces that firms face when entering international markets: cost

A global strategy was effective if it standardized all of a firm’s products for all of its worldwide

markets. Doing this would reduce a firm’s overall costs by spreading investments over a larger

global market. However, a global strategy should be based on three assumptions:

●Customer needs and interests were homogeneous worldwide

General Motors had tried to pursue a global strategy with Chevy, but had a multidomestic

strategy with other brands.

Headway was being made with Chevy’s fuel-efficient small cars, especially the Cruze in China,

and GM also had this multidomestic strategy with local brands in certain regions such as

Opel/Vauxhall in Europe, and Wuling in China. The European brands, with expertise in small car

At General Motors, industry and value chain analysis pointed to a company out of sync with the

marketplace. Car designs needed to improve, costs needed to be more under control, fundamental

cultural issues still needed to be addressed: fiefdoms, resistance to change, strong union

presence, dysfunctional approach to accountability, not taking responsibility for decisions, etc.

All strategies needed more focus to achieve synergies. Would Barra’s leadership be enough to

return GM to its former position in the industry?