Running Head: Case Analysis - General Motors

General Motors1

Running head: Case Analysis - General Motors

Team Project: Case Analysis

General Motors (GM)

Bombardier

Kyungpook National University

Table of Contents

Introduction ………………………………………………………………………. 3

Case Analysis

Background ………………………………………………………………………... 3

Opportunities & Challenges…………………………………………………………. 4

Initiatives …………………………………………………………………………... 6

Is GM on Track? ………………………………………………………………….. 11

Current Information & Situation ………………………………………………. 12

Expected situation ……………………………………………………………….. 13

Conclusion ……………………………………………………………………….. 14

Bibliography ……………………………………………………………………... 15

I.Introduction

General Motors (GM), having been one of the largest automakers in the world, was hit by the USA Today article’s saying, “The business model for this industry is broken.”It stimulated GM to aim at planning to enhance efficiency of the company by integrating GM’s demand and supply chains sustained by the latest technologies, which has been known as Digital Loyalty Network (DLN). As its name suggests, DLN includes three elements of GM: technology-enabled standing for “Digital,” customers’ attachment to GM standing for “Loyalty,” and collaboration between its supply chain and distribution chains standing for “Network.”The purpose of this paper is to show the previous and present status of GM based on its background, opportunities and challenges, and initiatives according to the model case analysis of Graduate school of business, Stanford in order to better understand where GM is supposed to be next based on what efforts GM had performed.

II.Case Analysis

II-1. Background

GM, having been founded in 1908 and manufactured cars and trucks worldwide,has its headquarters in Detroit, employs 244,500 workers in every major region of the world, and sells its vehicles and services in about 140 countries. GM hasglobally sold 8.35 million cars and trucks through the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM's largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia, and Germany.

Since the early 2000s, global market,economic uncertainty, and increasingconsumer demands have made automakers facethe problems between the need of rapid responsiveness to the market and the inflexibility of automotive industry,for example, fixed plant assets, a unionized workforce, and fixed parts supply schedules. In other words, imbalance between the supplyand demand sides, which finally links to customer’s satisfaction, has appeared as the problem automakers have to solve.

In addition, the appearance of Asian automakers from Japan, South Korea, and others has added another problem GM has to answer by intensifying the competition among automakers. They entered the U.S market and succeeded in holding significant market shares by shifting consumer tastes preferring smaller cars equipped with qualified options, compared to U.S products. Therefore, GM has recognized the need to build effective strategic relationships with suppliers, dealers, and even competitors in order to ultimately satisfy the consumer’s expectations.

II-2. Opportunities & Challenges

Like other automakers, GM also only focused on raising sales in order to use their capital-intensive plant assets and unionized labor force. This resulted in excessive costs for keeping dealers’ large inventories not reflecting customers’ preferences and consequently losingprofits.Thus, GM evaluated and identified its capabilities through three areas: the customer side, the supply side, and IT or the “digitizing” side.

II-2-1. Customer side

GM needed to focus on not only their high quality products but better understanding of customers’ taste and preferences. Balancebetween products and customers were major task for GM to work.Thus, it was essential for GM to do rapid and sensitive responsiveness leading to customers’ satisfaction through the enhanced internal structure and the latest technologies.

Leveraging the Brands

GM’s multi-divisional structure stayed lack of effective integration between the segmentedparts of GM and their customers. It might be caused from the short of connection between each dealer having collected customer data. In other words,GM’s different braches maintained their customers for their own business rather than share with other branches. Therefore, GM’s ineffective customer management seemed to makeGM to lose theopportunities to gain customers’loyalty leading to final profitability.

Dealers Relations

To solve the demand uncertainty and long delivery lead time, GM stocked huge levels of inventory as a competitive elementby letting expected buyers “touch, feel, and engage with” the vehicles. However, the whole expenses included unwanted and excess inventory.Related to customer’s aspect, GM needed to create new sales and delivery channels by negotiating among dealerships such as the Internet and auto supermarkets.

II-2-2. Supply Side Opportunities and Challenges

The key issue of supply chain was also excess inventory. Regarding long replenishment lead time and unpredictable production resulted in unwanted inventory levels as a form of buffer and safety stock against the uncertainty.

Communications Channels

Inefficient manual communication channels such as fax, phone, modem, or electronic spreadsheet between GM and its supply chain partners as well aslittle collaboration in product development causing delayed development cycle time required GM to restructure its internal organization and business processes especially on the supply chain side.

Logistics

The complexity of GM’s inbound and outbound operations resulted in the unpredictability of order fulfillment lead times by beingaccelerated through the lack of communication and coordination between GM and its suppliers. It reminded GM of the time of managing multidivisional logistics.

II-2-3. IT Infrastructure Opportunities and Challenges

GM recognized that its information system was too old to effectively integrate the flow of the company and the solution of connecting its fragmented infrastructure was the standardized computer systems. The system based on new technology was expected to promise improved efficiency and reduced costs by contributing to GM’s being the first self-digitalized enterprise.

II-3. Initiatives

The key of GM to success was to marry the customer and supply chain sides. Also, GM created a digital loyalty network to drive new value by the latest technologies.

II-3-1. Customer relationship management initiatives

On the customer side, GM recognized that improved relationship with customer as well as creating new sales channels have the key of differentiating GM with others

Leveraging customer data

It was to find ways to better leverage customer data warehoused in numerous discrete enterprise customer management (ECM) databases. By using ECM, GM could begin to consolidate the ECM system and databases to capture valuable information with each customer interaction, and GM dealers at the new location could contact customer with appropriate product and service offerings, and then personalized treatment could help maintain customers and create a loyal and profitable customer base. Eventually, better customer knowledge would lead to more profitable customer, greater loyalty, and richer customer information.

Differentiated Customer Responses

GM needed to examine customer demands concerning vehicle delivery because customers had widely varying and personalized expectations when it came to such order fulfillment regarding lead time, delivery reliability, and the importance of exactly getting the desired vehicle configuration. Also, many customers would wait for a certain amount of time and some even would pay premiums to get their preferred vehicle. They wanted to get the car at the desired time and desired price. In this sense, what was really needed was a differentiated supply chain response for each customer.

New channels: Harnessing the power of “e”

GM began developing a complementary Web-based channel that would not only allow customers to search for the vehicle they wanted but would also provide GM and dealers with rich customer information. The result was GM BuyPower, GM’s online portal, which integrated online channel and a personalized offline dealer experience. The reason for GM BuyPower was to strengthen the “shopping” and “buying” aspects. It was designed for customers to choose the dealer as well as vehicle and served as an ongoing communication link to customers. For those reasons, customers could searh for the vehicle they wanted, view all dealers in a chosen Zip code, and choose the nearest or preferred dealer. Every customer request from GM BuyPower could be tagged with customer information, and dealers could personalize their responses with appropriate offerings. In addition, marketing efforts also created strong awareness of GM brands and led to increased consideration for customers. As a result, GM BuyPower became the most frequently visited automotive OEM website in the world and more dealers became increasingly interested in participating BuyPower. Another thing related to online was Web-based tool. In this tool, customers could create personalized profiles of all GM vehicles they owned and get the many beneficial things such as service.

Direct Links to Customers with Telematics

OnStar was created in order to improve the relationship with customers. Onstar had lot of advantages to satisfy customer. It allowed not only dealers to essentially interact with the customers daily but also consumers to push a button and receiving a wide variety of safety, security, and convenience features. For example, subscribes of Onstar were given the ability to remotely unlock a car door if the keys were accidentally locked inside, and stolen vehicles were recovered and so on. Consequently, Onstar became strong selling points of GM, and more than 10 million customers interacted with Onstar. GM continued to explore the integration of new services into Onstar, such as XM satellite radio.

II-3-2. Supply chain management initiatives

GM has realized that strong internal structure based on well integrated supply and demand chain ultimately links to the real profits of the customer side initiatives. Thus, GM has embarked some drives on the supply side through backing and empowering starts such as Build-to-order (BTO) and improving link and collaboration between GM and its extensive supply network.

Build to Order Delivery

In the stream of automobile industry’s shift from build-to-stock model to a more balanced build-to-stock and build-to order model, GM has started new initiatives on the supply side named Order-to-Delivery (OTD), which consists of three cross-functional groups; order fulfillment, supply operations, and logistics. GM has been responsible for every step related to customer from facing customer to deliver of vehicles, aiming to reducing inventory, increasing customer satisfaction, and reliability by delivering vehicles. In the long-term period, OTD ultimately guaranteed to enhance the relationship between engineering, manufacturing, dealers, and customers allowing GM to effectively collaborate with suppliers

Shoring Up Communication in The supply Chain

GM judged that around over the half of its operation including materials procurement and sharing information, and communication between huge systems of GM could be accomplished through the Internet by 2004. Therefore, GM built their own private Web-based portal called GM SupplyPower enabling intensive integration between GM and its every single business. As a result, GM SupplyPower helped themsave operation costs andfinally contributed to the vehicle development process throughoverall effective operation system through their improved collaboration.

The "Big Three” launched Covisint

Instead of manual communication system between GM and its supply chain partners, Big Three auto makers including Ford and DaimlerChrysler created the Internet-based business-to-business (B2B) exchange system, called Covisint. It enabled every suppliers of GM from large to small ones to share immediate information through the only one standard protocol. Consequently, Covisint guaranteed to reduce inventory, quickly sense to the market, and speed up vehicle development times.

Inventing New Practices in Logistics

GM having used disparate IT systems of third-party logistics providers (3PLs) judged it ineffective to communicate between GM and its providers. Thus, GM launched “super-3PL” centrally managing multiple 3PLs into one information system.It enabled GM to manage and keep track of all the steps of shipments through the Web and resulted in reduce expense and delivery lead time in its logistics. Therefore, GM could achieve better facilities to dealers and buyers through improved information flow, dependence, and flexibility of its production and distribution system.

II-3-3. IT Initiatives: Integrating the Value Chain

Cultural shift

One of the ways to digitize GM was to train its executives about the importance of IT in order to meet the need for continuous connection between the business side and the IT side. Thus, GM hired a chief information officer (CIO) and process information officer (PIO) in every business unit in order to assimilate technology initiatives into GM’s essential business model.

Infrastructure Improvements

In addition to the effort to let GM be aware of IT, GM launched out enhancing the company’s existing systems and technology infrastructure.By inserting middleware applications between wide area networks (WANs) and local area networks (LANs), GM unified segmented disparate systems into only one computer-aided system worldwide. Also, GM has been equipped with the capability to anticipate where the customer is supposed to be by working as a team on the customer side based on the Enterprise Customer Management (ECM) database.

All – encompassing IT

GM’s scheme was to invest IT throughout the extensive infrastructure of the overall GM from suppliers, dealers, employees, alliance partners, and customers. In other words, the web business embraced GM’s overall internal processes, from making the initial concept of a car, such as product development and manufacturing, to sales and long-term service.Through this strategy, GM could achieve the unrivaled position by transforming itself.

II-4. Is GM on Track?

By 2002, GM has achieved great progress “digitizing” through the aspects of customer, supply chain, and other parts of organization such as product development and manufacturing. The results of this great progress has shown that many of the customers returned to GM, and supply chain could achieve reduced delivery lead time and improved replenishment reliability.In other words, GM has stepped to another aspect of their business based on integrating its initiatives of customers and suppliers supported by the latest technology.However, GM had to assess and decide what initiatives had to be supported to make them be in the fixed position as an automobile industry business model among their various initiatives invested millions of dollars. Considering other factors affecting them such as economic slowdown and increasing competition, they might add up new efforts to make creative value.

III. Current Information & Situation

During recent years GM has to face many problems. The major role among them is played by the global crisis, which affects every aspect of companies’ environment starting from suppliers and ending with customers. Being such a huge global company, GM greatly suffers from the loss of customers and price increase. The company has almost been bankrupt in 2008-2009.However,considering its economic importance to U.S. industry, countries’ government approved the bailout plan for 13.4 billion dollars to be given to GM and 4 billion dollars would be available to withdraw later. Besides, GM pleaded European governments for 4.3 billion dollars for aid; thus, it acknowledged its lack of funds and willingness for de-globalization of GM.

In 2007, disputes with labor unions appeared throughpeople’sstriking against the company.It has led 2.81 billion dollar loss since 1970. It would show that negotiations with labor unions have high priority because GM’s labor cost is much higher than usual compared with other companies’. Therefore, new offers and agreements should be suggestedto prevent more problems and economical difficulties.

Another current issue affecting GM is weak competitiveness. It is difficult to increase competitiveness by lowering expense.However, some measures seem to be urgent. One of the possibilities to increase GM’s competitiveness would be achieved through changing its marketing strategy as well as approach to production itself. Developing new technologies and vehicles should be the main focus for this shift. Also, support from marketing need to be strong so that people are aware of the updates in the company.

Increasing product priceindicates that raw materials also become more expensive. It lowers the profit and production possibilities of vehicles even more. This is why new material development should be encouraged by the company. Even if it is unable to produce or invent new kinds of materials, it couldbe accomplished by making alliance with other companies like “DuPont” specializing in such processes as material and technology development.

Because the word of mouth is one of the most powerful information sources,customers’ dissatisfaction might quickly lead GM to be bankrupt. GM might solve this issue by improving customer management service via more training and adding features such as personalizing and adjusting cars to customers’ preferences. However,it should be very cautiouslyviewed in the aspect of huge increased spending.

In the near future, gasoline driven vehicles are going to be changed into alternative engines. In 1996, GM presented an electric car by means of showing the progress of technology. As oil price is high, the first thing that GM should focus on is the change from fuel engines to alternative ones. GM stated that this should be done by 2020. Besides, investing into alternative resources for the production itself might be a good idea to cope with the increasing oil price.

Although overall situation does not look good to GM,it might turn out well in the end with a big support from U.S. government and restructuring of the company. However, now we can only guess the outcome of the changes but no one is sure.

IV. Expected situation - New waysof approaching to customers

Through the current situation of GM, some solutions could be deduced.

First is warranty extension from one year to five.Second is effective customer management system though monthly check-up and call center training. In addition to the aspect of customer, top 10 percent workers are paid extra bonus in terms of applying new human resource strategy.

V. Conclusion

As the name globalization suggests, the market of every organization becomes bigger and wider. It means that the customers of the organizations are scattered in not only their own countries but also others in the world. According to the model case analysis by Stanford University, a few years ago GM already achieved its prosperity through customer’s satisfaction by integrating its suppliers supported by the newest technologies. However, the heyday of GM did not seem to last long enough. In other words,inflexibility, one of the distinct features in automobile industry based on its operation system, looks no longer suitable for the international trend like global economy and market.Therefore, GM needs to put primary focus on customer’s satisfaction such as warranty extension and improved customer management resulting from effective infrastructure integration based on effective human resource management in order to survive in global markets.