General Motors Case Essay

6461 Words Jun 20th, 2008 26 Pages

General Motors is primarily engaged in automotive production and marketing and financing and insurance operations. GM designs, manufactures, and markets vehicles worldwide, have its largest operating presence in North America. The core competence of General Motors is innovation. This is the driving force behind its $190 above turnover. General Motors has been utilizing innovation in service ad technology to secure itself a dominant position in the automobile industry, since 1908.

The main problems faced by General motors are declining U.S. automobile market share, high pension costs, rising fuel prices, lack of differentiated products, inability to generate revenues from its core activity (manufacture of cars), over
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as medical costs ↑ the profitability of GM ↓.

3. Costs of various heads have risen dramatically. These include raw material costs, fuel, healthcare and pension costs. These have worsened the profitability situation of General Motors. So much so that the company was able to translate its sales to net income only by 1.45% in the year 2004 (Net income/Sales= $2.8 billion/$193 billion=1.45%).

4. The company does not offer competitive, differentiated products anymore. Its most profitable products such as SUVs and trucks are less fuel efficient than other vehicles. As fuel costs are increasingly on the rise, General Motors is likely to lose more customers.

5. General Motors has always been ahead of other industry players by emphasizing on innovation. However it was unable to come up with a commercially viable hybrid vehicle on a timely basis as its competitors sprung ahead. Therefore General Motors cannot claim the pioneering advantage in this progressively more important product category.

6. The company is constantly making losses in its core business activity. In the first quarter of 2005 there was a loss of over $1 billion. In the second quarter there was again a loss of $286 million. A major proportion of these losses stem from the North American operations of General Motors. While industry-wide North American vehicle sales grew slightly, GMNA’s vehicle production

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