General Motors: From Birth to Bankruptcy

Introduction

General Motors is an American multinational automotive manufacturing company which has been viewed as the world’s second largest in the automotive industry. This paper seeks to discuss the company’s history, from its establishment up to its bankruptcy in the year 2009. The paper will look into the company’s history and its SWOT analysis.

History of General Motors

The establishment of the General Motors traces its origin to the nineteenth century. In the year 1892, a person by the name Olds, through his savings decided to convert an engine manufacturing company into a motor vehicle company.

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The commercial production of vehicles however did not start immediately as the company’s initiatives were for a number of years restricted to experimentation. These experiments led to the first test being done in the year 1895 when the company took a road test of its first model vehicle that had the capacity to move at about eighteen meters per hour.

Mr. Olds, who had named his transformed company as Olds Motor Vehicle Company, then established a motor vehicle manufacturing company in Detroit. This was the first motor vehicle manufacturer in the American region. The company received a positive reception in the market as it managed to sell more than one thousand vehicles in the few years before the close of the century. General Motors was then a development of a merger between the Olds Company and another company, Buick that had been developed.

The merger took place in the year 1903 following an economic recession that called for measures to ensure profitability in the industry. The general motors company then continued its expansion and innovations that fostered its developments until the economic recession that was realized after the Second World War.

The company’s management, however, proved its competence by developing new policies that that saved the company. The company also exerted its competitiveness in the industry in the closing years of the twentieth century. It, however, experienced a set back from the year 2008 when it greatly shrank its operations and expenditure. Further economic pressure then led to the company’s bankruptcy in June of the year 2009 (Funding 1).

SWOT analysis

SWOT analysis refers to the analysis of strengths, weaknesses, opportunities and threats that face an organization. The history of the general motors company exhibits a wide range of features as relates to strengths, weaknesses, opportunities as well as threats.

Strengths experienced by General Motors

One of the strengths that the General Motors Company had was an advantage over some of its competitors with respect to the variety of products that it had been offering to its customers. This advantage had been to the benefit of the General Motors Company over its long time competitor, Ford. Ford had resorted to production of a single model of car which was model T. The strategy of the general motor’s competitor was to produce a large number of the same model of vehicle and maximize on the economies of scale.

The General Motors whose car models were mainly targeting the rich classes of people changed its strategy to producing a wider variety of vehicle that would as well target lower economic classes of people. Its wide variety of production, which was based on grouping sections of the company departments to specialize in production of vehicles for specific market targets, helped the company to counter the competition that it faced from its competitor.

Another strength that the company developed was the decentralization of the groups that it had formed in order to expand its market. The then CEO of the General Motors, Sloan, made the groups to be autonomous in the operations and management.

The aim of this move was to create competitiveness among the company departments in terms profitability. This would be a motivational move as each department would strife to outdo one another thereby increasing the overall profitability of the company.

The diversification of product models, therefore, gave the company advantages in two perspectives: beating its competitor which was successful as well as increasing its profitability through an established healthy internal departmental competition. The company through this advantage controlled the vehicle market (Case Study 252-263).

Another strength that was identified with the company was its move that established and nurtured new skills that were less costly to the company’s operations. This strategy was a replication of some of the techniques that Japanese company used.

General Motors through this move established a cheaper means of production that provided it with a more competitive advantage over its competitors whose products were considered to be of lower quality. This further led to a relatively lower production costs in the company’s special department that was established to employ Japanese techniques.

The lower costs would then give the company higher profits if it maintained its selling price of the department’s products and even gave it an opportunity to lower its prizes to beat its competitors out of the market. The General Motors Company also entered into a venture with the Japanese Toyota Company through which General Motors intended to learn from Toyota how the Japanese managed to produce at low costs.

Though the ventured threatened to fail, it was eventually undertaken and General Motors acquired the technologies that empowered it to produce vehicles that were of high quality and at lower costs of production. The joint venture, therefore, gave the company more advantage to manipulate the market since it acquired more capacity of generating profits (Case Study 252-255).

General Motors Company also established branches to reach the global market. Measures such as formation of mergers with companies in foreign states were undertaken in the bid to spread the impact of the company into the global market.

Establishments of partnerships such as that which was done in Hungary between the General Motors and a local company in Hungary for supplies of its materials used in assembling vehicles helped the company to localize itself in foreign markets. These strengths helped the General Motors Company to hold on through the tough economic times that the company faced in the vehicle manufacturing industry.

Weaknesses

Weaknesses refer to setbacks that face an entity. Being a business organization and one that deals with production and marketing of commodities, the General Motors has been and is still bound to face challenges in its operations and marketing as well as in its internal activities.

One of the weaknesses of the company has been its inability to foresee and plan to control its susceptibility to loosing its market control in the motor vehicle industry.

The General Motors Company controlled a greater percentage of the motor vehicle market in the United States which was estimated to be more than fifty percent. It, however, lost its control to be shared among other companies. The company also suffered from impacts of its technologies as well as models that were much inferior to the ones that were owned by the other companies.

Technologies that were for a long time employed by the American company had a lot of disadvantage to the company. It is reported that at the time when the company started to lose market control in the first and the second decades of the twentieth century, the company was characterized by poor efficiency levels as well as the manner in which the company captivated its customers.

Responses that General Motors received from its customers were relatively worrying leading to lost touch between the company and its customers. Though the management moved to counter the market loss by diversifying the range of products that it offered, the company should have foreseen the possibilities of these occurrences and taken appropriate measures prior to their happening that cost General Motors its dominance in the motor vehicle market of which it had previously controlled more than half.

The range of products that the general motors company offered to its consumers also turned out to be its weakness. The company had seemingly specialized in relatively expensive models of vehicles that were only affordable to the richer classes of people.

This then played a role in the company’s loss of the market control share as Toyota and other car companies that joined the motor vehicle market. The Japanese marketer, for example, introduced two brands of vehicles that were relatively cheaper as compared to the brands that were offered by general motors.

Consumers, especially the group that could not afford the costly brands that were offered by general motors then shifted to purchasing the Japanese vehicles. General Motors was only reported to have planned for strategies to counter the Japanese cheaper provisions by trying to introduce models that would fit middle and low economic classes in the market (Case Study 252-263).

The General Motors Company also suffered from inferior business model that it applied in its operations as well as its market. Elements such are costs of production processes and even qualities of the products that the company had offered were generally regarded to be poorly managed.

The company was, for example, cited to be incurring a lot of unnecessary expenditures that strained its profits. The company, for example, spent a lot of money in the year 1990 in a bid to improve its quality production and check on its costs, though the result of that expenditure was not significantly realized. The company also failed to control its expenditures in times by reducing its expenses on resources especially its number of employees which analysts had identified as a major strain to the company (Case Study 252-263).

Opportunities

Throughout its history in the twentieth century and the first decade of the twenty first century, General Motors Company had a number of opportunities at its disposal. The first opportunity that the company had was influencing the American market so that it could have a monopolistic power in the country. Being the first provider in the market, the company had an opportunity of researching into its customer needs such as producing the cheaper car models that the Japanese company came to provide.

The oil shortage that rocked the world in the 1970s and raised an alarm over the use of heavy oil consuming vehicle, a characteristic of the type produced by General Motors Company, was also an opportunity for the company to read into the demand of the market and start producing vehicle brands that consume lesser amount of fuel.

An opportunity for General Motors Company to eliminate its competitors through fair means has also occasionally emerged for the company. Possibilities of acquiring competing companies which seemed to be smaller than General Motors occurred in the year 1990 when the company spent an amount of money, on restructuring, that was enough to acquire its two competitors through purchasing them.

This acquisition move would have restored the company’s market control as well as its profitability. The company equally had the opportunity to lead in exploring the global market which could have given it an advantage to counter its lost market in America. Some of these opportunities still remain to be available to the company (Case Study 252-263).

Threats

The company has as well faced a number of threats in its operations, profitability and survival in its entire existence. Most of these threats are also continuous and might continue to burden the company in future. One of the threats to the general motors company is global economic instability.

The company is reported to have greatly suffered from the major economic recessions that took place after the Second World War and the one that occurred at around the year 2009. Both these recessions cost the company its stability. Future recessions, therefore, remain to be a threat to the company. Competitors’ innovations has and still remains to threaten the company’s market and profitability since it is always seen to trail behind other companies in almost every initiative (Case Study 263).

Control Systems

General Motors are taking up measures to ensure that they are meeting the demands of their customers, for instance, the company in 2007 certified the web control system to engage in online customer who wish to make purchases (Irvine 1). on the accounting systems it has been reported that the company still might be facing some challenges with its internal system as company officials have at one moment described it as not effective (Caleb 1).

The company needs to tighten its grip on the control system to make it possible for it to advance. There is a need for the company to engage the customers more closely in order to ensure that the products that the company makes meet the needs of the consumers.

Recommendations

The company should be more innovative through market research in order to break competitors’ strength in markets. More sensitivity to changing technologies and market structure and demand should also be adapted in the company. Critical changes in the company’s operations structure together with sensitivity to views such as those of experts in economics and commerce fields can help the company to at least develop its profitability. Much rigidity and conservation of the company’s culture might just further ruin the company.

Conclusion

From very humble beginning to being a giant manufacturer of motor vehicles, the General Motors Company has a long history of downs and ups. Though the recent economic times have heavily cost the giant, there is still room for more expansion.

Works Cited

Caleb, Newquist. Accounting News Roundup. Going Concern, 2010. Web. April 28, 2011.

Case Study. General Motors: from Birth to bankruptcy in 2009. Case 18, n.d. Print.

Funding. General Motors Corporation. Funding Universe, 2004. Web. April 24, 2011. http://www.fundinguniverse.com/company-histories/General-Motors-Corporation-Company-History.html

Irvine. General Motors Certificate Autobytel’s Web Control System for New GM Onesource. Autobytel, 2007. Web. April 28, 2011.

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