How Much Can The Internet Help GM
Case Study by: Tom Olsen Steve Puig Cliff Godfrey
Competitive Forces Model
New Market Entrants •Next to Nil •Well Established Industry
Substitute Products And Services
•Other Vehicles •Navigational Systems •Other Informational Gathering Tools •Internet Remains •Highly Competitive
GM Industry Set Toyota Suppliers •GM is not able to Outsource its Parts as Effectively as the Competition •Current structure Makes it next to Impossible to use JIT Inventory
Ford
Honda
Customers
•Demand Differentiated Products •Web Services Facilitate Dealer-Customer Transactions •Dealers are highly Selective
Value Chain Model
Supplier’s Suppliers
Suppliers
Firm (GM)
Distributors (Dealers)
Customers
Internet Business Strategy
Covisint, GMSupplyPower for supplying the
company allowing quicker build-to-order and possible JIT services in addition to cutting additional costs. GM’s collaboration system has cut completion time to 2 weeks from 12 Slashed development time from 48 to 18 months, eliminating $1 billion in costs OnStar service has promise not yet realized Online brochures facilitate dealer/customer transactions
3. Evaluate each of GM’s e-commerce and e-business initiatives described in this case. How much value can they bring this company?
eGM – Set up to integrate internet Technologies into GM’s operations. It was dismantled in 2001, which caused skeptics to say GM retreated form its internet aspirations. Contrary to what critics claim, Wagoner and Szygenda say eGM's dismantling is a sign of success, asserting that e-business has become an integral part of the company's fabric. Regardless of eGM's fate, GM's e-business initiatives have succeeded in changing how the company makes business decisions. GMBuyPower – GM has no interest in backstabbing dealers and selling cars direct through the internet. They do however enable the consumer to create their dream car from scratch, and locate the nearest dealers who stock the particular choice. This has lead to a great many car sales. GMOwnerCenter – A digital filing cabinet for car owners, which saves money and office space for the documents. DealerWorld – Database of information for dealers to look up car, and purchaser information, giving them access to much more than could gather on their own. GMAC SmartAuction – An online auction for dealers, to buy post-lease vehicles where neither party needs to be physically there, cutting costs on both sides.
Internet Initiatives cont.
Building Vehicles to Order – The holy grail of automakers. If they could build every car to order they would, because inventory expenses would disappear. If they can streamline the process of picking a car and options, get that information to the plant that builds it, and have the stock of parts necessary, get it produced in a timely manor, and be able to ship it to the dealer closest to the consumer, All parties involved will win. Their systems are not yet up to date. GmBuyPower could be a great tool, as could Covinist. Covinist – This could cut costs significantly for all the carmakers involved. It is not operating based on its original purpose. The 1st tier suppliers are not playing the game, which makes it useful only for smaller suppliers so far. Most suppliers do not want to bid on orders, which would decrease their profits, and customer loyalty. OnStar – The car based information/ Navigation/ telemetics/safety system which GM basically runs the only one. The problem is creating a lasting and loyal customer base, not 1 year customers. They need to create an image of necessity and value for customers to get hooked on. This could be a great source of constant revenue for GM. Sharing Engineering Information – TeamCenter Engineer 7 is a developmental tool that allows team members from different departments collaborate and gives them the ability to access all the information available to any other member. This alone has cut development of full models down to 2 weeks form 12. Socrates – This allows employees to access information that regards their employment, and fosters a sense of value in the internet for their employees.
What management, organizational, and technology issues do you think GM has had to face and will need to solve in implementing its Internet strategy?
GM certainly has had a tumultuous decade or so. It was a managers nightmare, and still technically is. It has transformed itself in numerous ways. It’s internet strategy has been one of the most important. It has also been one of the hardest, as the fruits of it have not fully paid off yet. One of the biggest problems it faces, is how it will work on Covinist. It is a significant cash draw, if it cannot offer them the savings it was intended to. It also is keeping them from achieving their goals of selling pre-ordered cars, specifically over the internet. Management also needs to keep the dealers happy, if a significant amount of sales are done through www.GMBuyPower.com, then routed to them for the actually delivery and sale. Many dealers might be frightened by this change. GM has done an overall commendable job with their introduction of internet technologies into their business processes. This is not what they need to worry about as much as they need to focus on a more creative design and marketing image. They are changing the directions of many of their brands, most notable Cadillac, which will hopefully bring the rest of their business into the 21st century.
5. How will GM have to redesign its business processes to be able to compete successfully and achieve a leading role in the new economy?
6. In GM’s drive to sell cars online and to build-to-order, what are some of the problems that technology cannot address?
GM would need to focus on
Supply chain management & efficient customer response systems. With this approach Gm will be taking on a more digital strategy that would require network-based information technology infrastructure investment &software competence to make customer & supply chain data flow seamlessly among different organizations; GM would also be moving away from traditional supply-push economic systems toward demand pull production
Technology cannot address GM’s
problem of very high fixed costs for pensions and health care benefits which are leaving the company with low profit margins.