GM's initiatives

Document Sample
GM's initiatives Powered By Docstoc
					                                               General Motors 1

Running head: Case Analysis - General Motors

               Team Project: Case Analysis

                   General Motors (GM)


              Kyungpook National University
                                              General Motors 2

                          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
                                                                      General Motors 3

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 has globally 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 increasing

consumer demands have made automakers face the problems between the need of rapid
                                                                         General Motors 4

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 supply and 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 losing profits. 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. Balance between 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.
                                                                       General Motors 5

Leveraging the Brands

         GM’s multi-divisional structure stayed lack of effective integration between the

segmented parts 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

make GM to lose the opportunities to gain customers’ loyalty leading to final


Dealers Relations

         To solve the demand uncertainty and long delivery lead time, GM stocked huge

levels of inventory as a competitive element by 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 as little

collaboration in product development causing delayed development cycle time required
                                                                       General Motors 6

GM to restructure its internal organization and business processes especially on the

supply chain side.


         The complexity of GM’s inbound and outbound operations resulted in the

unpredictability of order fulfillment lead times by being accelerated 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
                                                                        General Motors 7

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
                                                                       General Motors 8

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.
                                                                       General Motors 9

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 them

save operation costs and finally contributed to the vehicle development process through

overall 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
                                                                         General Motors 10

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
                                                                     General Motors 11

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.
                                                                      General Motors 12

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 through people’s striking 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 suggested to 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


        Increasing product price indicates that raw materials also become more

expensive. It lowers the profit and production possibilities of vehicles even more. This
                                                                      General Motors 13

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 could be 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 cautiously viewed 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 ways of 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
                                                                     General Motors 14

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.

Questions to be considered

1. What are the Challenges that GM face with currently?

2. What are the suitable ways to deal with the challenges of GM?

3. What are the key elements to succeed in future car industry?

4. How can they meet customer's satisfaction?

5. What Big Three stand for?

*6. What is this presentation about?
                                                                   General Motors 15


General Motors (2003): Building a Digital Loyalty Network through Demand and

Supply Chain Integration, Graduate School of Business, Stanford University.