General Motors (GM), Essay Example

Introduction

General Motors (GM) is a popular car manufacturer in the United States. The organization is based out of Detroit, Michigan and produces many different car brands, including Chevrolet, Buick, GMC, and Cadillac. The particular brands produced by the company vary significantly, which helps the organization diversify its sales (Murray et al. 1996). Due to the variance in price, the quality of these vehicles vary significantly as well. While GM is primarily popular in the United States, it has expanded its business practices across the world. For example, is has recently begun an initiative known as GM Korea. Furthermore, it is involved in many partnerships with Asian car manufacturers and is active in Russia, Pakistan, China, and India. It was the previous world leader in global sales between the years of 1931 and 2007.

As an active car producer in the United States, the company must engage in business practices in a manner that allows it to remain competitive. Other leaders such as Ford compete with GM because they have the same target demographic. Generally, these individuals are middle class individuals who may be first or repeat car buyers. Both organizations attempt to establish themselves in a manner that encourages repeat business, and they wish for their consumers to remain with their brands for live. As a consequence, GM is required to advertise frequently to remind its customers of the value of the cars that it produces, promising repeat customer’s incentives for remaining with the brand.

Another important aspect of GM’s business is maintaining its public image. Because the company is so large, it has been involved in some legal disputes that it would prefer its customers to not be aware of. One of the most significant cases of “bad press” was when GM decided to close down its car manufacturing plants in Detroit, Michigan. Although the company’s headquarters is still located in this area, this move sent many jobs overseas and led to the virtual unemployment of nearly everyone in the town of Detroit. As a result of this choice, individuals that live in Detroit continue to live in poverty as the economy has crashed and not been recoverable since this point. Life in the city has become so terrible that there has been talk about cutting off the city’s water supply, as there are no funds available to support its continued use. The company argues that it needed to take this action in order to prevent itself from shutting down, although economists have since proved that outsourcing the workforce was not necessary. In order to counteract this bad publicity, the company has needed to promote itself in a positive manner. As a consequence, they market themselves as a family friendly car and try to demonstrate these core values in their advertisements. While much of America has forgotten about the economic failure of Detroit as a consequence of these advertisements, many people are still angry with the company and refuse to purchase these vehicles. On the other hand, the company has promoted sales despite this tragedy by offering some of its brands for extremely affordable prices. This has allowed sales to rebound after the incident because even in cases in which people do not agree with GM’s actions, many do not have the ability to purchase other cars due to the issue of cost, which contributes to their tendency to stick with GM for their vehicle needs.

Another problem that GM is regularly faced with is due to the sheer size of the company. There are frequently recalls of GM vehicles due to safety concerns, which occurs as a consequence of occasionally under planned or inexpensive manufacturing procedures. While there have been many accidents caused by this lack of oversight, GM has reacted by ignoring the numbers and failing to report the error rates of their vehicles whenever possible. This has been mainly done in order to protect the company’s image, which is necessary for the organization to continue making extensive sales.

For many, the GM brand is generally associated with positive memories and this is why these customers continue to purchase the brand despite bad press. Therefore, there are many external factors of business that the company must consider in order to remain successful in both the American market and across the world. It is important for the company to capitalize on the positive features of its business and minimize the negative components if it wishes to remain successful.

Overview of External Factors

 Overall, the GM brand is involved in many different aspects of the vehicle manufacturing process. The company is large and different members of the group are responsible for selecting the design of the cars, determining safety, physically producing the cars, and marketing them to the public. These operations must be well organized due to the large amount of cars manufactured and sold as a consequence of the business that the company participates in. While GM is generally associated with its operations in the United States, it is actually a multinational corporation that sells cars around the world. Furthermore, it designs vehicles to cater to diverse populations, including individuals that live in North America, Latin America, Asia, and Africa. Currently the organization is experiencing a period of rapid growth in Asia, and it will be necessary for it to modify its business practices in a manner that allows the organization to maximize the business that it does in these regions.

In order to remain successful, GM has diversified their business by reaching out to markets in different countries. This is an effective move because it does not allow the market in a particular nation to impact sales. Successful businesses understand how to diversify properly (Jain 1997). Not only is GM doing this with regards to the different geographic regions it serves, it also diversifies within these regions. In order to ensure that an appropriate amount of sales will be made, the company designs specific brands to market to different target populations. The Chevrolet is meant to be a low line car, even though there are luxury options available. As a result, GM is able to cater to people who want to buy a car but may not be able to purchase an expensive top of the line vehicle. However, despite the low prices of these cars, their quality can still be considered high for the price. Therefore, these cars are ideal for first time buyers or people on a budget. On the other hand, GM produces the Cadillac which is meant to be a luxury brand. The least expensive cars in this line are typically considered to be expensive, and as a result, these cars are enjoyed by the successful and wealthy. These cars are designed to be more physically appealing than the other alternatives and they are made to be comfortable as well. These two types of cars represent the company’s diversification strategy. Ultimately, the organization is able to market to two very different types of people as a consequence of this plan. In addition, this plan protects them from a shifting economy. During times of political turmoil, people are less likely to purchase luxury brands because they are concerned with saving their assets. However, in many instances, these individuals need a car to work, so they will still make a purchase. As a consequence, wealthy individuals may prefer to purchase a Chevrolet over a Cadillac even though this is not the particular brand that was marketed towards them. Because GM sells cars at a variety of price ranges, the organization is able to support both itself and its customers despite the fluctuating economy that is prevalent in the United States and around the world today.

Even though diversification in the market place is able to help GM reach customers despite the economic status of their country, they are impacted by the changing prices of raw materials. Furthermore, it is important for the organization to consider that since they are producing their cars overseas, there is an associated shipping cost. Overall, the fact that GM has operations all over the world helps diversify the risk related to the changing price of raw materials as well. Typically, the company acquires its raw materials from countries across the world. When the economy is poor in one nation, it can therefore take advantage of this situation by purchasing the raw materials for a low cost compared to the profit it will make by selling the car. Therefore, GM benefits by conducting research into market trends around the world, making the wisest and most reasonable purchases as applicable. It also draws upon this research and understanding of the transportation industry by determining the most effective shipping routes. Ultimately, it is plausible for the company to ship raw materials and the cars at various stages of completion in a manner that will allow them to take advantages of the prices and markets in foreign countries. As a consequence, GM deals with external market factors in this manner by mapping different shipping routes and determining which route is optimized in terms of reducing the travel time and cost, thereby increasing the profitability of the business that the company conducts.

While GM has general control over its spot in the market, both this company and other leaders in the United States have been losing in competition to foreign manufacturers. Of particular concern is China, as its growing economy is leading businessmen to attempt to enter new markets. Furthermore, many Japanese brands have been present in the United States for a long period of time, and these companies are continuing to affirm their presence. Therefore, not only is GM concerned with competition from within the country, it must extend its practices to consider competition from car brands that are from outside of the United States. While new entrants to the market are not typically a threat, GM should be concerned in this instance due to the amount of funds that these companies are willing to invest in expanding both their brand and their nation’s economic well-being.

Another external factor that GM and other similar companies must consider is that many people are reconsidering the use of their motor vehicles for transportation due to the rising costs of fuel. As a consequence, a growing number of people are electing to take public transportation options, which is benefitting the environment, but not the investments of large auto companies. Furthermore, environmentalists are going through great lengths to convince the public to avoid using cars that have traditional gasoline engines due to the connection that vehicle use and driving has to global warming and air pollution. GM is concerned about the influence of these organizations because while it does have an electric model on the market, this is an expensive and therefore less popular car option. An additional problem with the sales of these vehicles is the need to charge the car and the lack of infrastructure in place for many people to do this without extra work. There are also political pressures related to this problem. The government is offering tax breaks to individuals who drive fuel efficient and ecofriendly cars. Thus, people are more likely to invest in hybrid cars, which have proven technology and are more affordable. GM is not well known for producing cars with this technology and is therefore not able to compete effectively with companies that do.

Despite the fact that GM is not able to remain competitive on some fronts, it has taken advantage of investment in technology as an external factor to help it boost its sales. While the cars themselves have not always been deemed safe, the organization has invested in the On-Star satellite technology system that car owners can use for many reasons. The device is attached to the car, ensuring that it can never go missing. Furthermore, it is linked to the car’s reporting system, allowing the car dealership that the car was purchased from in addition to the car owner’s maintenance team to be instantly aware of potential problems to the car. Importantly, the system informs the car owner of this diagnostic information by providing the driver with monthly reports concerning the health of the car. If the tires need to be rotated, the oil changed, or even if there is a more drastic problem, the driver will become instantly aware of the problems and be able to consult the maintenance team in order to rectify the issues. Another feature that this technology includes is instant directions that could be downloaded to the vehicle. Drivers call On-Star and provide them with an address. In the process, they are able to speak directly to a representative, which is indicative of the human touch that the company is trying to provide. As a result, the driver is able to ask any questions they may have as it pertains to travel options, driving safety, and more. The system also includes a system that, on impact, alerts On-Star operators who are able to know where you are located and provide you with emergency services if necessary. Many drivers prefer buying a GM car as a consequence of the presence of this feature because it makes them feel safer. Individuals who buy new GM cars are provided with a free six month trial to this system and many drivers remain customers after this trial has lapsed. GM is continuing to make improvements to this feature in order to stand out from its competitors which is beneficial because competition is becoming increasingly fierce in this particular environment.

Demographic Features of GM

GM has recognized that it is having a difficult time competing with other car companies in the current economic climate. As a result, it has identified the need to partner with foreign countries in order to increase the number of sales it makes. Therefore, the company is currently undergoing a restructuring that is focusing on these demographic features of the practice. According to the most recent annual report, the company boasts, “GM, with its joint venture partners, maintained its leading market position in the key growth markets of Brazil, Russia, India and China (the BRIC countries) during the year, with a particularly strong performance in China, where GM and our partners delivered 2.4 million cars and trucks” (GM 2010). While the company is explaining its transition in a manner that makes an enhanced appeal to customers and investors, the main reason that the company has become so invested in the world market is that it is not able to grow as rapidly as it wanted to in the United States. Therefore, it depends on finding markets where there are not already severe competitors and finding a niche in these locations before other American companies begin to adopt the same strategy. While other American car companies do exist abroad, their presence in Asia is not to the same extent as GM. Therefore, GM is trying to persuade these markets that their cars are the best and if they do this early, they believe that they will able to have permanent power over this market, making it more difficult for their competitors to begin selling cars in these countries.

While GM has recognized this need for expansion, it is important for the company to conduct operations that are culturally relevant in order to appeal to the diverse groups of people living in these nations (Moule 2012). Therefore, it is essential for the organization members to gain an understanding of these distinct cultures, which is somewhat challenging for members of a society that are not used to the traditions of these cultures. Currently, the company relies on conducting Internet research to learn about the cultural traditions and needs of these diverse peoples. Furthermore, it is attempting to gear marketing towards these cultural understandings. The current success of the organization with this regards indicates that its marketing principles as it pertains to cultural understanding is effective, although there is certainly room for GM to grow in this aspect.

In particular, it would be beneficial for GM to enact specialized operations that focus on these needs. Since there are many different headquarters placed around the world, each office should focus on one or several cultures in order to engage their clients that are within the closest geographic proximity. While one would believe that it is easy to understand cultural traditions of distinct cultures, this is not always the case (Nine-Curt 1984). Simple observation would lead once to believe that a culture is known, but it is not until a language, religion, and more are analyzed that GM could come to truly understand the people that it is trying to serve. Therefore, it is recommended that the company finds ways to engage its customers using more interactions in these regions. It would be beneficial for GM to incorporate members of the society that it intends to serve within the organization so that this cultural competency could come more naturally.

Furthermore, it is important for GM to take a greater advantage of local demographics within the United States. Although the company has a variety of price options available for interested customers, it would be beneficial for the organization to work with the dealerships in order to find a way for purchasing or leasing a car to become more financially feasible. In many cases, especially with the less expensive cars that the company has, young people and recent graduates wish to acquire them, but do not have the credit available for a lease and do not have enough money to purchase the car. Many dealerships offer new graduate discounts and while this provides incentive for purchase, it does not resolve the credit problem that many first time want to be car owners face. Therefore, it is reasonable for the organization to modify this plan in a manner that allows for these individuals to purchase cars. It is important for the company to know it will make a profit, so it could adjust this deal to state that it will provide beneficial lease options to individuals that are recent graduates and have begun working their first job. In this manner, the risk of allowing these individuals to lease or purchase a car is significantly reduced, and the company is able to make a greater profit because they are able to make a sale that they otherwise wouldn’t have been able to. Even more importantly, many car companies are unwilling to make this type of deal with individuals that do not have credit, so GM will be able to outcompete other car companies with this regards and acquire the more sales it wants to have.

In addition, it is important for GM to take a greater advantage of the diversity of cars that it has by marketing more effectively to the appropriate target demographics. For example, in many middle class neighborhoods, and everywhere in general, only commercial for the Chevy will show because this is the car that most people can afford. While this is effective because a larger percentage of the population will end up purchasing this car for this very reason, it is important for the organization to take advantage of its knowledge of demographics to ensure that it is able to suitably reach other members of other populations as well. In order for this to be plausible, GM should collect census data in order to gain a greater understanding of the areas in which people of different socioeconomic statuses live. Using this information, it could classify these areas as poor, middle class, or wealthy. This will provide the company with information that it could use practically for marketing. It is best to continue to market the Chevy in poor and middle class areas, while it would be possible to market top of the line cars like the Cadillac in wealthy neighborhoods, although it could advertise this particular car in middle class neighborhoods as well because some of these individuals would be interested in purchasing and be able to purchase this luxury car.

Another aspect that it important to consider with regards to the diversification of marketing strategy is that different marketing methods will be effective for different groups of people. This ties back to the idea of cultural competency. Even within the United States, there are people from distinct cultures and backgrounds that wish to be represented in the marketing process. Therefore, it would be reasonable for GM to conduct a similar demographic study using the census, but in this regards, to determine which ethnicities and religions predominantly inhabit certain areas. Based on this knowledge, further research can be conducted to determine the locations that these people visit most frequently, whether they watch television frequently or not and at what time, and what transportation option they prefer to use. All of this information can be used to optimize the placement of car advertisements in addition to allowing for the production of advertisements that are culturally relevant. Studies have shown that people are more receptive to marketing that utilizes people of their same race. Therefore, if a neighborhood is predominantly African American, GM would benefit by providing these individuals with advertisements that feature an African American actor or actress. Likewise, white neighborhoods would prefer to see white characters. Since there are many neighborhoods with either mostly white or mostly African American inhabitants, it is possible for GM to take advantage of this for marketing purposes.

A final recommendation for GM is that they need to understand how the shift in demographics is capable of impacting their business practices. Overall, the population of the United States continues to change, meaning that information that was once true about certain areas is no longer. Therefore, it is essential for the organization to gain a more in depth understanding of the populations that it is trying to serve. While using the census is an excellent tool to get a general understanding of a geographic region in addition to the lifestyles of individuals living within it, it is also important to understand that these numbers are not always comprehensive and there may be many factors related to these areas that the corporate office cannot become aware of. Since GM has many different dealerships around the country and the world, it would be beneficial for the organization to use these relationships as a valuable resource to understand more about the culture of an area. This strategy is strengthened by the fact that the individuals who work within these dealerships and are GM employees typically live in the areas that they serve. Therefore, the company could either regularly engage with these employees to determine the culture or these regions, provide these workers with surveys that should be filled out occasionally, or use a combination of the two. Many people have formed a distrust of large corporations like GM because they appear to lack the human aspect of customer service. While customers regularly interact with the salesmen, the company itself and the individuals that actually make the cars appear to be faceless, which contributes to a certain sense of distrust. Therefore, it is important for GM to make themselves appear to have more of a face so that their company begins to become more appealing to a broader set of customers. This will also help the organization compete more effectively.

Conclusion

Even though GM is considered one of the leading car brands in the United States, it still has a lot of room left for growth. The company is currently concerned with a variety of external factors, the most important of which are factors that impact the prices of raw materials on the market and competition. While GM is attempting to compete by diversifying its business, this plan is only somewhat effective. It is recommended that the company utilized demographic factors in order to gain a more comprehensive understanding of its customer base. Overall, this understanding needs to apply on both a local and international due to the particular sales goals of the company. In order to ensure that both of these ventures are successful, it is important for members of the organization to gain an enhanced cultural competency so that they are able to gain a better understanding of the people that they serve. In order to do so, it would be beneficial for the company to conduct comprehensive demographic research, utilizing previous census data as a primary tool. This information can then be supported by data provided to the company by the local dealerships. Overall, this strategy can be used to further diversify the organization’s marketing practices, enabling to both connect with and reach a larger amount of people. It is expected that the net profitability of the organization will increase if they follow these recommendations due to an enhanced ability to compete and approach customers with a sales suggestion.

Bibliography

GM 2010, 2010 Annual Report, accessed 10 June 2015, <https://student.unsw.edu.au/how-do-i-cite-electronic-sources>/.

Jain, Subhash C. Marketing Planning & Strategy. 1997

Moule, Jean. Cultural Competence: A primer for educators. Wadsworth/Cengage, Belmont, California, 2012.

Murray, Johan & O’Driscoll, Aidan. Strategy and Process in Marketing. 1996.

Nine-Curt, Carmen Judith. Non-verbal Communication in Puerto Rico. Cambridge, Massachusetts, 1984.