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DREXEL MGMT 450 - General Motors and the Auto Industry

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Executive SummaryA Snapshot of General Motors TodayThe Strategic Issue Facing GM: Avoiding BankruptcyThe Economy TodayHistory of the recessionEconomic ClimateStimulus PackageGross Domestic productInflation RateUnemployment RateThe Auto Industry TodayGM’s StrategyThreats Affecting GMThreat of RivalryThreat of suppliersEconomic ThreatsThreat of SubstitutesThreat of BuyersThreat of EntryWeakness of Internal Cost StructuresGovernment Intervention and the Restructuring of GMGM’s Outlook/RecommendationsWorks CitedGeneral Motors and the Auto Industry: A Strategic Analysis D r e x e l U n i v e r s i t yM a n a g e m e n t 4 5 05 / 2 1 / 2 0 0 9Helena Boe, Diane Ketler, Nicole O’Keefe, Andrew Rubenstein, James SiverioPage | 1Table of ContentsExecutive Summary.....................................................................................................................................3A Snapshot of General Motors Today..........................................................................................................4The Strategic Issue Facing GM: Avoiding Bankruptcy................................................................................5The Economy Today....................................................................................................................................6History of the recession...........................................................................................................................6Economic Climate.......................................................................................................................................7Stimulus Package....................................................................................................................................7Gross Domestic product..........................................................................................................................8Inflation Rate..........................................................................................................................................8Unemployment Rate................................................................................................................................8The Auto Industry Today.............................................................................................................................9GM’s Strategy............................................................................................................................................11Threats Affecting GM................................................................................................................................12Threat of Rivalry...................................................................................................................................12Threat of suppliers................................................................................................................................14Economic Threats..................................................................................................................................16Threat of Substitutes..............................................................................................................................17Threat of Buyers....................................................................................................................................18Threat of Entry......................................................................................................................................20Weakness of Internal Cost Structures........................................................................................................21Government Intervention and the Restructuring of GM............................................................................22GM’s Outlook/Recommendations.............................................................................................................23Works Cited...............................................................................................................................................25Page | 2Executive Summary General Motors (GM) is one of the big three auto makers of the world (GM, Ford, and Chrysler) and has historically been the largest and most successful. They have built some of the most famous and classic vehicles on the road which have portrayed messages of both modesty and display of class for a market of consumers who range from working class to music superstar; as Alfred P. Sloan, CEO of the 1920s put it, GM makes “a car for every purse and purpose.”In recent years however, GM has taken an unexpected turn for the worse due to the changing economic climate that is affecting the world. Many economists argue that the US has been pushed into arecession that had started with the housing crisis of 2008. From this crisis stemmed a major banking crisis that has lead to financial institutions implementing tighter lending guidelines for business and personal consumers. This has greatly affected GM since the company, along with many other auto making companies, rely so heavily on short term returns to fund such a complicated value chain and large portfolio of brands.Of the auto making companies facing the turmoil of falling sales and crashing returns, GM has nodoubt been hit the hardest and is facing complete bankruptcy. The fact that GM has such a large portfolio is working directly against their success because of the fact that they are spread completely toothin; by being unable to focus on the core products vital to the company’s success, GM is forced to spread money it does not have around to failing brands which are only driving the company further into debt. Even with initial governmental funding, GM is still unable to find a remedy for its failing success.GM has historically built brands around the assumption that they will be consumed whether or not they are built around consumer tastes. This lack of versatility and inability to explore long term consumer consumption has created a number of threats with which the company is now faced. Rising gas prices has shifted the majority of consumer tastes to energy and fuel efficient options which GM has not sufficiently adopted, rather just the opposite since they focus more on their pick up and SUV products which are extremely wasteful and fuel inefficient. In light of this, GM is losing business to competitors who have extensively


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DREXEL MGMT 450 - General Motors and the Auto Industry

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