The automobile industry value chain analysis

The automobile industry value chain analysisSection 2 next on from your analysis in Question 1, discuss the competitive postion of General Motors Europe (GME) at the time of the case.Threat of EntryThe automobile industry is face the mature stage, although the high barriers to entry considering the huge amount of capital required for companies to manufacture and design their cars and the very low switching costs consumers face when ever- changing carshowever it doesnt mean there ar no in the raw entrants to Europe for instance Asian automaker as Toyota Nissan and others to be actively present in the market.Threat of RivalryThere is a very high scourge of rivalry within the industry, as automaker should always be updated with new technologies, founding and come out with new models and design. Moreoer for GME the exit barrier is relatively high due to investments made throughout the past decades. With the emergence of Asian carmakers in Europe there had been a diversification con sidering models and tolls, in other words it is a diversity of rivals.Threat of SubstitutesSubstitutes within the industry be more or slight depending on consumers and their preference of commuting and travelling, it incorpo counts cycles, buses, underground and also could be planes and just walking. Consumers arent offended by taking public transports within the most European countries, also traffic jam in some places are reason for not using a car, which decrease the switching cost., plus the high price of gas play a major role.Threat of SuppliersAs automakers manufacture their cars so the threat is considerably low, as there are a outsize modus operandi of suppliers GME can choose from, which make suppliers give more discounts, also cars elements are more or less standardised. Most of the time car companies make up with one supplier and there is no forward integration as suppliers are small comparing the automaker and in contrary GME can blend backwardly the supplier or in some cases they create an alliance to reduce the costs.Threat of BuyersExcept big companies buying lots of cars, solobuyers represent an insignificant threat but at the same time its bargaining power is high as the customer has plenty of diametric brands, models and prices to choose from. The large number of consumers are facing as said before low switching costs and the loyalty brand isnt very high which means that GME has to attract and retain consumers by incentives for lesson due to price sensitivity, as consumers are looking for the best deals concerning quality/price.Value chain analysisPrimary Activities The Primary activities for GME are the followings increase Designing, Resources purchase, Production, Marketing and Distribution and finally Customer Service.Product Designing is becoming of the key features within the industry. As nowadays cars are almost standardised, so with the estimable tools GME cars have already an image of strength and power. GME is at the same t rying to offer cars that are not only powerful but also less fuel consuming.Resource purchase the purchase of the right material is very important, as seen in Porters Five Forces, suppliers have very low power on GME in other words the organisation can almost select its preferable price over the supplier.Production GME was the largest manufacture of cars in Europe the take reached its peak in the early 1990s. However, its methods have showed an inadequacy, as they have been producing more than the demand.GMEs Marketing Distribution efforts havent done an efficient job of pleasing the public. This could be by displaying cars in showrooms, announcement etc. in order to get automobiles GME uses trucks and trains to deliver them to dealers.Customer Service Support generally supporting the customers after a sale. GME has an 800 number so if customer needs help or have an enquiry they can call for free.Support Activities sustain the daily operations of GME but are not directly implicat ed in the manufacturing process of GME vehicles. These activities include Human Resources, communications and Consumer crediting.Section 3 Assess the performance improving options taken or proposed by GME at the time of the case.General Motors Electric knew that it could only improve from within (internally) as Macro economic factors like exchange rate, inflation rate etc are beyond their reach.All successful melodic phrasees have mainly two aimscut costsincrease gross salesIn GMs case increased sales was not an accessible option, so therefore the comp any(prenominal) had to focus on performance improving options, here below is what GM proposed at the time of the case.GM reduced its workforce by 20% in an attempt to boost productivity and reduce costs by $600 millionUse competitive determine and offer additional servicesGME formed a strategic alliance with Fiat SPA in 2001 a restructuring plan called Project Olympia was produced to once more reduce costs and decrease merchandise capacity by 15%Closing down Luton plant to again reduce costsMoving production to cheaper areas in this case a German plant was closed down and manufacturing transferred to PolandIntegration of operationsAbandon cost incurring practices like using different parts and wiring for different carsStrategically GME have achieved both some success and failure in its operations to improve the situation in Europe, for example the reduction of employees and closures of unproductive plants are fully justified as the business cant continue to record huge losses year on year, in fact these decisions should have been made faster reflecting GM poor management structure unable to make quick decisions in a ever changing market. GM was also correct to cut out the practice off using different parts and wiring for different cars as this reduces overheads as any loss making business must cut costs at every opportunity. However there are also strategic failures GM apply for example a strategic alliance with an Asian manufacturer would have been more beneficial then with Fiat as this alliance could have disposed GM access to supreme management and technology resources, in return GM could have offered some concessions to the US market. Another example of poor strategic decision making is the use of competitive pricing which a loss making business should never implement as good marketing could over time allow for premium prices. GM should have offered extended warranties as this actually costs the company very little in real terms, in the USA GM offer warranties for 100,000 miles over 5 old age perhaps this could be implemented in its European business model.General thoughts on how GM can improve their European performance Change management team in EuropeForm strategic alliance with Japanese manufacturer with superior manufacturing techniquesFocus on the lucrative segment of the European marketReduce investment in the EU, until the economic situation improves (short-term vs. long -term )Change EU business model e.g. produce little cars which are now popularOffer additional features to their carsUsed money saved and invest more in RD project long term strategy to recapture market shareConclusionGeneral Motors is the largest automaker in the world and has been an industry leader for 77 years yet it finds its European operations in all kinds of trouble. Huge financial losses, a dissatisfied customer base, competitors with superior management and production techniques to name a few. All of these problems are due to GM having a poor corporate strategy plan, GM become reactive rather then proactive and in strategy you can never rest on your laurels, the company missed clear trends within the market such as a demand for smaller cars, cars with less CO2 emissions, cars with additional features etc. This case is a good example of strategy as it shouldnt be done strategy requires successful firms to undertake feedback from their customers, for firms to have clear an d set goals at all time and how to get there, strategy requires firms to ever excel and always be ambitious to seek new and rewarding risks. The main findings of the report suggest that GM didnt have the right business model or structure to cope with sudden change this is fairly understandable due to GM size and decision making tends to be slower amongst large companies due to the amount of management layers, but one would necessitate a company with manufacturing facilities in 35 countries and sales in 200 countries to at least get the basic rights. GM was guilty of not gainful enough attention to the Macro environment were political changes were gearing towards reducing CO2 emissions, GM also underestimated the threat from Asian car companies and as a result quickly lost market share and sales.