Organizations experience various changes throughout their lifecycles. Some firms may not recover from such events, which result in massive losses, but other firms usually restructure and continue with their business activities.
This research focuses on Cisco Systems, General Motors, and Avon. It shows how these companies were able to restructure their operations and get back to business.
Cisco Systems
IT firms of today need to optimize their services and resources while focusing on cost reduction and improving on productivity. Cisco implemented a lifecycle methodology during its restructuring efforts. The company needed to make its processes responsive and efficient. Cisco changed from using a traditional organizational model to a new lifecycle-based model. As a result, the company improved its operations across five different domains.
Previously, Cisco relied on a traditional silo-based organizational structure (Cisco Systems, Inc., 2008). Employees had to handle all aspects of operational and implementation works.
Thus, they had to drop some operational duties in order to facilitate deployment. The traditional approach created duplication of work and effort throughout the organization. However, employees were not aware of the role and effort duplication within Cisco. The regional voice and network teams were in charge of implementation and operations. These teams worked with over 300 customers.
They had to evaluate and manage support services, change, service performance, service resiliency, and staff and expertise. As a result of a tremendous growth, the company could not cope with these roles and technology evolution. Cisco’s existing resources could not accommodate growing needs of customers. Such needs put pressure on available resources to the limit. The company needed a change because of deteriorating services.
Cisco had to change from the traditional IT-based approach to a modern approach. Thus, the firm had to restructure it processes and operations in order to accommodate work and effort duplication and accommodate the growing demands from customers. Cisco had to consolidate and simplify its operations. In addition, it had to introduce effective communication and collaboration strategies. This change had to affect the global operations of the company.
Cisco organizational structure solved its business challenges. The new lifecycle business model improved business operations and customer service. The restructuring affected more than 400 workers in different business units. The initiative led to several positive changes in the company. Different teams can now spend their time on training and mentoring new employees. Cisco created a ‘focus area’ to cater for specific needs in different service areas.
The team proactively focused on operations using a developed strategy that focused on similar activities. Different business units improved collaboration and communication. This has facilitated ‘horizontal processes’, which have facilitated feedback processes within the company. Moreover, the company has relied on regular communication and reinforcement strategies during staff meetings to analyze performance metrics and link them with the reward and recognition system.
Figure 1: Cisco change in operations after restructuring
The company used its restructuring strategy to focus on new ways of improving operational efficiency by focusing on support services. Cisco has been able to improve its customer services because of increased focus on customer cases.
Figure 2: Cisco’s rise in customer satisfaction after restructuring
The company has embarked on improving its existing structures to accommodate growth. Moreover, the current IT firm can respond appropriately to changes and demands in the IT industry. The company believes that as it grows, it would be able to respond to customers’ needs with improved services.
The company believes that the “lifecycle methodology laid the groundwork for structuring efforts for improving effectiveness and productivity” (Cisco Systems, Inc., 2008). The company wants its right staff to focus on business improvement through the evolutionary framework of the lifecycle methodology.
General Motors (GM)
The automotive industry is significant in the US economy. The industry leads in job creation and consumption of raw materials like plastic, glass, iron, steel, aluminum, and electronics (General Motors Corporation, 2009). Thus, changes in the automobile industry in the US have massive impacts.
From 2008, the company had to cope with the worst financial crisis and credit market in the history of the world. There were significant changes in the American and the world economy. As a result, the sales of new vehicles declined quickly. General Motor’s experienced a rapid decline in revenues.
Moreover, this decline enhanced the speculation about a possible bankruptcy of the company. The company consumed its liquidity and faced bankruptcy. GM resorted to Federal assistance in order to improve normal operations and market conditions. It required $18 billion in assistance for restructuring and improving operations (General Motors Corporation, 2009). The company expected to start repayment of the Federal loan from 2011. GM’s restructuring strategies involved the following approaches.
First, GM wanted to embark on dramatic changes in its product portfolio. The company wanted to launch 22 new vehicles between 2009 and 2012, which would be fuel-efficient and crossovers. Second, GM restructuring strategy would involve the introduction of new products that would be fully compliant with the 2007 Energy Independence and Security Act.
In addition, GM also wanted to invest in varieties of advanced propulsion technologies, improve its existing power trains, develop small displacement engines, improve automatic transmission, and develop light and hybrid vehicles. Third, the company wanted to streamline its operations, reduce brands, nameplates, and dealerships in order to concentrate its available resources on growth strategies in profitable areas.
Fourth, the company also wanted to introduce “full labor cost competitiveness with foreign manufacturers in the US by no later than 2012” (General Motors Corporation, 2009). Fifth, GM had intended to improve manufacturing efficiency and reduce costs by improving productivity and reducing the number of employees. The company has consolidated its manufacturing facilities across various regions.
This has allowed the company to achieve high productivity and flexibility in manufacturing processes. This would ensure that the company enhances production in the following years. In fact, GM has made significant improvement in vehicle manufacturing. It also embarked on a global integrated strategy in its major manufacturing plants.
This was a strategy to introduce general lean processes and principles in manufacturing. The company restructuring efforts would result in flexible production in all major assembly locations, which handle various vehicles. Finally, GM also intended to restructure its balance sheet and boost its liquidity through Federal fiscal aid. The overall aim of these restructuring strategies and financial aid were to restore GM to operations, boost production, and restore profitability.
GM had to revamp its dealerships because they had served the traditional markets. However, they needed improvement for excellent customer care and convenience. The company had to change in order to match competitive strategies. GM had to recruit dealers in good locations for business in which it could derive maximum revenues.
Avon
The company manufacturers and sales beauty and other related products. Avon has worldwide operations through its direct-selling channel strategy. The company has more than 42,000 employees. Avon has recorded financial growths since 2009 because of its restructuring efforts. It also recorded an increase in operating profit of $1,073.1 million. This represented an increment of 6.7 percent compared to the year 2009.
The company has experienced intense competition in the cosmetic industry. Since 2005, Avon had not been performing well (Todé, 2005). Consequently, the company embarked on a restructuring effort that had significant consequences.
Avon restructuring included substantial downsizing of its workforce according the Andrea Jung, the CEO. In 2005, the CEO identified a four-point restructuring strategy that focused on increasing sales. These included “increasing spending on advertising, marketing intelligence, consumer research, product innovation, and revamping Avon’s catalog” (Todé, 2005). Laura Klepacki, who authored a book about Avon, believed that the company has been on a restructuring path since 1997.
Avon announced significant changes in its global operations. It wanted to bring senior managers close to core business units, enhance global operations, integration, facilitate communication, and position itself for global sustainable growth. In 2011, Avon initiated a comprehensive and significant senior management restructuring since 2005. Senior management realignment aimed at facilitating operational effectiveness. Avon wanted to increase its commercial business units in major geographical priorities.
Restructuring initiatives have cost implications. For instance, efforts to revamp products and promote the company would result in significant costs related to market intelligence, advertisement, product development, and market research. Nevertheless, the company believed that restructuring would results in benefits for its operations. Benefits from restructuring would improve focus on consumers and global competitiveness based on the direct selling strategy.
In 2009, the company restructuring program aimed at reducing the number of employees by 3,000 for four years. However, Avon also planned to increase the number of sale representative simultaneously. Most organizations that have embarked on restructuring normally focus on reducing the number of employees in order to cut operational costs (Hiles, 2010).
Avon also planned to streamline its global supply chain by outsourcing some operations as a means of processes consolidation. These initiatives aimed at cost reduction. In 2009, the company projected to make a significant savings of $200 million after implementing its restructuring program. Still, in 2009, Avon extended its restructuring program in order to save $900 million by focusing on efficiency in its global supply chain management.
Avon believes that its restructuring effort has resulted in success. For instance, the program allowed the company to focus on the global supply chain and identify key areas in which improvement were necessary. It also increased the company’s profit by 80 percent despite the decline by nine percent in sales revenue. The company decided to realign its specific local business operations, stream transaction-related services, and elements of outsourcing.
Conclusion
This study shows that a firm may experience any form of risk during its existence. Some risks will result in closure of the business while others may not force a company to closure. An effective business continuity approach can ensure that the company survives from its hardship. The study shows that restructuring strategies have positively worked for different companies.
However, one major negative impact of restructuring in a firm is job loss for employees. In most cases, firms engage in layoffs in order to reduce costs of operations.
As corporate competition intensifies, businesses, especially multinational corporations are gradually expanding towards international boundaries to explore emerging markets. New business globalization strategies are emerging and firms are now adopting cross-border business partnerships known as International Joint Venture (IJV) approaches to enhance the growth of their businesses.
Joint Ventures are different organizational entities developed through agreeable terms of two or more firms with the intent of achieving certain strategic purposes. According to Beamish and Lupton (75), “joint ventures aid firms in accessing new markets, knowledge, capabilities, and other resources.”
While open international trade associations among nations have opened doors for successful multinational corporations to engage in joint ventures, multiple issues arise from IJV practice. Although the practice may deem significant and successful over time, the shared ownership often experience instability risks in the partnership as the joint venture involves different parent companies (Beamish and Lupton 75). Therefore, this essay analyses the case of IJV between General Motors and Toyota.
Overview of the Case
Years after the realization of International Joint Venture as a business practice that enhances global business expansion, corporate firms from the United States, United Kingdom, and Asia Pacific regions started working jointly.
China and Japan opened free trade to many European nations and multinational companies from different nations amalgamated to venture in the burgeoning economies (Li et al. 52). Around 1980s, the automobile industry grew exponentially subsequently leading to international joint ventures between multinational companies from the United States and those from Japan (Beamish and Lupton 75).
By February 17 of 1983, General Motors of the United States entered into a production memorandum with Japanese Toyota Company purposely for mutual business growth (Kwoka 46). General Motors reached a consensus with Toyota following its troubled motor business in the United States and general exports, following the shooting of oil price around the Middle East. Toyota Company was by then leading in the production of small cars that satisfied consumer.
None of the corporate firms could ascertain that this international Joint Venture between these great multinational could lead to one of the prime controversial corporate antitrust instigations of the modern days (Kwoka 46). The quandary that emerged after the mutual agreement was whether it would lead to an increase in production of smaller cars domestically manufactured by GM in the US or pricing wrangles between the two partners.
Beamish and Lupton (80) assert that, “organizations engaging in mergers and acquisitions may spin off joint ventures that do not fit the strategy of the new parent.” Multiple antitrust questions emerged since the inception of the joint venture between the two companies as corporate analysts focused their attention on several emergent issues (Kwoka 48).
Making a decision on the relevant automobile market became a dilemma for the two partners, issues about the economic impact of the venture, and operational efficiencies in the joint venture as well, became questionable matters between the companies.
While international joint ventures provide multinational corporations with opportunities to explore emerging markets and share business strategies, some joint ventures come with malice intentions than mutual benefit (Steensma et al. 495).
Shortly after breaking down its mutual agreement with Ford at around July 1981, General Motors Corporation now known as General Motors Company presented a joint venture proposal to Toyota Company. General Motors Company has had a mixture of success and failure throughout its operations in the automobile industry (Kwoka 47).
Knowing that its market of large-size fuel guzzler cars was in jeopardy and gradually dwindling following the dramatic rise of oil across the world, General Motors ensnared Toyota into a partnership. The two companies under agreeable terms were to invest equally in a joint business enterprise that Toyota Company would operate (Kwoka 47). The agreement also allowed a General Motor sub branch located along the West to produce some corolla-branded General Motor vehicle.
The giant Japanese automobile company was still reluctant to form a joint venture with General Motors on the basis that operating costs in Japan were considerably lower as compared to operational costs in the United States (Kwoka 47). However, following demand for small cars that would be cost effective as presumed, the Toyota Company entered into bilateral relations with General Motors.
Under the umbrella of the two companies who agreed to invest equally in the twelve-year partnership deal, the newly developed venture received a new name, NUMMI (New United Motor Manufacturing, Inc (Kwoka 48).
Apart from equal investment agreement, the initial agreement about the joint venture was that the establishment intended to venture into the production of the new compact cars lasting, and not any other cooperative deal (Kwoka 49). Moreover, Toyota Motor would dominate the top management, control labor relations, provide car-assembling components, and design the cars in the bilateral business. More importantly, agreed NUMMI venture would operate for only 12 years.
Legal Issues in the Case
Despite joint venture largely depending on agreeable terms and concession between the two or more business partners, legal issues must remain acknowledged in partnership deal (Beamish and Lupton 80).
In the process of entering into agreements about the formation of NUMMI both General Motors and Toyota Company breached some legal regulations that control bilateral trades. In the context of the United States business and trade regulations, before engaging in any mergers, corporate partnerships, business acquisitions, joint ventures like NUMMI, parent organization must respect federal laws (Kwoka 47).
For an international joint venture involving companies from the United States and other countries become acceptable, the agreements must comply with the stipulations of the Federal State Commission (FTC) of the United States. As the FTC has the capacity to impose certain restrictions within the joint venture, especially anticompetitive issues, companies engaging in a joint venture must consider engaging the FTC in their agreement (Kwoka 49). General Motors and Toyota failed to comply with FTC regulations.
The FTC has the power to minimize restrictions that encourage anticompetitive effects of bilateral trades and capitalize on the competitive benefits through federal antitrust acts (Kwoka 50).
Based on the case reports, the FTC alleged that it was not aware of the joint venture between General Motor and Toyota and that it did not approve the partnership. Following such allegations, the FTC sought to challenge the joint venture of GM-Toyota legally through the United States antitrust laws. Many Asian countries have been using protectionist measures in the international trade and this meant the GM-Toyota agreement would probably have issues of industrial competitiveness.
The FTC filed a lawsuit against the joint venture between General Motors and Toyota predominantly to protect and improve the industrial competitiveness of United States corporations in the global market (Kwoka 50). Joint ventures approved by the FTC were rarely subject to antitrust actions from private organizations. Controversially, Americans fear of losing international competitiveness resulted in approval of the GM-Toyota joint venture.
Whereas the agreement of General Motor and Toyota Company on the NUMMI joint venture breached the FTC antitrust regulations stipulated under the Hart-Scott-Rodino act of 1976, the venture commenced although with legal prejudice (Kwoka 49). In this scandalous joint venture, the five Federal State Commissioners also practiced legal intolerance by deliberately consenting and approving the controversial joint venture.
The United States federal law enforcers themselves played fowl in protecting the national interest in terms of international competitiveness as denying GM to produce small cars would ruin their international business competence (Kwoka 50). As an independent federal administrative agency, the FTC had the mandate to abolish or legitimize a consented joint venture.
Apart from the five federal trade commissioners taking part in the investigation of the joint commission as requested, an independent private economist investigated the claims (Kwoka 50). Despite the report from the private consulting economist suggesting that the GM-Toyota venture was unlawful, FTC voted on 3-2 margin and illegally approved the venture.
Economic Analysis Relevant to the Case
The United States has been very sensitive and competent in protecting its international supremacy, especially through the international markets and trade (Steensma et al. 495) Illegalizing the agreed joint venture between General Motors and Toyota could have resulted to serious economic implications for the United States.
Automobile industry of the United States has been in the forefront in promoting growth of national economy and the ruling of FTC must have focused on the enhancement of economic efficiency. According to Steensma et al. (492), “the extent of control by foreign or local entities on joint ventures also has important economic implications.”
The FTC commissioners and knew the perceived importance of the joint venture between the two companies to the economy of the United States. Failure to approve the venture during the moment of rising oil prices would hamper the sales of big fuel guzzlers produced by GM and other automobile companies in the United States; hence, affecting the national economy and its business reputation.
Multinational corporations from Asian, Europe, and America have been essential in balancing the global economy through their involvement in international trade (Steensma et al. 493). However, the joint ventures agreed upon by these multinationals normally raise economic questions ever since bilateral agreements become acceptable.
General Motors-Toyota joint business was likely to suffer from implications of cooperative behavior. Determining the relevant product or the compact car, that NUMMI would design was an economic question to consider in the General Motor-Toyota partnership. Japan during this moment was the leading exporter of automobiles in the United States, and therefore, the NUMMI partnership would affect Japanese car exports to the United States (Kwoka 51).
Although the initial plan and target of General Motors targeting in the joint venture would have, to develop small cars that satisfy consumers in the American market, economics of market viability emerged. Although American domestic market could produce potential consumers, 200,000 to 400,000 units of new vehicles would exceed the market capacity.
This meant that it was essential to identify a potential geographic market for the surplus production and export purposes to enhance further global outlook. The United States has several automobile companies that have always been competing for the same domestic market (Kwoka 60).
Considering the American domestic automobile market for the newly designed vehicles was ambiguous as the market already had potential car manufactures and related production facilities. Economists always consider cars as differentiated goods where consumer behavior relies on consumer attitudes and perceptions on the car designs.
Not all the differently designed cars imported into America or homemade earn the anticipated market reputation and the likelihood of the new cars to triumph in the market were unpredictable. America also had restrictions on imported cars and only allowed 1.68 million units annually (Kwoka 52). The concept of demand and supply in the economics of a market directly emerge from this viewpoint.
The signing of General Motors-Toyota joint venture came shortly after the United States and Japan mutually introduced the Voluntary Restraint Agreement (VRA) to limit certain Japanese imports into the United States (Kwoka 56).
The VRA is a form agreeable business engagement of that the United States adopted to regulate excess automobile imports from Japan. The VRA was a principle that was to become effective in two years from 1981. For economical perspective, VRA is a willful reduction of exports from an exporting country or without any coercion from trade tariffs and quotas developed by the importing country (Kwoka 56).
From the Japanese side, economists believed that it was a malicious plan by the United States government and its automobile industry to destroy the Japanese flourishing automobile market and industry. It was likely that following reduced imports of Japanese imported vehicles, Americans would rely on their domestically produced vehicles (Kwoka 56). If VRA would persist prior to the agreement, huge economic implication would befall Japan as a nation.
The General Outcome of the Case
Prior to its development and commencement, the reality about the unexpected and unforeseen economic consequences of the joint venture began protracting with time. The notion that General Motors was to pick the ideas of assembling small cars from the NUMMI joint venture and integrate it into its plans became futile (Kwoka 72). Limiting the size of the venture and its operational duration in the United States, predominantly to give General Motors a chance to pursue its plans of assembling small cars went unsuccessful.
General Motors was unable to begin domestic assemblage of small cars, especially of Isuzu R-Car as per their anticipated plans and other small cars (Kwoka 74).
Another foremost intention of the NUMMI joint venture was to assemble and produce small cars through Japanese artistic knowledge and management at considerably low operational and market expenses (Kwoka 75). Despite producing efficient automobile manufacturing techniques, the facility required lesser human capital than the earlier GM plant, but was still a high labor turnover.
Conclusion
Although international joint ventures are powerful business techniques that enable corporate organizations to undertake cross-border partnerships and expand internationally, numerous implications are unseen. The general optimistic perception is that joint ventures between multinational from different companies result in effective exploration of new markets, knowledge, and skill sharing among other significant resources.
Reason being that joint ventures depend on parent organizations with differing management practices and marketing strategies, managing the partnerships often becomes challenging. “These companies may have competing or incongruent goals, differences in management style, and in the case of international business, additional complexities associated with differing government policies and business practices” (Beamish and Lupton 75).
The case of International joint venture between General Motors and Toyota Company is a replica of the above notions. Many multinational firms normally enter into joint venture accord principally to develop new products or services as witnessed in the case of General Motors and Toyota Company.
Unknown is the logical fact that the survival of joint ventures will solely depend on the stipulations of the memorandum signed and the behaviors of the parent companies.
The case of General Motor and Toyota may remain the most controversial and complicated, especially when one observes the economic sense of the venture and the government stipulations that existed in both countries. General Motors was hopeful that the joint venture would spur its domestic market through the production of small-size cars, but finally received mixed fortunes of mostly failure.
The FTC commissioners illegally accented the joint venture between the two companies in favor of protecting the image and competitiveness of the United States in the global market. Reliance on automobile corporations to enhance domestic economy and disproving the joint venture would lead to extreme detrimental economic implications for the United States. Playing fowl and accepting the joint agreement through a federal renowned FTC afterwards brought General Motors to economic tumble.
Whereas Japanese and their Toyota small automobile techniques successfully managed to employ their efficient techniques to assemble the anticipated cars, some issues derailed the joint venture. The quandary about getting the most appropriate geographic market and competitiveness between the Japanese and the Unites States market emerged.
The hidden agenda of General Motors was to manipulate Toyota’s small-cars technique and devise means of integrating the plan into their own designs. Everyone in the United States, including the presidentially appointed FTC thought that the NUMMI venture would be cost effective in its operations and optimistically increase the number of small cars that the American market desired.
In the end, General Motors failed to explore its earlier plan of autonomously developing small cars in the United States using their own approaches. Toyota stuck to the earlier agreements and efforts to become independent in the small-car business went futile. Therefore, while joint ventures may present firms with growth opportunities, parent firms determine their success.
Works Cited
Beamish, Paul, and Nathaniel Lupton. “Managing Joint Ventures.” Academy of Management Perspectives, 23.1 (2009): 75-94. Print.
Kwoka, John. “International Joint Ventures: General Motors and Toyota.” The Antitrust Revolution: Economics, Competition, and Policy. 1st ed. Ed. John Kwoka and Lawrence White. New York: Oxford University Press, 1989. 46-79. Print.
Li, Jiatao, Katherine Xin, Anne Tsui, and Donald C. Hambrick. “Building Effective International Joint Venture Leadership Teams in China.” Journal of World Business 34.1(1999): 52-68. Print.
Steensma, Kevin, Jeffrey Barden, Charles Dhanaraj, Marjorie Lyles, and Laszlo Tihanyi. “The evolution and internalization of international joint ventures in a transitioning economy.” Journal of International Business Studies 39.3 (2008): 491–507. Print.
One of the vital business processes that resulted in the constrained growth of General Motors (GM) was the fact that it lagged behind in technology because it had not embraced the modern market gists. Most importantly, alternative-hybrid inclination has already taken effect on the market, but GM had not yet taken advantage of this new technology.
Some minor processes were altered as a result of the changes; similarly, the new CEO is paying attention to different modalities of transforming the information technology services in the company (Motavalli, 2010). It is noteworthy that general motors has abolished the traditional IT system and has employed the use of numerous IT providers.
The company has designed a modern IT system to boost its business growth. As a result, this has ensured smooth running of the company plants with the elimination of the frequent stalling of machines in its plants. Essentially, GM has embarked on the project of building an electric car (Opel) to be tested in Germany. These changes mainly took place in the ICT and production segments of the business (Motavalli, 2010).
The other business process that led to GM’s decline was the company’s organizational structure which was vertically integrated; as a result, there was inadequate communication amongst employees. Hence, the various projects could not be completed, and new regulations were not being implemented in time. Further more; there was a disjointed communication process in the company resulting from the disunity among various departments.
This resulted in declined profits since the production process was not smooth. For instance, the company was spending a lot time in the production of one car. As a result, it led to the replacement of the top executives of the company. Thus, leading to a new system in the management hierarchy that enhanced improved communication through out the company. This process belongs to the administrative function of the business, and it is considered as the most important for any business to succeed (Jordi, 157).
General motors employed a poor market strategy by primarily exploiting the US market. As a result, its profitability was under pressure despite its vast size. This was because of rise in competition, in US market. Alteration of the process came in when the company focused more on the global market so as to overcome this competition.
Lately, the company has embraced expansion by increasing its production in the Chinese automobile market. This was a strategy to expand its market and cope with the current competition. This was a significant process in the production and operation function of the business (Cryiac, 2009).
Key among the business factors, which have constrained the growth of general motors, is their financing program, the General Motors Acceptance Corporation (GMAC) financing. Thus, the company failed to administer innovative ideas as a get way to register profit; instead, it mainly depended on the GMAC financing.
This meant that it did not introduce new brands neither did it restructure output and subsequently concentrate on improving their current lines. Currently there is an alteration of minor processes as the company is considering reducing its number of brands. For example, it is taking in to account pawning off the “Hummer” brand to any interested company. This mainly concerned the research and development function of the business (Welch, 2010).
References
Canals, Jordi, Managing corporate growth, New York, Oxford University Press, 2000. 157.
GM, based in Detroit, is the second leading auto producer after Toyota. It was founded in 1908 and has been a market leader on a global scale for close to 80 years. One of GM’s strength is that it operates different brands i.e. Chevrolet, Hummer and Cadillac in America. This makes it easier for it to penetrate the market; furthermore, the company has other brand and subsidiaries worldwide. GM has guaranteed its global presence by entering into partnerships with different companies such as Daewoo.
It has also enhanced the levels of cooperation with Isuzu and Suzuki. It is not forgotten that GM has manufacturing ventures with different companies, like Renault. GM also has advanced technology cooperation with Daimler, BMW and Toyota. The company has close to 200, 000 employees worldwide with manufacturing and assembly plants in 34 countries. These contribute to its penetration of the market.
Weaknesses
GM pays remarkably high additional benefits to its employees. These amounts are much higher than what their competitors pay. With all other factors constant, they spend much more than their rivals such that a weaker balance sheet is guaranteed.
Union agreements have also made GM absorb many employees thus a large workforce that may at times be redundant. Since general motors manufacture up to 70% of the spare parts used during assembly, they end up with higher unit prices since they have to recover their investment in the parts and the assembled vehicles.
Their competitors buy ready made parts from other dealers and may bargain for discounts during purchase, thus a lower vote head. GM has outdated information structure that cannot be used effectively to communicate with each other. They should embrace Internet connectivity and use it to provide a host of other products. GM should also diversify its products. Great emphasis has been placed on motor vehicle production and sale thus limiting market growth.
Opportunities
The company has a chance to improve on its current status in the market. This is because they have strong market bases in America, Germany, UK, Canada, China, Brazil and Italy. These markets have not been largely infiltrated by other automobile brands. GM should therefore, rethink and redesign its products in order to penetrate these markets.
While individual buyers may not have a lot of power against such a large manufacturer, collectively buyers have enormous influence on the market trends hence may affect line success or failure. Taking this into account, GM should make customer satisfaction a priority.
Threats
The biggest threat to GM is in the developing world, where brand loyalty is not existent, and shopping habits are determined by price. The business was out of touch with the customer wishes thus manufacturing expensive units that could not be easily sold. This was the principal contributor to the company’s failure, as the units consumed more fuel, in addition to the, high purchase and maintenance prices. Workers may use their unions to extract proceeds from the company during the procurement of spare parts, a necessity for car assembly.
As opposed to the United States, emerging markets have alternatives to car possession, like public transport, walking or biking. Purchasing vehicles is not a necessity in such settings. It is notable that vehicle purchasing is determined by complementary factors, including fuel prices, availability of space for parking, communications and insurance. Any deficiency or lack of access to the above mentioned privileges may negatively affect vehicle purchase.
When asking a random person about the most influential, most innovational and overall most famous American companies of all time, one is likely to hear the General Motors Co. being mentioned at least in the top five. A publicly traded corporation that has been around for more than a century, GM has stood the test of time successfully.
Certainly, the company had its ups and downs since September, 16 1908, when it was founded by William “Billy” C. Durant (General Motors, 2014a, para. 2) up to the present days; however, it is not the persistent success that fascinates me about firms, but their capacity to accustom to an unceasingly changing environment, and GM is a graphic example of such a company.
Being a manager in General Motors (GM), which nowadays takes the eleventh place in the top stock list (Investor Guide, 2014, para. 2) is truly a fantastic opportunity for a person that would like to become an influential leader, and an analysis of the GM’s priceless experience is the first step towards getting to know the company and its leaders better.
Analyzing GM’s success, one must admit that a lot of its recent triumph can be attributed to the company’s mission, vision and attitude towards its stakeholders, as well as the choice of the primary stakeholders in general. As the official company’s statement says, the company’s leaders put a strong emphasis on the company’s policy of expansion into the global market and the fact that GM is a multinational corporation.
Thus, GM’s mission concerns engaging into “socially responsible operations, worldwide” (Mission statements, n. d., para. 1) and providing “products and services of such quality that our customers will receive superior value” (Mission statements, n. d., para. 1), as well as welcoming the company’s employees and business partners to share the company’s success and making sure that the stockholders “receive a sustained superior return on their investment” (Mission statements, n. d., para. 1).
The given mission statement shows that GM has taken all major stakeholders into account and aims at satisfying their needs and meeting their interests. While such a complex task is going to be rather difficult to perform, the very fact that GM has a very stringent set of ethical principles is worth appreciating.
These principles will help the company not only gain weight in the target market and among the future partners, but also maintain positive relationships among the staff, therefore, creating perfect environment for the company’s economic performance and evolution.
When it comes to evaluating the effect that porter’s five forces of competition have on GM, one will notice inevitably that of all threats listed, the rivalry among existing firms (Schahter, 2012) seems to be the one of the greatest concern.
Indeed, taking a single look at the rest of the forces is enough to realize that GM has little to fear in terms of competing with new entrants; neither is the company afraid that the product in question will be ousted by its alternative.
True, the popularity of hybrid cars has grown considerably; however, GM has also pointed at the change of its vision towards a more environmentally friendly one and has launched the vehicles that run 30 mpg at the very most (GM, 2014).
GM SWOT Analysis
Strengths
Global delivery model;
(GDM allows addressing customers’ needs in a more efficient manner, since the language barrier and cultural differences are of no issue any longer);
Focus on stakeholders’ interests as the basis for the company’s mission and vision;
Positive company image within the Asian (Chinese) market;
Domination in the home market (16% of the total home market share belongs to the GM Company);
Widely recognized brands that sell well among the target audience.
Weaknesses
Brand dilution
Because of several flaws in the recent updates of GM’s famous brands, the company has lost a considerable about of loyal customers.
Bureaucracy within the company
Because of a set of very rigid standards and principles that the company’s transactions a carried out and general actions of the company’s managers are taken, the company has become notoriously slow in its reaction towards market changes.
Unreasonably high pricing policy;
As a brand that has become a household name since the beginning of the XX century, GM has the right to value its brand high. However, in the light of the recent quality issues, its price setting strategy has to be redefined. At present, the prices for the company’s production are shockingly high. While in 2006, the company’s “no haggle” policy (Valdes-Dapena, 2006, September 24) worked for the benefit of sales, attracting more customers and earning their trust, the current pricing policy clearly contributes to shrinking the number of customers down.
Intolerably frequent recalls.
As the recent data shows, the company had to recall “nearly 300,000 Chevrolet Cruze cars” (because of the technical issues, particularly with the transmission line and brakes (O’Toole, 2013, August 16)). The given issue has had its toll on the company’s popularity.
Opportunities
Promotion of hybrid cars and other types of environmentally friendly choices;
Using the increasing prices for the fuel;
Shaping customers’ needs by introducing new features into products and conjuring a successful promotion campaign for new brands;
Adopting the acquisition policy and merging with other companies.
Increased prices for raw materials (in 2011, the price for raw materials made $3,500 per car sold at $28,000 (Suttell, 2011, January 17); in 2014, the estimated price for raw materials will rise by 5% (Suttell, 2011, January 17).
Judging by the fact that GM is suffering from the increases in costs for supplies and a nonetheless rapid decline of its products popularity among the target audience, it will be reasonable to suggest that the GM should switch to a more efficient manner of advertising its product, at the same time increasing the rates of products quality by introducing better quality evaluation systems.
Seeing how delivering high quality results demands that company’s costs and, therefore, prices for the product should rise, it will be highly recommended that the GM should cut the costs for inbound and outbound logistics (i.e., transportation of raw materials) and spend sufficient amount of money on a new advertising campaign in order to cement the GM brand in people’s memories.
The leadership issues within the GM Company should be touched upon. In many ways, the path chosen by the GM leader has defined the unique organizational culture of the company, in which the principle of shared knowledge, customer satisfaction and commitment to the company prevail.
Because of the use of transformational leadership, the company leader manages to motivate employees for better performance (Ishikawa, 2011), at the same time changing their attitude towards their job, customers and product quality.
However, because of the need to relate to the target audience and address customers’ individual demands, GM should also adopt the principles of laissez faire leadership in that the company’s leader should give the leaders of the GM affiliates the freedom of choice on a local level (Kierulff & Grant, 2009).
Finally, the choice of corporate governance mechanisms related to the new set of principles that the GM is going to be guided by demands that the company should introduce the concept of an independent audit into the company’s production process and quality assessment.
Seeing how a mixture of transformational leadership and laissez faire leadership style has been chosen in order to help the company evolve, it will be reasonable to suggest that independent audits will help check whether the leaders of the affiliates follow the company’s quality standards and satisfy customers’ demands (Guxholli, Carapici & Gjinopulli, 2012).
It is crucial that the laissez faire leadership principles should prevent the corporate governance principles from allowing GM leaders to interfere with the decisions and choices of the local affiliates.
Seeing how the leaders of affiliates are aware of the details that the major leaders may have no idea about, it will be more appropriate to leave the decision-making process on a local level to the former. Small business relevance principle is another key to the company’s success within the target market.
The choice of a laissez faire leadership style as one of the components of the general leadership style, however, may lead to certain ethical concerns. For instance, the rates of fraud may rise due to reduction in the number of staff monitoring activities.
The given ethical issues can be resolved by using the transformational leadership elements and change employees’ motivation, thus, shaping their organizational behavior (Chan & Cheung, 2012).
In addition, financial incentives should also be provided for overachieving employees. Thus, the concept of healthy competition will be included into the company’s standard for organizational behavior.
Based on the aforementioned information, the communication plan for the GM must include the following:
Who: business people and families;
What: customer satisfaction as top priority;
When: within the next three months (advertising campaign development);
Why: improving GM’s reputation and increasing sales rates;
How: use of modern media;
By whom: GM’s leader and key people.
Although General Motors has had its ups and downs, there can be no doubt that the aforementioned experiences, both positive and negative, have contributed to shaping the company into what General Motors is famous for nowadays, that is, its ability to survive the most complicated business conditions and find solutions to some of the most difficult business and economic dilemmas.
Judging by the results of the analysis conducted above, the company is going to face a number of risks in the future, yet taking these risks will entail stellar financial opportunities, as well as chances for future evolution and expansion. It could be argued that the leadership strategy in General Motors could use some improvement in terms of enhancing the employees’ motivation.
However, it seems that, taking the company’s recent success into account, one should abstain from fixing what is not broken. As long as General Motors retains its reputation of an innovative company with high quality standards, it is going to remain at the top of the list of the most successful publicly traded companies ever.
Reference List
Chan, A. W. & Cheung, H. Y. (2012). Cultural dimensions, ethical sensitivity, and corporate governance. Journal of Business Ethics, 110(1), 45–59.
General Motors (2014a). Company: History and heritage. Web.
GM (2014). Innovation: Environment. Web.
Guxholli, S., Carapici, V. & Gjinopulli, A. (2012). Corporate governance and audit. China-USA Business Review, 11(2), 253–267.
Ishikawa, J. (2011). Transformational leadership and gatekeeping leadership: The roles of norm for maintaining consensus and shared leadership in team performance. Asia Pacific Journal of Management, 29(20), 265–283.
Kierulff, H. & Grant, L. (2009). Limiting laissez faire profits: The financial implications. Journal of Business Ethics, 90(3), 425-436.
Individuals with disabilities still experience employment discrimination at their workplaces. Although the Americans with Disabilities Act 1990 was enacted two decades ago, it has resulted in marginal improvements.
Presumably, companies are reluctant to hire persons with disabilities (PWDs) because of potential extra costs and other drawbacks associated with disabilities. This briefing focuses on how General Motors (GM) manages workers with disabilities.
According to Langtree (2015), disability entails “physical or mental impairment that considerably limits one or more major life activities” (p. 1).
While some cases of disabilities may impair a person completely, in some instance, some persons with disabilities can perform a job with or without reasonable accommodation and are therefore qualified disabled employees.
The Americans with Disabilities Act (ADA) of 1990 protects such persons from discrimination in the workplace, including access to training and career development. Organizations such as GM have been able to accommodate persons with disabilities as a wider strategy for promoting diversity.
Perceived barriers to employ PWDs exist. For instance, some employers have cited high costs associated with mobility and renovation to accommodate them, poor attitudes at all corporate levels, inability to perform the job well and possibilities of lawsuits.
In addition, others have claimed that PWDs may not promote customer service and retention and quit their jobs.
Researchers have however demonstrated that these claims could be myths.
The US Chamber of Commerce report, Leading Practices on Disability Inclusion concluded that “hiring people with disabilities is good for the bottom-line” with the conclusion drawn from case studies conducted at 3M, PepsiCo, Merck and AT & T. It was established that workplace accommodations are low cost (most of these accommodations do not require more financial supports) such as “scheduling flexibility, allowances in dress code rules or allowing an employee to sit or stand”.
In addition, employers could get several benefits associated with accommodation. These include attracting and keeping talented workers; enhancing output and morale, and company diversity; and reducing employees’ reimbursement and training and development costs.
Further, People with disabilities are loyal, have low turnover rates and they are motivated to perform. The average cost of accommodation is $500, which is far less relative to the cost of employee turnover (Owen, 2012).
Diversity at GM: A focus on People with Disabilities
GM has created the People With Disabilities (PWD) Employee Resource Group to address various issues in all facets of the business (General Motors, 2015).
The company focuses on several aspects of diversity to accommodate PWD. Moreover, GM’s concerns for PWD go beyond the organization by creating Enhanced Products to improve the customer experience for those who have hearing impairment and other forms of impairments.
The company aims to create awareness about PWDs by providing support and information to employees with disabilities and other PWDs outside the GM community.
It supports community organizations with information on disability issues in the work environment, organizes internal company events for PWDs to create disability awareness among employees, as well as support employees with mental health issues.
GM focuses on rebuilding its workplaces to accommodate PWDs. The company works with architects to redesign its locations and improve accessibility to the Detroit Riverfront and Renaissance Center Marriott. Accommodation changes include wheelchair ramps and automatic doors for better accessibility.
Moreover, it also works with PWDs and facility management to create an “evacuation procedure for PWDs, including testing the Evacuation Chair”. The company also intends to create new “parking spaces for PWDs and enhance transportation activities on the Tech Center grounds”.
The company also continuously improves its technology systems to enhance accommodation. GM has embarked on implementing “beta testers for IT improvements to guarantee they are reachable to disabled employees”. Such changes have affected all operating systems, intranet and all internal communications services such as email and IM among others.
Finally, GM sponsors sports and events to support individuals with disabilities such as the May 2012 Special Olympics Summer Games in Michigan as a way of giving back to the community, and it consults with GM Mobility on Universal Design training for GM Dealerships to improve customer experiences.
Consequently, it has trained subsidiaries to cater for clients with disabilities adequately.
GM’s PWD Future
The PWD Employee Resource Group aims for sustained success in attempts to make GM a “Workplace of Choice for individuals with disabilities”. The company has also focused on providing assistance to help employees who care for PWDs and aid them find resources and GM products to enhance self-management and movements.
GM believes such endeavors will allow people with disabilities to drive their vehicles with minimal challenges and anxieties.
Conclusion
This briefing on disabilities shows that PWDs can be beneficial to organizations through accommodation. Accommodation of PWD is low cost and it could even cost nothing and usually has high positive impacts to organizations. The company relies on different methods to enhance diversity.
Overall, it is a form of diversity management in organizations and it is good for business.
General Motors is one of the most successful automobile firms in the global market. According to Bolman and Deal (1), the management of General Motors has exhibited unique capacity to penetrate the global market despite the hostile environmental conditions.
The scholar notes that at a time when American firms were winding their operations in the Arab world due to the growing anti-American sentiments in the region, the General Motors was able to withstand the storm and even expand its operations. Egypt was one of the most attractive markets, and the firm established its production plant in the city of Cairo to serve the local population.
The plant served the regional market of North Africa and Middle East. The Arab revolution that was forced by Hosni Mubarak, the long serving Egyptian strongman, led to instability in the country. The political turmoil in the neighboring markets of Tunisia, Libya, South Sudan and part of the Middle East worsened the situation. In this paper, the researcher will analyze the role of the leadership of this firm in managing this geo-political turmoil in the region.
Geo-Political Events in the Arab World
The Arab Spring started in Tunisia and forced the President Ben Ali to run out of the country to Saudi Arabia. This event inspired the Egyptians that were uncomfortable with the leadership of Hosni Mubarak. The unrest started in various cities in the country following the massive civilian protest.
Business operations were brought to a standstill as the rowdy youth pelted cars and business premises with stones. The situation went on for 18 days. This forced the President Hosni Mubarak to resign his post. The military took over the leadership, but it did not stop the unrest.
In Libya, another attractive market for General Motors, a new revolution started. The city of Tripoli became a battle field as the government forces clashed with the rebel fighters. The events in Libya were worse than what was taking place in Egypt. Unlike Egypt, where the civilians engaging the government forces were unarmed, in Libya the rebel forces had effective arsenal to engage the government military forces.
The rebels managed to take over power after gunning down the then President Muhamar Gaddafi. In Egypt, things were not getting better even after the democratic election that saw Mohammed Mursi come to power as a new Egyptian president. He was accused of high-handedness. He was soon sent out of power and the military took over the leadership of the country once again.
The Impact on Business
These events had devastating impacts on the business community in Egypt. For four years, there was no political stability in a country that had been seen as an oasis of peace in a troubled Arab World. It was almost impossible to conduct businesses in such environments. The roads were impassible because of the activities of people trying to bring change to the government. They were barricaded using burning tyres and stones.
The rowdy youth would pelt cars and business premises with stones, especially the business premises that were perceived to be owned by the government sympathizers. Many investors were considering other regions away from Egypt and the neighboring countries that were politically unstable. Security was not guaranteed as criminals took advantage of the unrest to loot from various premises.
Some of the customers of General Motors, especially the organizational buyers, had frozen their activities due to the ongoing turmoil. They were also scared of the events and feared that their businesses could be destroyed. For almost one year, General Motors majorly relied on the government as the main organizational buyer of its products. The export to Tunisia, Libya and Sudan also dropped.
The Approach Taken by the Leaders to Address the Problem
General Motors has a long history of operation in Egypt since 1920s. That is why when it became apparent that the business environment in the country was getting worse, the top management unit had to act very swiftly. The chief executive officer of the firm, Dan Akerson, travelled to Egypt to assess the situation in February 2011 following the resignation of Hosni Mubarak. The top management did not expect such a serious twist in the country’s political structure.
Akerson was met by the regional managers in Egypt, led by Rajeev Chaba. The team wanted to find a way of maneuvering in this important market that was facing serious security challenges. Before travelling back to the United States, Akerson, with the helpof Rajeev Chaba’s team, drew a plan on how to deal with the prevailing environmental conditions. The plan was the least expected move of the General Motors.
The company announced that it would open its stores and continue with the operations despite the raging storm in almost all the major urban centers in the country. However, the production capacity was reduced because the local market was not very attractive. As Howard and Hussain (3) mention, Rajaav, with the blessings of the directors in Egypt, doubled its security at the production plants and the show rooms in order to facilitate the production and sale of its products.
However, the management knew that it had to avoid being seen as a government sympathizer that did not care about the concerns of the public. As Prashad (4) notes, it was during this political turmoil that General Motors spent the highest amount of its profits in corporate social responsibility.
It was one of the firms that were actively involved in giving aid to the protesting youths. They donated money to buy food and medicine in case someone was injured during the violent protest. One dilemma that the leadership faced was how to handle the rival groups. The government was at war with the rebels.
The firm had first approached the government and requested for a security beef-up, a request that was gladly accepted by the military rulers. However, the locals were also very important in enhancing security because in most of the cases they are the causes of insecurity. It had to associate with these two warring groups without being seen as a sympathizer of either side.
To do this, Mr. Akerson had to come up with a unique way of addressing the problem. Mr. Rajeev Chaba was instructed to focus on how to offer any humanitarian help to the locals as long as it did not facilitate them in any way in their fight against the government.
On its side, the management in the United States maintained a close relationship with the government. It was very important as the firm reopened the production plant. The fact that most of the shares of the firm are owned by Egyptian and Saudi investors also gave it the impression that it is a local firm. It gave it the image of an Islamic firm even among the radicalized Muslim youths that were against the presence of large corporations from the West.
The Performance of the Leadership in Addressing the Problem
The performance of the leadership of General Motors in addressing this problem can be described as impressive. According to Grasso (2), GM is one of the few multinational corporations that were able to withstand the storm arising from the political revolution in the country.
One area that expresses this impressive performance very clearly was the ability to relate well with both sides of the warring parties. This was done in a way that none of the parties considered the firm to betray their relationships or to be sympathizing with the opposing groups.
The firm was always ready to offer help to the people affected in the streets during the protest. This made it to be seen as a firm that is in touch with the locals. At the corporate level, the relationship between the firm and the Egyptian leadership never deteriorated. The firm is steadily making progress in the Egyptian market at a time when other firms are restructuring following the relative peace witnessed in the recent past.
Conclusion
The geo-political environment in the Northern Africa following the Arab Spring affected many businesses in the region. General Motors was one of the affected firms in this turmoil. However, the leadership of the firm came up with a unique strategy that helped the firm to overcome the security threats posed by the rebellion. The firm is currently enjoying huge profits at a time when other multinationals are to get back on track following the relative calm that has been witnessed in the recent past.
References
Bolman LG, Deal TE. Reframing leadership. In: Gallos JV, editor. Business leadership: a Jossey-Bass reader. 2nd ed. San Francisco, CA: Jossey-Bass; 2014. p 35-49.
Grasso D. High-performance GM LS-series cylinder head guide. North Branch, MN: CarTech; 2014. 144 p.
Howard PN, Hussain MM. Democracy’s fourth wave? Digital media and the Arab Spring. New York, NY: Oxford University Press; 2013. 144 p.
Prashad V. Arab spring, Libyan winter. Oakland, CA: AK Press; 2012. 272 p.
The automobile industry is characterized by impulsiveness and indecision due to constant political, social, technological and economic transformations. Consequently, automobile companies find themselves in dynamic situations that call for steady adjustments.
In such circumstances, the companies require effective leadership to help in identifying the most feasible and productive changes. Brown (2007) maintains that car companies should transform their operations in order to remain competitive.
Hence, they need transformational leaders who can identify emerging opportunities and restructure the companies to exploit the opportunities.
The success of General Motors is credited to its effective leadership. In spite of General Motors having numerous competitive advantages over other automobile companies, it relies heavily on its transformative leaders.
The leaders are responsible for formulating operation strategies and establishing appropriate structures to facilitate implementation of the plans.
This paper will discuss the effectiveness of leadership in General Motors. Besides, it will identify various growth strategies that General Motors can pursue.
General Motors’ Leadership
According to Bayou and De Korvin (2013), the current state of automobile industry calls for transformative leadership. It underlines the reason General Motors hires transformative chief executive officers (CEO).
Through the transformative leadership of Mary Barra, General Motors has been able to restore order in all its global units.
Bayou and De Korvin (2013) allege that the most critical role of a transformative leader is to re-establish order and shrewdness into the messy whirl that is the modern day’s business atmosphere. Prior to Barra assuming leadership of the company, General Motors’ product development processes were in absolute confusion.
The company had at least 30 distinct platforms. Besides, the company offered inefficient services and manufactured inferior cars. There were needs to align operations and enhance organizational efficiency (Fogel, Morck & Yeung, 2014).
Barra embarked on these vital transformational objectives and within one year she managed to downsize the product line. In addition, she improved the quality of cars and ensured that employees were conscious of customer needs.
Today, General Motors manufactures its cars based on customer demands and preferences. Barra has instituted a team of leaders with varied skills in the automobile industry to help the company meet customer demands.
General Motors suffered from autocratic leadership for many years. The company’s leaders did not give employees an opportunity to explore their talents or make decisions. Employees received instructions from plant managers and CEO.
Such leadership style inhibited innovation. In return, General Motors was unable to compete with other automobile companies leading to its meltdown. Currently, the General Motor’s leadership has eliminated bureaucracy and emphasized on employee empowerment (Fogel et al., 2014).
Employees are responsible for making decisions on matters affecting their areas of specialization. Besides, they are accountable for all their decisions. Barra’s leadership has restored employee commitment and innovation leading to General Motors becoming competitive.
Indeed, the current leadership has helped the company to be in the forefront of the fight against global warming. General Motors has not only managed to offer value to its clients, but also reduce the United States’ overreliance on hydrocarbon-based fuels.
Competitive Advantages
Bayou and De Korvin (2013) allege that General Motors is the second principal automobile company worldwide. One of the General Motors’ competitive advantages lies in its extensive geographic coverage. The company has 207 divisions that are distributed throughout the globe.
The different divisions share ideas on product development with each other, thus helping the company to develop superior cars. One of the challenges that automobile companies encounter is lack of efficient design teams.
However, General Motors has trounced this challenge by establishing a design team that can combine skills from different markets. Besides, General Motors produces its automobile parts at low costs due to economies of scale.
According to Dyer (2006), General Motors has an extensive collection of regional brands such as Cadillac, Hummer, Buick, Pontiac, Chevrolet, Saturn, and Saab. The extensive collection of brands enables the company to compete with other automobile companies in local and regional markets.
Its brands are not only strong, but also popular in most countries. Therefore, General Motors does not incur enormous marketing costs since most customers are familiar with its brands. Besides, General Motors reaches a broad market base relative to other companies.
Challenges to General Motors Strategies
General Motors faces a myriad of challenges in its plan to recover from past financial meltdown.
First, the company requires minimizing repetition in model production and producing vehicles that will increase its profit margin. To achieve this, General Motors has to ensure that its product range matches with the income distribution of its target markets.
Second, the company’s technology is not consistent with the dynamic automobile industry (Fogel et al., 2014). General Motors should update its technology in order to implement its recovery strategies.
Third, for General Motors to make a significant profit and minimize operation costs, it should scale down its global coverage. It requires relinquishing some markets that do not give it substantial returns.
Even though General Motors has conquered the liquidation that it experienced in 2009, the company still requires containing its operation costs as a strategy to regain productivity.
Finally, General Motors cannot realize its goals with undertaking a major restructuring and changing its corporate culture (Bayou & De Korvin, 2013).
The main challenge is that the United States’ government influences the decisions made by the company. Therefore, it is hard for General Motors to initiate cultural transformation or implement other strategies aimed at benefiting the company.
Possible Growth Strategies
For General Motors to overcome the current competition in the automobile industry, it should focus on alternative growth strategies. The company should invest in technology and focus on customer needs. There is high demand for trucks in the global market.
Hence, General Motors should invest in truck development as one of its growth strategies (Fogel et al., 2014). The truck development will help General Motors to increase its revenues, and therefore its competitiveness in global market.
Additionally, customers are buying hybrid vehicles since they are environmental friendly. Thus, General Motors should invest in hybrid electric cars as a measure to boost its sales volume.
Conclusion
Automobile industry is characterized by constant changes that call for effective leadership. Through transformative leadership, General Motors has managed to recover from past financial meltdown. Currently, the company is working hard to re-establish itself in the automobile industry.
The leadership has helped General Motors to abolish bureaucracy and encourage innovation. The company has numerous divisions worldwide that makes it enjoy economies of scale. Moreover, it has an extensive collection of brands that are popular worldwide.
The United States’ government influences decisions made by General Motors. Hence, it is hard for the company to initiate and implement recovery strategies. For instance, the company cannot reduce its global coverage since it has to get authorization from the government.
General Motors should invest in hybrid electric cars and trucks to achieve future growth. Demand for trucks and hybrid vehicles will continue to rise as people go for environmental-friendly cars.
References
Bayou, M., & De Korvin, A. (2013). Measuring the leanness of manufacturing systems: A case study of Ford Motor Company and General Motors. Journal of Engineering and Technology Management, 25(4), 287-304.
Brown, A. (2007). Organizational culture: The key to effective leadership and organizational development. Leadership & Organizational Development Journal, 13(2), 3-6.
Dyer, J. (2006). Specialized supplier networks as a source of competitive advantage: Evidence from the auto industry. Strategic Management Journal, 17(4), 271-291.
Fogel, K., Morck, R., & Yeung, B. (2014). Big business stability and economic growth: Is what’s good for General Motors good for America?. Journal of Financial Economics, 89(1), 83-108.
Multinational organizations are those organizations that have globalized their operations. Such organizations have branches in many countries around the globe. Some of the branches are given some aspects of autonomy although they are still answerable to the headquarters. A good example of such organizations includes the General Motors Company.
This company has branches in almost all continents on the globe and also enjoys a good fraction of the market share. Intercultural management is a style of management that is sensitive to the different cultures represented by employees from different countries and languages (Information Resource Management Association 2002).
Due to the large extent of its operations, the company, just like any other company has personnel who come from different countries. These personnel speak different languages and also have a different culture from that of Americans. For these reasons, the company is forced to deal with issues typical of an intercultural organization.
This is because various forms of misunderstanding usually arise in such kinds of workplaces as a result of differences in culture and language interpretation. It is worth noting that such kinds of language and cultural differences are the main factors that cause international alliances and mergers to fail (Holstein, Not Dated).
This is also because there is no corporation that can operate in an environment full of misunderstanding caused by language misinterpretations and differences in culture. This paper discusses how several issues cause misunderstanding and subsequent failures of globalized business organizations.
A case study of General Motors is given as a good example to show how the culture of the business management, misunderstanding and cultural differences in the factories overseas caused the failures of the automobile company in the year 2008 (Adair 1997).
Managerial situations
Managerial situations require exceptional skills that are actually aimed at controlling, predicting and adapting to particular situations. Traditional planning techniques are important in any managerial situation because it helps an organization to become more prepared and more responsive to changes that are hard but the organization can go through if it is well prepared.
Managerial situations require a leader to plan on how to deal with practical circumstances that rock an organization. The four orientations of planning are therefore very important when a manager is faced with challenging situations. These strategies include reactive, inactive, preactive and interactive. A reactive strategy is a sought of flashback whereby things tends to return to previous state.
This strategy deals with things separately. The inactive strategy tends to deal with issues at the current or prevailing situations. In this kind of situation, the management seems to be satisfied with things as they are (Rossiter 1998). The management therefore tends to muddle through the situation. The preactive strategy is one that believes in change. This strategy has the ability to predict the future.
Prediction of the future allows the management to be more prepared for the situations. Last but not least, managerial situations require an interactive gesture.
This strategy has a perception that the past, the present and the future are different although they are quite inseparable. This suggests that for any bad situation that happened in the past, the organization will feel its impacts both at the time of its happening, in the present and even in the future (Krolicki 2011).
Conceptual framework
The conceptual framework of this paper tries to give a master plan of the way intercultural management can be achieved in a globalized organization. This is a good starting point because it acts as a guideline to effective management. Communication is one of the most important aspects of management in any organization.
It is coincidental to find out through a study done by Joshi and Lazarova, that an average of 97.5% of leaders and team members highlighted communication as the most important thing that makes leaders competent (Spencer-Oatey, Not Dated). This is why some of the biggest problems in an organization are caused by poor communication. Most of the communication problems arise from the lack of a shared language.
This is especially so in a multicultural globalized organization. For instance, an American copyrighter will experience difficulties in interpreting the meaning of some aspects of Japanese language when working in a Japanese company. This can happen even when his manager is pretty good in English (Sypher 1990).
This situation suggests that there are various misunderstandings that may arise when a person tries to explain something to people who are not natives of the language that person is using. Such situations will cause subtle differences especially during communication and may make people to have various interpretations of the message which may vary in context and even in the meaning.
Although this situation is more common in multicultural international organizations, it also occurs to some substantial levels between native speakers of the same language. Communication is therefore very important in developing a good relationship, mutual understanding and intercultural competence.
Communication also helps in adjusting to language proficiency and in understanding the importance of intercultural management in a globalized organization (Spencer-Oatey, Not Dated).
The case of general motors
In the year 2008, General Motors was faced with a managerial problem that was related to financial issues. These financial issues arose from decades of abuse of power by the top management. Analysts proposed a $25 billion bailout in order to keep the automobile company afloat the market.
Other analysts were however skeptical with this bailout because they though that it will only take care of the financial issues and yet the roots of the problems that the company faced emerged from a cultural trend (Transcultural Synergy 2011). This is because the problems are believed to have developed for the past fifty or more years as a result of money minded Chief Executives.
Thus, the $25 billion bailout will only make the company stay in the market until when the money runs out. General motors opted for expensive health care programs for their personnel instead of looking down on the union. This is because the management thought that staring down the union will cause strike among the employees.
The option that the management took was however detrimental because it brought the company to its knees in terms of competitiveness. As a result, the market share of General Motors has continued to decline over the past forty or so years (George 2008).
The lack of a competitive General Motors is therefore attributed to the high employee costs as well as inflexible work rules. For this reason, it needs a new leadership with new culture (Adair b. 2007).
Many analysts have come up with new proposals aimed at helping the company to improve its competitive nature in the market (World- Traveler 2011). Some of the analysts suggest that dividing General Motors into two companies will help it diversify its products and make them more efficient. Others suggest that a new management needs to be installed in the company.
The new management will help bring in a new culture for all the employees that will empower them and make them become more independent thinkers and hence more innovative. New employees also need to be negotiated so that the company can use a new wage scheme that will help it continue to operate effectively in the market.
A new culture will also help the company’s management to embark on an aggressive development of new products out of innovation. It has also been suggested that the company should only retain those factories that are most productive both in the United States and foreign ones.
All the above factors should help the company to operate with cash balances that are enough to make it stay afloat the international market (Zeromillion.com. 2011).
In relation to innovation and culture, the company needs an all time effort to manufacture different kinds and shapes of automobiles for the market. The cars should range in size from small to large according to market demands. GM also needs to come up with a different plan for their products.
This plan should take care of various aspects in the motor industry such as fuel efficiency. For instance, Chevrolet, one of the lightest cars with the smallest engine had poor fuel efficiency. Such kinds of mistakes in the automobile company should be reviewed with an aim of improving the fuel efficiency.
In addition, the company needs to borrow a leaf from the Japanese automobile industries whereby General Motors should build batteries in the U.S. This is to help them gain independence from battery making companies that are always rocked with troubles. Some of the problems of the battery companies include manufacture of defective batteries.
At one time, a battery company that was being outsourced by the General Motors was forced to recall six thousand battery units. A good solution to this could be a joint venture with a first rate battery manufacturing company like one from Japan (Flint 2008).
General Motors needs a complete overhaul of the century old corporate culture. This is because the current corporate culture is dominated by managers whose main focus is to chase the next deal in order to reverse its market decline. There is also a problem in the middle management sector.
The problem is that most middle managers are still operating with comfort and they are not dedicated to offering extra efforts to the company. This situation of the middle managers staying in their zone of comfort has been there for quite a while thus, prompting the need for change.
The management of General Motors has helped bring up a lot of bright minds. However, among the people the company has developed, there are those whose minds are uncultured. Such kinds of minds are the ones responsible for dragging the efforts of others. The management should therefore set up a mechanism that will check and minimize the number of individuals who have uncultured minds (Adair a. 2007).
The other thing that General Motors should be wary of is the conception that it is a big company and that it is a proxy of the world. As a matter of fact, such kind of thought is one of the reasons that make the company suffer from the troubles it is currently experiencing.
Achieving understanding
The process of achieving a mutual understanding between people is actually based on the way senders and receivers of communication can encode and decode signals respectively, exactly in the same way. Miscommunication therefore is as a result of a mismatch between the messages sent and those that are received.
This means that there must be a sort of familiarity of the language between the senders and the receivers of that language (Aurifeille 2006). This is the reason why some books describe communication as a way in which the meaning of a message is transferred from the sender to the receiver.
The case of General Motors is not an exception to this because in this scenario, various aspects of communication are responsible for the decline of its market share. Correct interpretation of information from the company’s top management to the middle managers, both in the local U.S. factories and foreign factories would help the company stay afloat in the market (Fine 1969).
Barriers to communication can cause difficulties in understanding the message being conveyed. There are so many barriers to effective communication. Some of them include physical barriers such as location of the sender and the receiver and faults in the system design. Attitudinal barriers are also deterrent factors for effective communication (Arnott & Raab 2000).
They come about as a result of problems between the employees and managerial staff of an organization. Such problems include poor management and lack of consultations especially when undertaking sensitive tasks. In addition, psychological factors such as the state of mind of the staff and the linguistic ability of the conveyor of the message can also be barriers of communication.
Noise can also cause lack of effective communication. In a globalized international multicultural organization, the biggest problem in effective communication is the language factor. Cultural difference is therefore included as one of the noise factors that inhibit effective communication in an international organization. It can interfere with effective transmission of the meaning of a particular message.
How to achieve mutual understanding
Mutual understanding in any multicultural organization depends on the knowledge of terms and the language proficiency (Brome et al. 2005). If people are to collaborate with each other, even in a globalized multicultural organization, they have to come to terms with each other’s meanings especially if they speak different languages.
Effective management of an organization requires the leadership of an organization to attune to indirect signals so that everything can be understood. Mutual understanding is enhanced by selecting leaders who are aware of the different cultures of the environment that they lead.
Thus, it would be prudent enough for a company like General Motors to come up with strict mechanisms that will enable it to select effective leaders or managers who will spearhead and control the company’s operations in foreign factories. This is because as discussed earlier, multinational alliances and mergers fail mainly because of lack of understanding of the different cultures in which the companies operate.
A good strategy is to train leaders from the foreign countries who will then have the ability to run these factories in their own countries and represent General Motors effectively (Hogan & Stubbs 2003).
Another option is to train the company’s leaders in the culture that they will be operating in. This will help them to familiarize with the different culture and hence make them more effective in managing the company’s foreign factories.
In a multicultural society, business organizations thrive by finding common grounds across cultural and ethnic groups. However, homogenous cultures, such as those found in most European countries, business organizations in these countries maintain their local value systems.
It is worth noting that the entire concept and principles of management in all cultures may be same. The only distinct difference comes in the way the practice of management is done (Bowe & Martin 2007).
In multicultural environments, things change constantly because there is a sort of competition between the different cultures in the society. This means that there is a lot of improvement which is contrasted with most homogenous societies that do not easily discard their long and proud histories.
Homogenous societies tend to run their organizations in a conservative way because they believe that patience as well as an established way of doing things are virtues and not weaknesses. Multicultural organizations should not be managed in such a way that they target each group separately (Farber 2002).
The problems that managers in multicultural organizations face are that few people within organizations understand all areas of organizational ethics, cultural and legal systems in transition. A good example is when senior managers in Intel concentrated on global strategy and structure. As a result, there were complaints from the middle managers.
These managers complained that they faced resistance from various aspects of the corporate culture. The resistance actually prevented them from globalizing their operations. The human resource department focused on building better interpersonal and cross cultural skills (Facts on Files 2009).
Managing multicultural corporations needs a comprehensive approach of corporate cultural, ethical, and legal value systems. It is important to understand that members of international, globalized and multinational organizations enter the organizations with different cultural backgrounds and leave corporations very rapidly. For this reason, managers should try to leave corporate cultural and ethical value systems intact (Davis 1999).
It is also worth noting that the primary motive for managers heading multicultural organizations is based on the promise that a good organizational structure will increase profits. The profits will therefore stimulate growth of the corporations. It must be understood that these concepts work hand in hand with cross cultural relations between producers and consumers (Dogramasi & Adam 1985).
Education
It is therefore very important to educate managers so that they may become more cultural sensitive. Currently, there are many programs that require courses across a broad range of business functions such as marketing and strategy.
The development of responsible global business leaders requires significant amount of the course content in the core courses or in elective address international business, leadership and social and environmental responsibility issues. This will create a strong foundation of global knowledge (Doh & Stumpf 2005).
It is worth noting that unskilled and semiskilled workers are increasingly becoming less and less needed. This implies that countries must put more and more effort into developing high-quality education systems in order to prepare students for more skilled jobs in the future (Marquardt, M. et al 2004).
Education and vocational training is important especially in contemporary world where there are changes in global market dynamics, technology, and the structure of labor. This has created a much complex work environment that has increased the number of jobs that need high level skills like problem solving, interpersonal, and other work place skills.
It is therefore very important for leaders to utilize organizational development skills to sustain an environment in which professional education can work effectively and students can learn successfully in order to become effective global leaders (Marquardt, M. et al 2004).
Therefore, knowledge, rather than physical assets should define competitive advantage. This will make the administrative and managing process an easier task to undertake in a business environment that has diverse culture.
Since societies are transitioning from the industrial era to the global knowledge era, job requirements are becoming more challenging. It is also not surprising to see the importation or exportation of knowledge through hiring of expatriates in a globalized business environment.
It is therefore the duty of the management to come up with an administrative framework that will assimilate the diverse cultures arising from hiring of foreign employees (Custom Essay 2011).
Cultural sensitivity
Cultural interests and sensitivity, self awareness, and global mind-set act as solid foundations of international business skills. This is a set of competence that leaders ought to develop in order to accommodate diverse cultures and remain competitive in the global market. The development of these competencies can be initiated through foundation courses that focus on cross cultural management issues and skills (Doh & Stumpf 2005).
In addition to the above, leaders need to be exposed to a variety of experiential assignments, that address not only cross cultural sensitivity but also self awareness. For instance, some business schools like Wharton School require some of their students to participate in out-of-class experiences such as treks in the Himalayas or Patagonia.
The reason behind this is to develop decision making skills under stressful conditions. It also serves to expose the students to different countries and cultures at the same time (Doh & Stumpf 2005). Other universities are known to offer in-class simulations to practice leadership skills, and also assign leadership autobiography to develop self awareness (Flint 2008).
Global leadership skills can also be obtained through learning from other people’s experiences and reading comprehensive surveys. Some books are known to provide diagnostic surveys, learning objectives, cases, practice exercises and experiential activities to enhance self awareness. The books are also good especially because they give important ideas and opinions that are important for global business leaders.
Thus, leaders can find ways of managing personal stress, problem solving, coaching and counseling, motivating, managing conflict, empowering and delegating, and building effective teams with diverse cultures (Doh & Stumpf 2005).
In addition to the preceding methods, business schools can benefit from the inclusion of specific country or area studies and diverse out-of-class activities like speakers, events, and competitions that address culture and leadership (Clark 2003). Honesty, integrity, ethics and social and environmental stewardship is also an important factor that leaders should have.
Some countries such as Philippines offer good courses that are designed to produce social responsible leaders who are experts in Asian culture and management styles. The contents of the courses in the curriculum reflect these underlying values (Doh & Stumpf 2005).
Business leaders of a globalizing business organization should bend on recruiting only those professionals who can cooperate effectively. The professionals should also be able to interact with each other with minimum amount of risk. It is quite natural that the situation where a leader hires employees who share the same set of values, rules and cultural norms is ideal.
However, this situation is not ideal in the modern business environment. Since the modern workplace environment is multicultural, the leader must work to enhance the smooth operations of the business with employees from India, China, Germany, Poland and Philippines working together with minimum conflicts.
Thus, the organizational culture should be neutral and without any bias to any set of cultural norms and values (Custom Essay 4). This is why emphasis must be placed on recruiting employees who can easily adapt to the multicultural business environment (Caroselli 2000).
The international customer relations have continued to receive major boosts from the globalization of the economy. Increased cross border alliances and the initiation of e-commerce can also be some of the factors that have contributed most in enhancing globalization and intercultural diversity management.
Many companies can now appreciate the role of effective management of intercultural diversity in the day to day operations of the international organizations. As the issue of globalization gains momentum, many companies find themselves getting in contact with employees from different nations, languages and cultures.
For this reason, any business that wants to globalize its operations must come to terms with managerial issues typical of a multicultural organization. Therefore, intercultural management deals with managerial issues that affect the globalized corporation across borders.
Mismanagement of multicultural organizations can cause heavy losses to the corporation especially when the leadership does not know how to go about international projects. According to the current statistics, many international projects that involve international acquisitions fail due to poor personnel know how of the cultural differences.
It is therefore imperative for any globalized corporation to be sensitive to the differences in culture throughout its operations (Becker 2000). Differences in management styles across the cultures can negatively affect the profitability of a corporation. Mergers involving multinational business organizations can be a contributing factor to failures in a business.
This is because these mergers usually have an impact on the human resource due to the obvious- cultural differences. It is therefore imperative for managers to conduct extensive studies of the market before they think of trying any move that may end up to be detrimental to the operations and profitability of the company (Transcultural synergy, 2011).
My own experience of working in a multicultural organization is pretty interesting because it has exposed me to different kinds of cultures. Working with people from different countries has helped me to understand the nature of different cultures.
I have come to understand that Americans are more liberal, innovative and always try to do new things. They can easily embrace a new culture in whatever environment. On the other hand, people from Europe tend to be quite conservative. They believe that doing things the conventional way is not retrogressive. Instead it is a virtue that they all strive to enhance.
Conclusion
Multinational organizations are those organizations that have globalized their operations. Such organizations have branches in many countries around the globe. Intercultural management is a style of management that is sensitive to the different cultures represented by employees from different countries and languages.
Managerial situations require exceptional skills that are actually aimed at controlling, predicting and adapting to particular situations. Traditional planning techniques are important in any managerial situation because it helps an organization to become more prepared and more responsive to changes that are hard but the organization can go through if well prepared.
General Motors needs a complete overhaul of the century old corporate culture. This is because the current corporate culture is dominated by managers whose main focus is to chase the next deal in order to reverse its market decline. Cultural interests and sensitivity, self awareness, and global mind-set act as solid foundations of international business skills.
This is a set of competence that leaders ought to develop in order to accommodate diverse cultures and remain competitive in the global market. Business leaders of a globalizing business organization should bend on recruiting only those professionals who can cooperate effectively. The professionals should also be able to interact with each other with minimum amount of risk.
It is quite natural that the situation where a leader hires employees who share the same set of values, rules and cultural norms is ideal. However, this situation is not ideal in the modern business environment.
Since the modern workplace environment is multicultural, the leader must work to enhance the smooth operations of the business with employees from India, China, Germany, Poland and Philippines working together with minimum conflicts.
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General Motor Company is the world’s second largest automobile producer after Toyota. It is found in United States of America. The company employ’s different marketing strategies to ensure that it remains competitive in the ever changing motor industry. One of the strategies that the company uses is corporate social responsibilities practices to create awareness in the world market of its products existence.
Under the policies of corporate social responsibilities, the company has embarked on massive environmental conservation measures which it approaches from an internal approach, through making environmental friendly products and external factors where it engages in environmental conservation practices. This paper analysis the conservation measures undertaken by the company. To approach the subject the paper will be guided by some questions.
Characteristics of GM’s commitment to the environment
The company approaches the issue of environmental conservation from an internal and external approach. Internally the company aims at producing products which emit pollutant minimal gasses. Half of the company’s production is landfill-free; this means that they can be recycled. The company has 43 landfill-free plants where they aim to recycle over 96% of its products and make fuel from 3%. This will reduce wastage to the environment.
The company has embarked on continuous improvement of its automobiles to ensure that they are fuel efficient. Fuel efficient vehicles emit minimal green house gasses to the environment. Burning of fossil fuels has been quoted to be the highest source of green house gasses The Company has made measures to ensure that fuel consumption is to the maximum by its motor vehicles. When fuel is fully burnt, it effect to the environment are minimal.
From the outside, the company has involved itself in environmental conservation activities like tree planting, garbage collection and water recycling projects. These are done for the public in various countries where the company has a branch. The company is also working on a project which will see it start manufacturing electrically charged motor vehicles.
The company is approaching conservation from a curative approach. This is where it tries to engage in projects that restore the environment to its original form and also preventive measures where it ensures that it does not dispose its wastes in an unacceptable way (Jastram, 2007).
Environmental issues with fuel economy and greenhouse gas emissions
Fuel is a natural resource which need to be protected like any other resource consequently burning of fuel emits green house gasses which affect the ozone layer. When the ozone layer has been affected, the resultant is global warming. It is estimated that in1906 – 2005, earth’s surface temperatures raised by 0.74 ± 0.18 °C. General motors’ have realised that burning of fossil fuel results to green house gasses emission.
This has made the company make products which are fuel efficient to ensure that they use little fuel; to conserve fuel reserves and emit minimal green house gases. Engines are designed in a way that there if full combustion of fuel to convert all carbon monoxide gasses into carbon dioxide which is less harmful.
In the same spirit, the company is on product testing stage of electrically charged motor vehicle. The new models will have the option of using electric power or using fuel. With time there will be a fully electric automobile from the company. These efforts are made to ensure that there is minimal use of fossil fuels to conserve the environment (Ernesto & Zedillo, 2008).
GM’s real strategic reasons for these environmental initiatives
GM has six objectives that it wants to attain as far as conserving n the environment is concerned. They are;
Restoring and conserving the environment
Recycling wastes and reducing waste in all its processes
Educating the public on the need to conserve nature and the environment
Development of strategies which reduce environmental pollution
It aims at working with the government and international bodies committed to conserve the environment
Undertaking environmental audit and device ways to improve the environment from the results of audits (General Motors’ Corporate Website, 2010)
The reasons for an environment conservation measure are both for the benefit of the company and the society.
Conservation being a corporate social responsibility will create a good relationship between the company and the people whom it targets as its customers. Good relation creates customer loyalty. This can thus be seen as a marketing strategy.
The move has also been taken for the sole benefit of the community where the company feels obligated to restore the environment for sustainable development.
Thirdly the move is seen as a compliant measure with governmental regulations and international and national conventions like Kyoto protocol. These regulations and conventions mandate a company to ensure that it adopts environmental friendly processes. In case it violates the set standards, there are penalties in term of taxes. This can be a reason why GM is much concerned with environmental conservation (Chiras, 2009).
Conclusion
GM is the world second largest company in the world. The company adopts environmental conservation measures which start from making products which are environmentally friendly to engaging in practices that conserve the environment. The efforts to conserve the environment is triggered by the benefits that a company gets from corporate social responsibilities and the need to restore and conserve the environment.
References
Chiras D. (2009). Environmental Science; spotlight on sustainable development. New York: Jones & Bartlett publishers.
Ernesto Z. & Zedillo, E. (2008). Global warming: looking beyond Kyoto. Washington: Brookings Institution Press.
Jastram, S.(2007). The Link between Corporate Social Responsibility and Strategic Management. CIS Papers No.17. Hamburg: Centre of International Studies.