The Role of PESTEL Analysis Application

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Table of Contents

PESTEL Analysis
The five-force model
SWOT analysis
Reference List

PESTEL Analysis

The PESTEL analysis is a strategic tool for the business strategy analysis, which provides a vivid picturisation of the business; it is the analysis of the macro environment to find out the emerging trends, market growth and business decline.

The political factors depend on the government and its stability, the tax policy, monopolies act, trade tariffs of the government etc. The political climate has a changing effect depending on the country’s policies on import and export. The company being a corporate giant, it has to agree on the limits of the executive pay and perks fixed by the government. The government has recently made changes to the tax policy to hike consumption tax, tax on import etc.

“Stronger financial controls will be pivotal as GM works to end losses of at least $US88 billion from 2004 until its June 1 bankruptcy filing. In November, GM said it had generated $US3.3 billion in cash in the third quarter while losing $US1.15 billion.” (Gibson, 2009, para.11).

The socio cultural factors depend on the demography, life style, income, consumer behaviour; the demography includes age, gender and culture. General Motors finds it in the market in the name of the brand Ac Delco and it has the market presence in different countries – Asian, European, and US.

The technological factors include the internet and the online marketing done through advertisement in the web and the awareness about the new products through advertisement and the online portals.

The environmental factors are given much consideration by General Motors. They give priority to the aspects of vehicle air pollution and safety act. This company is the one to receive award for environment stewardship among the six organizations.

The legal factors are those with the legislative point of view; they depend on the import and export laws and the trading laws and policy which the company practices.

The five-force model

The threat of new entrants

The new players in the market try to capture the market with innovative features and the penetrated price in the market. In the case of automobile industry, new entrants are not at ease to enter as the market is matured with economy in production.

Competitive rivalry

Automobile industry is not a static industry. Rivalry in the industry is closely related in terms of productivity and profitability. The 3 big players are Ford, General Motors and Chrysler which are the leading brands who have their own technological innovation and discard obsolete technology. The rivalry is with regard to price, durability, warranty and offers.

Power of buyers

The power of buyers includes the good impact created on the product by the buyer and bulk purchase done. The buyers are said to be strong if the company concentrates more on the buyers and they produce according to the taste and preferences of the customer. They form the backward integration.

Power of suppliers

The suppliers are those who supply the raw materials to the company; the raw materials are those which contribute to the fast availability of the products. The suppliers are said to be strong when the profit of the company is more and the customers are also strong and they offer attractive offers to the suppliers.

Threat of substitutes

A substitute exists for the product when the demand for the product is analyzed. In the automobile industry, the substitute arises when the same product has great demand. It mainly depends on the geographic location; so the threats faced by General Motors are less in number.

SWOT analysis

“SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues.” (SWOT analysis, 2009, para.1).

This paper analyzes SWOT for General Motor Company. For General Motors strength, weakness, opportunities and threats are somewhat dynamic and there is a possibility for integration. “For example, what might be a threat in one category for General Motors, can turn into an opportunity or become a new strategy for General Motors in the future.” (Highfill, et al., 2004, para.18).

Strength

One of the major strengths of General Motors is global awareness and its hold in the market. General Motors has got manufacturing units in 34 countries and “sells and services vehicles in some 140 countries.” (Company profile, 2009, para.1). Company has got very good market share. Company is always maintaining its annual sales at top spot. Company has got potential for using modern technologies. Company is always implementing new innovative ideas in improving the quality of products. Another important strength of the company is it is having highly motivated leadership and staff officers. Having variety of brand names such as “Chevrolet, GMC, Cadillac, Buick, Pontiac, Saturn, Hummer, Saab” etc add an extra point to the strength of the company. (Thomas, 2008, p.6).

Weakness

General Motors is one step behind in the revolution of energy/hybrid trend. This is one of the greatest disadvantages and that may sometimes result in loss of market share. Even though company has got potential to use new technologies, it is always failing at implementation level. There is a huge communication gap from top to bottom in the company. Top levels and mangers are always having problems with trade union people. General Motors always depends more on US markets.

Opportunities

General Motors is trying to expand its market in foreign countries. This is a great opportunity for the company to make its place secure in this competitive world. Sharing of knowledge about hybrid cars with rivals like Toyota and Saturn is another opportunities for General Motors to gain knowledge about hybrid cars. Providing low interest rates is another added opportunity for increasing its sales. The company is planning to develop new styles and models of automobile to attract or bring customers near to general motors.

Threats

Growth of foreign and domestic competitors is a major threat. Introduction of hybrid cars by Toyota is the greatest threat faced by General Motors recently. Increase in the fuel price has reduced the sale of trucks in the market. This is a small set back for the company. Rising costs of steel etc is another important threat faced by General Motors.

Reference List

Company profile, 2009. GM.com. Web.

Gibson, N., 2009. General motors lures Chris Liddell to top financial post. The National Business Review 24/7. Web.

Highfill, D. et al., 2004. Automotive industry analysis-GM, DaimlerChrysler, Toyota, Ford, Honda. Academic Mind.com.

SWOT analysis: lesson, 2009. Marketing Teacher. Web.

Thomas, C., 2008. General motors’ strategic analysis. Scribd. Web.

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