Case Analysis 1

The problem for car companies in this economy is the furious competition between
various car companies forcing each company to either spend more money on marketing,
reducing their price point to appeal to consumer, or adjusting their production to fit the demand
of the market. The problem is that there are numerous car companies, which have given
consumers various options of what kind of car they would prefer. From American car companies
of General Motors, Ford and Chrysler to the popular Japanese cars Toyota, Honda, and Nissan.
There are many other car companies that have establish a more expensive rich brand for rich
consumers who are willing to pay a fortune, such as Germany's Volkswagen or Audi, Mercedes-
Benz, and BMW or they can pick the more luxurious car from Italy, such as Maserati, Ferrari,
and Lamborghini. These various options have cause other companies to compete with each other
and make them think of how they can best one other in term of prices, the way the car looks, the
materials used in a car, the way they should market their car to make their product more
appealing than others, and how much production of their model should they produce based on
the demand in the market. This problem is important because it can lead car companies to
become obsolete in terms of their car model, causing consumers to purchase their competitors
instead of them. Furthermore, this problem can cause the company to increase their spending
expenditure to keep up with the competition causing them to either decrease their quality in order
to meet with the consumer’s price point or vice versa.
In addition, another problem that could be problematic is that consumer does not want to
spend money due to financial problems, the downturn of the economy, or the high price of
complement good that is required for consumer to purchase to fuel the car, gasoline. This
problem is important to solve because to majority of consumers, this could be a deal breaker. As
gasoline prices have increased, their willingness of purchasing a car could drop dramatically as
the cost of living have increase and the need to keep up with expenses of purchasing a new car
will rise exponentially. Therefore, in the eyes of consumer if the car is a huge liability towards
their finances, consumers will be more hesitant of buying a new car. So, if there was an
alternative method of using gasoline or if there was a way to make the car more appealing in
decreasing the consumers’ liabilities, then they will buy the car companies’ vehicle in a
heartbeat.
The caused of the decrease attractiveness of GM is that other competition have a better
branding and are at a better price point than GM. As shown in the table below, Toyota is
currently more popular than GM based on revenue and market cap that was produced in 2019.
Net
Car Companies Revenue Income Market Capitalization
Toyota $272.031B $16.946B $201.02 B
GM $147 B $8.014 B $48.06 B
Ford $155.9B $0.047B $32.16 B
Nissan $104 B $2.877 B $45.20 B
Honda $138.25 B $5.493 B $47.98 B
Tesla $21.461 B $ - 0.976B $134.84 B
 Based on Marketwatch.com financial data of GM below, from 2015 to 2019, GM’s
revenue has been going down, indicating that the market is slowly realizing that GM is no longer
the best car or have the best price point when it comes to sales. This could also indicate that
consumers are starting to look at alternative method of transportation or look at alternative fuel
sources when it comes to purchasing a car.

Based on an analysis of the graph below from Electrification Coalition, it shows that as
the year progresses, there have been a trend of people using alternative fuel sources as consumers
have been obsess with Tesla. At the end of 2015, there have been a rise in consumers purchasing
Tesla and exploded in 2018. This shows that with competitions trying to switch their fuel
sources, it will cause GM to lose their share in the market. In addition, Toyota, have been steady
increasing their share in the market from the start of 2015, as the company have been known to
produce a vehicle that would use both fossil fuel and electric, known as the Prius. Even though
Prius was produced in the early 2000’s, the market has not become environmentally and price
conscious of gasoline yet. Therefore, based on these graphs and tables, the market will see an
increase trend of consumers purchasing more of Tesla and Toyota in the near future, rather than
GM.
Not only does car companies have to worry about one another, another problem is
whether the consumer in this depress economy is capable of affording their car model at all.
Even if the consumer is capable of purchasing any car companies’ newest car model, the
problem lies with the complement goods that consumers have to purchase with it in order for the
car to function physically and used legally within any state in the United States. The first
problem would be purchasing gasoline in order to fuel the car so it can function. As
demonstrated in the table below from InflationData.com, gasoline have steady raising, causing
consumers to used either less mileage, such as no long distant driving, using less of the car and
staying home. As gasoline increases, consumers would be more hesitant of purchasing a new car.
Based on the chart from the US Census Bureau below, in 2007, the total new car sold was 7.6
million, compared to 2010, the number of cars sold have dramatically decrease to 5.7 million.
These two charts have show that there is a correlation between gasoline and the number of cars
sold or the effect on how gasoline have impacted the demand of consumers of purchasing a new
car as it could be cost effective to keep their current car and use the money that they would use to
purchase a new car to help them fund gasoline for their current car.
As gasoline prices drops after 2010, there have been an increase in 2011 of 12.5 million new car
sold based on the article, “Americans Are Expected to Buy a Million More Cars in 2012” and
increasing in 2012. Therefore, if GM can find a way to shift their manufacturing from fossil fuel
to an alternative fuel vehicle, their sales will surely increase as that is now the current trend in
this modern age.
My recommendation is for GM to convert or think of transforming their business from a
vehicle using fossil fuel towards a more alternative vehicle that uses fuel other than fossil fuel.
This means that GM would need to eliminate their current productions of fossil fuel car
altogether in order for them to be more competitive, while eliminating other expenditures to
increase their net profit. GM should step towards specializing their vehicles to only manufacture
hydrogen fuel, electric, such as Volt, or wind power. In order for GM to not crash and burn
during the transition, the company should slowly transit by producing only enough fossil fuel
vehicles to produce revenues, while trying to perfect their current Volt and make it more
appealing to consumers. Currently, when a consumer hears the phrase electric car, they
immediately think of Tesla, the reason why is that they have already establish a brand and
reliability towards their product, of being an electric vehicle. My plan will eliminate the both
problem of being a brand that will not only benefit the consumer in the long term of helping
them save money of the current gasoline price but give them the opportunity of purchasing a
recognizable and popular brand. By completely transforming the company, the company can
increase their price point and still have consumer purchasing their product without even thinking
that the price for the vehicle is too high. For example, how come a person would buy an Apple
product without thinking, when another product, a Sony phone is equally comparable in terms of
quality and has a lower price point. The reason is because the consumers are buying it for the
brand and customer service not the price. The plan that will be implemented will both have short
term goals and long term goals that will help GM compete with other car companies. See the
Action Plan page for more detail. The plan in total will cost approximately over a billion dollars
as GM is undergoing reconstruction within the company by replacing all of GM’s fossil-fuel
based vehicle to an eco-friendly non fossil fuel vehicle. This plan will be feasible because either
way, the company has to make the change in the future, and it will probably cost the company
more money in the future. The plan will be financed by either borrowing loan or converting
notes from banks to help the company increase their cash in hand to implement the plan. Another
method of funding is to appeal to the government for funding that by funding this project, GM
can benefit the environment and help consumers afford a more affordable eco-friendly car.
The SWOT analysis is included below. The risk of the plan is that the government from
other countries might increase the tariff on importing the car. The other competitors will react by
probably doing the same plan by transiting to only non-fossil fuel based as gasoline will
probably be obsolete in the near future. The union will probably demand for more pay due to the
requirement of increase training and increase hours needed for the transformation. The
employees will demand an increase pay, especially the general manager due to the increase in
staff in their branch and the training they need to implement to the new employees. The
government will not have a problem with GM transitioning to a non-fossil fuel source as it can
only benefit the environment, unless the government imposes a tax for transiting to an energy
efficient car. The suppliers will probably charge a higher price on materials needed for the car
causing GM to increase their prices in their current car model to break even. The stockholders
will hate the idea at first and the stock price will go down due to the finances of implementing
the plan. However, in the long-run by implementing the plan, the company will be more stable
and ensure the stockholders that the company will be more profitable and prone to bankruptcy.
 GM Action Plan
Goal of Plan
Steadily increasing the profitability of the business by improving the company’s image of being
more environmentally conscious of the environment and showing to consumers that GM cares
about customer service. In order to accomplish this, GM needs to increase their staff in
marketing and customer service, while improving their customer service culture.
Annual Income of $8.014 Billion Dollars with 173,000
The Business Currently
employees.
Increase the number of employees to only specialized in
customer service and start implementing a plan to shift
The Business in 6 months
the company from fossil fuel cars to electric, hydrogen,
solar, or wind. Increase funds in marketing department.
All staff must be retrained in customer service and
focusing on being more environmentally focus when
The Business in 1 year dealing with consumers. Annual income should be with
5-10 % increase as the company is still in transition of
being an only non-fossil fuel company.
Be within the top 3 of the industry as the company is
more focus on customer service and having the best eco-
The Business in 5 years
friendly vehicle. Become the most recognizable brand
that is superior than any other vehicle.
Course of Action (Time)

How GM can reach their Goal

Strategy Action Plan Responsibility When Accomplish
Characterize the skills or
General Manager of each
Recruitment Plan ability needed when June 2020
branch
recruiting new employees
Train or retrain new and
current employees to
accommodate customers. In General Manager of each
Enhance Customer Service The end of 2020
addition, update website to branch
provide FAQ or add a chat
function to assist customers.
Find a method for current
customers to pay for their
Improve income or cash Financial Manager
monthly payment on time.
flow within GM, while &
Find alternative method of Long Term Goal
reducing cost during the Hiring Manager (General
reducing staff by replacing
transformation Manager)
with people with new ideas
of thinking.
Increasing Sales Encourage each branch to General Manager June 2020
 meet with their top
returning customers and
&
discuss what they want in a
Distract Manager
vehicle, then report to the
district manager.
CEO
Think of alternative ways to &
improve the current Volt CFO
Replacing Fossil Fuel model and create another & Long Term Goal
eco-friendly vehicle that is COO
affordable and maintainable &
Engineers
 SWOT Analysis
Strengths
 A new, innovative vehicle and customer service
 Increase in quality of providing customer
service and producing a decrease cost product
 Able to keep the company current with current
trends and preventing the company to rapidly
transform to keep up with the economy later.
 Increasing global presence and offer a wide
range of car model for consumers.
Opportunities
 Begin to expand the market further and be more
competitive
 Investment in fuel-efficient car for consumers
causing consumers to shift lifestyle and
targeting millennials
 Increase store and brand expansion to other
countries.
Weaknesses
 Unable to bring down the price point for
consumers as the cost of producing a non-fossil
fuel based will only increase the company’s
expenditure.
 Government regulation and tax regulation
 High turnover rate of employees during the
transition
 Increase in debt
 Recall of cars will affect the brand’s image
Threats
 Rising competition in an oligopoly competition
that can affect sales
 Bad economy as of 2020 as consumers does not
want to spend any money, but to save instead
 Increase in raw materials needed for producing
the car.
 Increase in tariffs when selling the car globally