General Motors' Strategic Analysis

General Motors' Strategic Analysis

Automotive Industry

The automobile industry is the industry involved in the design, development, manufacture, marketing, and also of motor vehicles. In 2007, more than million vehicles, including cars and commercial vehicles were produced. In 2007, a total of 71.9 million new automobiles were sold worldwide: 22.9 million in Europe, 21.4 million in Asia-Pacific, 19.4 million in USA and Canada, 4.4 million in Latin America, 2.4 million in the Middle East and 1.4 million in Africa. The markets in North America and Japan were Stagnant, while those in South America and Asia grew strongly. Of the major markets, Russia, Brazil and China saw the most rapid growth. In 2008, with rapidly rising oil prices, industries such as the automotive industry are experiencing a combination of pricing pressure from raw material costs and changes in consumer buying habits. The industry is also facing increasing external competition from the public transport sector, as consumers re-evaluate their private vehicle usage.

The United States is the World's largest consumer market for light vehicles, passenger cars and Light trucks. The United States auto industry is dominated by the big three or General motors, Ford Motors and Daimler/Chrysler. These three account for roughly a little over half of the production of cars and light trucks in the industry. What has currently started to happen in the recent years is that the Big Three accounted for 41.5% of the light vehicle sales when compared to the top three foreign companies which accounted for the 36.6% (Toyota, Honda, & Nissan). Overall the Big Three account for 54.9% of the U.S. market in 2006. This was down from 58.2%in 2005, 60.1% 2004 and 61.8% in 2003. This trend is expected to continue but to taper off in the coming years

Factors Affecting the Automotive industry (PEST Analysis)

1. Political

Laws and government regulations have affected since the 1960s. Almost all of the regulations come from consumers increasing concerns for the environment and the concern for safe automobiles

2. Economic

The automobile industry has a huge impact on every country's economy. According to various studies this industry is the major user of computer chips, textiles, aluminum, copper, steel, iron, lead, plastics, vinyl and rubber. The study also showed that for every autoworker there are seven other jobs created in other industries. These industries include anything from the aluminum to lead to vinyl.

3. Socio cultural

Today's society judges people on the type of car you drive. Society does not like to admit to this but it is very true. Manufactures know this happens and targets their markets by these thoughts. Anyone who drives a nice vehicle is thought to be wealthy. No one wants to be seen driving an unattractive piece of junk because of the other people will think of him or her. Consumers also just feel better when they are driving a nice or new car; it makes them feel better about themselves.

4. Technology

The internet has affected just about every industry in the world and has also had a huge impact on the automobile industry. A study was conducted by J.D Power and Associates in 2002 and involved more than 27,000 new vehicle buyers. The study showed that 60% of the buyers referred to the internet before masking their purchases and out of that 60%, 88% went to the auto websites before going and taking a test drive. Business to business marketplaces has given the industry many opportunities because of the internet, such as more efficiency and lower cost.

5. Demographics

For many years now, the baby boomers generation has been the main target market for just about every product. As their generation is getting ready to retire and spend less money, the automakers are looking at the younger generation. Right now, the focus is turn towards the baby boomers children (generation X) who are in their mid 20's and 30's. According to analysts, five years from now Gen X will account for at least 30% of vehicles sales.

6. Global

General Motors, Ford Motor Company, Daimler Chrysler, BMW, Volkswagen, Volvo, Toyota, Mazda, and Nissan Motor Company come together to create a new trade association created the Alliance of Automobile Manufactures. The organization was to replace the American Automobile Manufacturers Association that only consisted of American manufactures, the global of the association were to work together on public policy matters of common interest to provide credible industry information