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Behind GM:

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by

Jane Pung

on 27 November 2014

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Transcript of Behind GM:

Struggling financial burden created by monumental pension and health-care obligations & crisis in macroeconomic
GM’s cumbersome and unresponsive bureaucracy
The mistake of GM selling cars
(new luxury SUV- Cadillac Escalade)
in Miami
Failed to connect with consumer’s taste & expectations
Hard time to persuade Americans consumer
What happen to GM?
GM’s cumbersome
Consumer Purchasing Decision
FLUCTUATION IN FUEL PRICE
CONSUMER DEMAND
CHANGE IN CONSUMERS TASTE AND PREFERENCES
Emergence of Toyota



Toyota overtook GM as the world’s largest automaker by sales in 2008
HOW?
GROWTH OF COMPETITORS
AVAILABILITY OF LOANS IN US
GROSS DOMESTIC PRODUCT (GDP)
BRANDS SATURATION
Behind GM:
Bosses misjudged New Urban Tastes
325000 employs
in GM
= almost Miami population
6 layers
of management:
from Top – Field
38 teams reporting to 1 GM,
oversea 1400 dealers
Since mid-1980s GM’s overall US
market share fallen 15%
Net loss in 2005:
$8.6million
,
cutting 30k jobs
How GM try hard
In Miami, Toyota & Ford: 1st & 2nd.
GM in 3rd.
Dealerships of Japanese & European
first set up in 1970s & 1980s
In 1990, GM-
13.8% retails market
in South Florida
Oversea car exploited consumers’ memories of GM’s
unreliable & unattractive mass-market vehicles.
In 1995, GM’s division advertising approaches to Hispanics community & Mexicans only comprise
4%
population of
Miami’s Hispanics population
.
Dealers pooling
their
advertising dollars
to buy bilingual ads in Miami.
In 1999, GM realized the mistake & centralized company’s marketing & operations: to stop local dealer spending &
take 2 years to reinstate
the groups.
The mistake
Find the evidence on how changes in the macroeconomics environment and financial crisisin 2007 and 2008 impacted General Motors operation.
Discuss the role of these factors versus the consumer demand issues described in the opening news article of this chapter.
During the financial crisis 2007/ 2008:
The automotive industry is among the sectors that were hit the most
Demand for automobiles had fallen sharply all over the globe

Macroeconomics factors which has impacted GM’s operation
Fiscal Policy
Gross Domestic Product (GDP)
Unemployment Rate
FISCAL POLICY
Government’s effort to fuel the economy’s engine
Fiscal policy - dependent on political orientations and the goals of policymaker.
GM was in the verge of bankruptcy when the financial crisis hit the US.
Government Intervention – financial bailout - restructuring
Troubled Asset Relief Program (TARP)
TARP fund had helped bring out the orderly bankruptcy
under Chapter 11 of GM
According to Alan S. Blinder, Mark Zandi in How the Great Recession Was Brought to an End” (2010), GM would have shut down its factories and sold their assets to pay creditors without the government’s help.
Big Three?
GM, Chrysler & Ford
How did Ford survive?
With the steady decline of the manufacturing sector in the United States through outsourcing of production to cheap labor areas abroad, 2.9 million well-paying manufacturing jobs have disappeared in the period 2005-2008 alone.
The table below provides evidence to support the fact that US has negative net export value which would as a result lower the GDP of the nation.
World trade of automotive products by selected countries 2001-08 (USD billions)
UNEMPLOYMENT RATE
The U.S government intervened in this matter since it threatened massive job losses as well as posed the potential for huge damage to the overall manufacturing sector.
According to a study by the Center for Automotive Research the bailout saved 2.63 million jobs and saved or avoided the loss of $105 billion in transfer payments and the loss of personal and social insurance tax collection
Increase in fuel cost
GM relied on its SUV and trucks
According to Cloud, John in Why the SUV is All the Rage (2012), manufacturers made a 15% to 20% profit margin on an SUV, compared to 3% or less on a regular car.
When demand for the big vehicles dropped quickly and customers went for smaller, less expensive, efficient cars
Consumer credit tightened, sales fell sharply
Average Annual Sales for GM, Chrysler dealerships and their competitors (2005-2008)
GM had a total of 8 brands which were sold in US, not including GM’s overseas brands such as Opel, Vauxhall, Holden, and GM Korea.
Contrast – Toyota – 3 brands in US
More brands demand more marketing & product development expenditures
Less is more
How does the empirical analysis of automobile demand presented in this chapter illustrate the fact that not only do consumers consider the monetary price of purchasing an automobile, but also they are sensitive to others costs (or the “full price”) of the purchase?
Non-monetary factors
Safety
Quality
Needs
After sales service
Brand loyalty
Literature Review
Article 1:
Car market and buying behavior- A study of consumer perception by Nikhil Monga, Dr. Bhuvnender Chaudhary and Saurabh Tripathi (2012)
Article 2:
A Study on Malaysia Consumer Perception towards Buying an Automobile by Choy Johnn Yee, Annie Ng Cheng San, and Ch’ng Huck Khoon
Article 1
Studied carried out Indian Market
Motives in buying car:
Increase in disposable income (39%)
Increase in family size (23%)
Family needs (17%)
Safety (12%)
Personality (9%)
Product specification for buying cars
Affordable price (32%)
Value of money (28%)
Manufacturing Image (12%)
Safety (10%)
Comfort (9%)
Technical superiority (7%)
After sales service (2%)
Studied in Malaysia, Klang Valley.
Article 2
Conclusion
Besides monetary concern, consumer will include on other factors in buying cars which will consider as the “full price” of the car purchase.
Factors Influences
Car-Purchase Decisions
Full transcript