General Motors’ Foundation

General Motors Company, commonly abbreviated as GM, was founded in 1908 in Michigan by William C. Durant. Initially, it operated as a holding company, but through a series of strategic mergers and acquisitions, it gradually transformed into a leading automobile manufacturer. For over five decades, GM was recognized as the largest automobile company globally, demonstrating its significant influence in the automotive industry. Despite facing bankruptcy and undergoing reorganization during the financial crisis of 2009, GM has since rebounded. Today, it is headquartered in Detroit and operates as an international company, providing services across five continents, 23 time zones, and in 70 languages, with the support of over 180,000 employees worldwide (GM a, 2018, P1).

The automotive industry stands at a critical juncture, facing transformative challenges such as the development of self-driving vehicles, the integration of sustainable energy sources, and the application of the Internet of Things (IoT). These are not mere trends but significant shifts that automobile companies must navigate to enhance their market share. According to a study by Sanjay Rishi and colleagues from the IBM Institute of Business Value, 60% of senior executives, out of 125 interviewed, highlighted sustainability as a pivotal factor impacting the industry in 2020 (Sanjay et al., 2008, P4). Beyond the pressing concerns of finite fossil fuel reserves, consumer purchase standards have evolved, prioritizing environmental and fuel efficiency over traditional metrics (Sanjay et al., 2008, P6 & P7). In response, GM has diversified its product offerings, introducing over 20 different types of hybrid-powered (electricity and traditional fuel) and ethanol-powered vehicles, ranging from sedans to trucks. This strategic expansion aims to address the dual challenges posed by industry competitors and the ever-evolving global trends (General Motors Fleet, 2018, p1).

This essay will explore GM's strategic investments in hybrid vehicles, evaluating whether the company should continue this trajectory to bolster its industry standing or pivot to alternative strategies for improved future returns.

Industry Challenges

The automotive industry is at a crossroads. The advent of self-driving technologies, the push for sustainable energy, and the growing importance of the Internet of Things are reshaping market dynamics. These challenges are not just technological but also strategic, as companies must decide how to align their portfolios with these emerging trends. For GM, a company with a rich history and vast resources, the question is how to leverage its strengths to navigate this new landscape effectively.

Threat of New Entrants

The automotive industry is inherently dynamic, driven by innovation and the pursuit of efficiency. Established companies like GM must continuously adapt to maintain their market position. GM's century-long history and global presence offer significant advantages, including economies of scale, a vast patent portfolio, and substantial fixed assets. These factors create high entry barriers for potential new entrants. However, the allure of green energy vehicles presents opportunities for newcomers. While companies like Tesla have successfully entered the market, others, such as Faraday Future, face significant challenges due to high fixed costs and limited production capacity. Consequently, while the threat of new entrants exists, the market remains accessible primarily to those prepared for extensive challenges and investments.

Bargaining Power of Buyers

The global automotive market is dominated by 14 mainstream manufacturers with fewer than 100 brands (Bould, 2018, P1). While individual consumers typically lack bargaining power due to their limited purchase volume, the availability of standardized products across manufacturers facilitates easy switching. This low switching cost empowers consumers to choose based on price, reputation, and additional features such as technology and environmental impact. For GM, remaining attractive to potential customers is crucial, as consumers today demand more than mere transportation. They seek vehicles that align with their technological preferences and environmental values. If GM fails to meet these expectations, the bargaining power of buyers could increase, favoring competitors or new entrants who can offer better value propositions.

The Power of Suppliers

Automobile manufacturing relies heavily on a complex supply chain, with companies sourcing numerous intermediate products for assembly. While GM's large order volumes provide some leverage in negotiations, switching suppliers can be costly due to the need to rebuild supply chains and potential disruptions in production. The recent approval of steel tariffs further complicates matters, potentially reducing GM's profits and necessitating the use of alternative materials. This shift would enhance the bargaining power of alternative material suppliers, making transitions more challenging. Additionally, competition among manufacturers for quality supplies can exacerbate these challenges, highlighting a significant disadvantage for GM in supplier negotiations.

Conclusion

General Motors stands at a pivotal moment in its illustrious history. As it navigates the complexities of the modern automotive landscape, the company must strategically harness its historical strengths while adapting to the demands of a rapidly changing market. The integration of sustainable practices, technological advancements, and consumer-centric innovations will be vital for GM to maintain and possibly expand its market share. While the threat of new entrants, the bargaining power of buyers, and the influence of suppliers present challenges, they also offer opportunities for growth and differentiation. Ultimately, GM's ability to innovate and remain agile will determine its success in the coming decades. As such, continued investment in hybrid and alternative energy vehicles, coupled with strategic partnerships and consumer engagement, appears to be a prudent path forward.

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