General Motors Europe Essay

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General Motors Europe

As of 2008, the economic agents are under tremendous pressure. A financial crisis commenced within the United States' real estate sector to quickly expand to other industries as well. The automobile industry was severely affected; probably it was the most affected industry after real estate for the simple reason that automobiles represent the second largest acquisition of an average family, after the house. Given this situation, vehicle manufacturers implemented a wide series of strategic decisions in order to respond to the emergent challenges. Most of these strategic actions revolved around cost cutting endeavors, such as the closing down of manufacturing plants or staff downsizing, but also the request of governmental loans. General Motors subscribes to this pattern of responses to the internationalized financial crisis. This report revolves around its trouble with the European subsidiary and the analyses conducted are valid for that period, namely late 2008 through today.

2. General Motors

Before actually lunching an analysis of the company and its decision regarding the European subsidiary, it is necessary to become familiarized with the organization. General Motors was established in 1908, to have been incorporated eight years afterwards. It operated within an estimated 140 countries, but only 35 countries hosted actual manufacturing plants. Its official headquarters are located in Detroit, United States, but the company employs more than 200,000 individuals worldwide. General Motors manufactures and distributes the following nine brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall and Wulling (Official Website of the General Motors Company, 2009).

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In 2008, it was met with tremendous financial challenges and filed for protection under the law of bankruptcy. With the support of the United States Government however, now the company's greatest shareholder, GM managed to overcome the situation and emerged from the bankruptcy file; the resulting organization is generically called the General Motors Company. Major processes of reorganization are currently underway.

TOPIC: Essay on General Motors Europe Assignment

3. Analysis of the Internal and External Environments

As it has been mentioned so far, General Motors began to feel the pressures of the internationalized economic crisis as early as 2008. However, it was only this year that they considered renouncing their operations within the Old Continent. The analysis of the internal and external environments will help better understand their decision.

3.1. The External Environment

The basic means of conducting an analysis of the external environment is that of constructing a PESTEL table of the elements which characterize the political, economic, socio-cultural, technological, ecological and legal environments. Given the current context however, the features of the external environment were those generally characteristics to the emerged financial crisis. As people began to lose their jobs, the automobile purchasing decisions were put on hold. This materialized in a significantly reduced demand for automobiles not only within the United States, but also in other markets. Then, in the faces of the new challenges, competition intensified at a national level as more and more automobile manufacturers would diversify their offering with the intent of attracting customers. Basically, what they did was to open financial services subsidiaries that would present prospective customers with more effective financial solutions when purchasing a vehicle. These loan offers would generally be calculated below the interest rate promoted by banks and they implemented more flexible terms and conditions, meaning that they stood increased chances of appealing to buyers. Manufacturers and providers would also struggle to present their prospective customers with the most attractive promotional offers and a variety of discounts. All this translates into an increased competition among national providers, such as Ford Motor Company or Daimler-Chrysler.

But there was also the competition raised by foreign manufacturers, generally Japanese automakers such as Toyota or Mazda. The success of these players within not only the American, but also the international market, was pegged to changes of an economic and socio-cultural nature. In a context in which the soaring prices of oil were pressuring the world, consumers felt the growing need for smaller size vehicles that integrated fuel efficient engines. Additionally, this demand was also fueled by the growing concerns of environmental instability.

An analysis of the competitive environment through Porter's five forces will reveal that the threat of new entrants is medium to strong, generally due to foreign competitors; the threat of suppliers is low; the power of buyers is also low; the power of substitute products is medium and the overall competitive rivalry is increased (Investopedia, 2009).

3.2. The Internal Environment

General Motor's internal environment before the decision relative to the operations in Europe was characterized by instability and fear. The staff members feared the loss of their jobs and these feelings seemed easily understandable in the given external context. A specific feature that was characteristic for the internal environment at GM was the company's reduced ability to compete with the Japanese manufacturers. Similar to Ford Motor, GM had invested large sums of money into developing large and luxurious vehicles, but as the crisis unfolded and the needs of the population changed, it was not able to change its direction and serve the new needs of the customer base.

In terms of actual results for 2009, these were significantly poorer comparative to 2008 and 2007. Sales in 2009 registered a 17% reduction comparative to the previous year. Revenues in 2008 decreased to $148,979 million, comparative to $179,984 in 2007. Relative to 2009, only the revenues for the first quarter are available, but the figures are not encouraging -- at the end of March 2009, revenues registered $22,431 million, nearly half of the value registered at the same time of 2008. Most of the company's financial rations indicate values inferior to the industry averages, pointing once more to the internal difficulties faced by GM (Reuters, 2009).

3.3. SWOT Analysis

In order to better understand the situation which surrounded General Motors in its pre-decision hours, it is best to organize the elements onto four categories -- internal strengths, internal weaknesses, external opportunities and external threats.

Internal Strengths

GM is a strong company, which has created a powerful reputation within international conscience; its more than a century old existence has consolidated this strength

The company was able to emerge from its bankruptcy file and has the ability to reorganize itself in a means that it gets through the internationalized economic crisis

Internal Weaknesses

Reduced ability to fight international competition, namely the Japanese manufacturers

Due to the large size of the entity, General Motors is generally unable to rapidly and efficiently implement change; this means that in situations of crisis, it is rigid and not easily adaptable

Major financial downsides in terms of various highlights, such as sales, revenues or financial ratios

Eternal Opportunities

The government of the United States of America recognized the growing threat of the financial crunch and will most likely step in to save the American automobile industry; this opportunity in fact materialized in the last month of 2008, as confirmations came that GM would received funds under the federal plan Troubled Asset Relief Program (TARP)

External Threats

Both the national and international environments manifest intensifying levels of competition; competition has always been present and even fierce within the automobile industry, but is now becoming ruthless as companies no longer fight just for customers, but for their very survival

The needs of the customers are changing as a results of the modifications which impact the global environment, such as the soaring oil prices or the growing concerns over the health of the natural environment (generally pegged to the threats of pollution and global warming); these changes imply the immediate necessity for change in order for General Motors to survive

The previous two threats give raise to the increased competition coming from manufacturers of eco-friendly vehicles, such as Toyota, with their already reputable Prius

The European Union had implemented a series of regulation which increased the taxes paid by importers of foreign cars, or which forced automakers to obey new environmental protection laws (Best Auto Review, 2007); the decisions significantly reduced the revenues of GM in Europe

3.4. Strategic Issues

Based on the results of the analyses conducted, it becomes clear that General Motors faced severe strategic issues as 2009 unfolded. The most important challenge to which they had to strategically answer was the internationalized economic crisis. They were also faced with the necessity to answer to the challenges posed by the intensifying competition within the United States and outside it, by both national as well as foreign manufacturers who were striving to maintain their competitive position. Finally, they had to develop and implement strategies that would help them respond to the changing needs of the customers. Before making other decisions however, it was imperative for the company to set the strategic course of action for the future of their European subsidies -- German Opel and British Vauxhall.

4. Available Alternatives

In establishing the alternatives available to the General Motors Company, the managerial team had to decide if it should treat Opel and Vauxhall as separate and independent subsidies or whether they should include them in the same… [END OF PREVIEW] . . . READ MORE

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How to Cite "General Motors Europe" Essay in a Bibliography:

APA Style

General Motors Europe.  (2009, November 5).  Retrieved January 18, 2022, from

MLA Format

"General Motors Europe."  5 November 2009.  Web.  18 January 2022. <>.

Chicago Style

"General Motors Europe."  November 5, 2009.  Accessed January 18, 2022.