Documente Academic
Documente Profesional
Documente Cultură
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DECLARATION
(ANIMESH BARIAR)
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ACKNOWLEDGEMENT
First of all I would like to thank the Lovely University and take the
opportunity to do this project as a part of the M.B.A.
Many people have influenced the shape and content of this project,
and many supported me through it. I express my sincere
gratitude to Mr. Sachin Jain for assigning me a project on
Business Environment, which is an interesting and exhaustive
subject.
He has been an inspiration and role model for this topic. His
guidance and active support has made it possible to complete the
assignment.
Last but not the least I would like to thank the Almighty for always
helping me.
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PREFACE
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Automotive Industry
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 pressures 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 are starting to lose market share to other rivals within the industry. In
2006 the Big Three accounted for 41.5% of light vehicle sales when compared to
the top three foreign companies which accounted for 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.
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Factors affecting the Automotive Industry (SLEPT Analysis)
1. Political
Laws and government regulations have affected this industry since the 1960s.
Almost all of the regulations come from consumers increasing concerns for the
environment and the concern for safer automobiles.
2. Economic
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
what other people will think of him or her. Consumers also just feel better when
they are driving a nice or new car, if 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 27,000 new vehicle buyers. The study
showed that 60% of the buyers referred to the internet before making their
purchases and out of that 60%, 88% went to the auto websites before going and
taking a test drive. Business-to-business marketplaces have 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 generations.
Right now, the focus is starting to 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 vehicle sales.
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6. Global
GM needs a sense of urgency regarding revising a strategic plan that incorporates the
next generation of vehicles. In today’s global economy and highly competitive auto
industry GM has no time to procrastinate. As stated, GM has just too much at risk in not
becoming an industry leader in alternative fuel technology. Fuel-economy legislation is
sparking the race. This is a critical time in auto industry with many threats, but
opportunities as well. The next several years will redefine GM.
Vision Statement
The proposed new vision for GM is as follows: For GM to become the automotive
industry leader in alternative fueled vehicles and providing superior quality products that
global consumers call to mind when they think of quality and innovation.
My vision for GM is to be the industry leader in innovation, and where all other industry
competition strives to imitate.
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Mission Statement
The current GM mission statements are as follows: Drive improvements in market share,
revenue, brands, people, responsiveness, and cost effectiveness through the
implementation of global common metrics and best practice sharing.
The new proposed mission statement will be as follows: GM will become an industry
leader, not a follower. To regain lost market share that was lost to foreign competition,
and once again be the auto industry leader in sales and market share in today’s global
market.
Values Statement
The auto industry just like the global economy is going through tremendous change, due to rising
fuel prices, and environmental worries, such as global warming. GM must use these threats as
opportunities, and take advantage of changing consumer buying habits. GM needs to change
consumer perception of the company, from a dull, poor quality, vehicles to innovative,
quality, and environmentally friendly company. To do this GM must portray an image
that states that GM values what the consumer wants and what the environment needs.
Listen to what consumers are saying directly and indirectly about GM’s current products,
and create innovative, green, vehicles that turn consumers into customers. At the same
time provide GM stakeholders pride and financial incentives to remain with GM.
Environmental Analysis
GM and the entire auto industry are currently challenged with the perfect storm. The auto
industry is being hit by a weak US and global economy, rising fuel prices, and social and
political environmental concerns and issues. In order to overcome these potential threat,
GM should consider mass producing a range of alternative fueled vehicles, i.e. fuel cell,
electric, and hybrid.
Competitor’s Analysis
The major competitors of General Motors are domestic companies like DamilerChrysler
& Ford Motor and foreign companies like Toyota Motor & Honda Motor.
Damiler Chrysler
As the number two auto manufacturer in total revenues DaimlerChrysler has positioned
itself as an industry leader, with this come many strengths. The DaimlerChrysler
umbrella covers many well-known brands such as Dodge, Chrysler, Mercedes Benz, and
Jeep. This means DaimlerChrysler has strong brands that are recognizable in almost
every part of the world.
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Ford Motor Company
Ford Motor Company is a global company with two core businesses: Automotive and
Financial Services. The Automotive business consists of the design, development,
manufacture, sale and service of cars, trucks and service parts. Ford has been focusing on
cutting costs to increase margins more than its competitors. It has used reverse
engineering in the development of their products. Thus Ford has been an innovator in the
auto industry.
Honda motor company is not your average Japanese car manufacturer. Originally know
for motorcycles, Honda has managed to elude the dominate keiretsu system in Japan and
become one of the dominant automobile manufactures in the world. There are many
strengths to Honda. Honda has a reputation for producing high quality products from cars
to motorcycles. Honda has won many awards for initial quality and customer satisfaction.
Their automobiles are reliable and generally fuel efficient. Their research has afforded
them competitiveness in innovative products.
The Toyota Motor Corporation was incorporated in 1937 and has many strengths being
one of the industry leaders in the automotive industry. Toyota has three major brands
underneath the company umbrella; Toyota, Lexus, and Scion. By having these three
distinct brands, it lets the company reach many sectors of the globe in a choice of vehicle
for customers. Toyota has traditionally also been the leader in Total Quality Management
or TQM. By using the Kaizen theory of continuous improvement, Japan caught up the
U.S. auto makers during the 1980s.
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Factors affecting GM: Chevrolet India (SLEPT Analysis)
• POLITICAL
Legislation
o Environment
o Company Cars
o Competition
Taxes and Duty
Subsidies
• ECONOMIC
– Excess Capacity
– Economies Of Scale
– Diversification
– Mergers and strategic alliances
• POLITICAL
– Legislation
o Environment
o Company Cars
o Competition
Taxes and Duty
– Subsidies
• SOCIAL
– Environment
– Car Culture
– Fashions and taste
– Redundancies
• TECHNOLOGICAL
– E-Commerce
– Safety
– Plant efficiency
– Gizmos
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SWOT Analysis
Strengths
2. Global Experience
As explained above even with GM's recent decline they still have the market share and
the experience to bounce back. They have been a worldwide company for nearly a
century now and have established themselves as the global leader for most of them. If
you recall I mentioned above that a current opportunity for GM is to expand globally and
as we can see they already have the experience to do so. It is just a matter of the correct
planning and proper implementation of those plans that will decided whether or not GM's
goals are achieved.
Weaknesses
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3. Stagnant Profitability
Looking at GM's profit we see that they are certainly struggling with respect to the size of
their company. Their profit margin was about 1.5% and the ROE has dramatically
decreased over the recent years dropping to 10% in 2004. This is a situation that
shareholders will not be pleased with.
Opportunities
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Threats
2. Growth of Competitors
GM no longer has the luxury of being the known leader in the automotive industry and
faces the reality that they are in serious trouble. As I mentioned earlier Toyota took the
first step in the direction of hybrid technology and has since drastically grown and
become the questionable automotive frontrunner to start the 21st century.
3. Pension Payouts.
Part of this threat is their own doing and the other is simply unavoidable. GM is
responsible for providing generous pension benefits to its employees, which at the time
seemed like a great idea, however they are now experiencing problems as more and more
people begin to collect.
With the rise of foreign competitors like Toyota, Honda and Nissan in the 1970's and
80's, rivalry in the American auto industry has become much more intense. Firms
compete on both price and non-price dimensions. The price competition erodes profits by
drawing down price-cost margins while non-price competition (e.g., new car rebates and
interest free loans) drives up fixed cost (new product development) and marginal cost
(adding product features). One of the other reasons there is such high rivalry is that there
is a lack of differentiation opportunities. All the companies make cars, trucks or SUVs.
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The competitors are compared to one another constantly. In recent years there has been
significant market share variation, another indication of rivalry and its very strong threat
to profits.
The presence of new firms in an industry may force prices down and put pressure on
profits. There are, however, barriers to entry that tend to protect established firms. One
would expect the production of automobiles to require significant economies of scale, an
important barrier to entry. The new entrant would have to achieve substantial market
share to reach minimum efficient scale, and if it does not, it may be at a significant cost
disadvantage. While the evidence suggests that economies of scale in the auto industry
are substantial, there are also indications that large size may not be as important as
commonly assumed. Nevertheless, entry would represent a large capital investment to
any new firm and the body of research still indicates that economies of scale represent a
substantial barrier to entry. Consequently, entry is currently a weak threat to profitability.
While five-forces do not directly consider demand, it does consider two factors that
influences demand ― substitutes and complements. Although new cars generally are
slightly price elastic, suggesting few real substitutes (e.g., bus and rapid transit), the
demand for a particular model is highly sensitive to price because of the availability of
close substitutes for a given model. A change in the price of a complementary product
(e.g., gasoline, batteries, and tires) could have a significant impact on the demand for
automobiles. The rising price of gas, an important complementary product, is likely to
affect some firms more than others depending upon the vehicle composition. Recent
rising fuel prices are likely to have a greater impact on the big three (GM, Ford Motor
and Daimler-Chrysler) whose most profitable models are energy inefficient pick-up
trucks and sports utility vehicles. On balance, the overall impact on "industry"
profitability from substitutes and complements is weak to moderate.
Buyer power refers to the ability of individual customers to negotiate prices that extract
profit from the seller. Individual consumers have some influence over price within a
given dealership, but little power over manufacturers. Customers can easily, and with
little cost, switch to other auto dealers. Furthermore, customers now have access to
market information (prices and costs) from the Internet that enhances their negotiating
power. But when you have many individual customers, each representing a small
proportion of total sales, they will have little bargaining power with manufacturers and
therefore pose a weak threat to industry profit.
Auto manufacturers require inputs-labor, parts, raw materials and services. The cost of
these inputs can have a significant effect on profitability. Whether the strength of
suppliers is weak, moderate or strong depends on how much bargaining power they can
exert. The auto manufacturers have large supplier networks that appear to exert little
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bargaining power. Nevertheless, the United Auto Workers (UAW), the only supplier of
labor, has historically exerted a great deal of leverage over the benefits and wages
provided by the big three. Because of this historical dominance by the UAW and the
uncertain results of their current negotiations with the big three, one has to characterize
supplier power, at least in this segment of the American market, as a strong threat to
profits.
Entry Weak
1) GM has cut its payroll drastically, by 45.8 percent in the U.S. alone since 2000. In
fact, GM is far from the largest employer in the industry. With 252,000
employees worldwide, GM ranks fifth overall behind Volkswagen (373,400
employees,) Renault/Nissan (316,121 employees,) Toyota (316,121 employees)
and Daimler (272,382 employees). Yet GM sold more vehicles worldwide last
year than any other automaker.
2) 9.3 million people worldwide bought GM vehicles last year. That’s more vehicles
than any other automaker in the world sold. And in the U.S., which is the world’s
largest market, GM sold more vehicles than any other manufacturer in 2007, and
it has sold more than any other automaker to date in 2008.
In 2008, the Chevy Malibu was named North American Car of the Year, and the
Cadillac CTS was Motor Trend’s 2008 Car of the Year. In 2007, the Saturn Aura
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and Chevy Silverado won North American Car and Truck of the year. Those
awards are given and judged by automotive journalists.
From plants to parks. From dealerships to driveways. From gas stations to grocery
stores. What happens in the automotive industry affects each and every one of us. In
fact, the collapse of the U.S.-based auto industry wouldn’t just impact the nearly
355,000 Americans directly employed by the Big Three. One out of every 10 people
in America is employed in a service that is related to the U.S. auto industry. If a plant
closes, so does its suppliers, the local stores, the hot dog vendors, and the local
restaurants.
The effect would be devastating in ways of which you never have thought:
• Nearly 3 million jobs would be lost in the first year alone – with another 2.5
million to follow over the next two years
• Personal income in the United States would drop by more than $150.7 billion in
the first year
• The cost to local, state, and federal governments could reach $156.4 billion over
three years in lost taxes, and unemployment and health care assistance
• Domestic automobile production would more than likely fall to zero – even by
international producers, due to supplier bankruptcies
The credit crisis that is affecting us all is wounding the U.S. auto industry in many
different ways. Carmakers can’t get loans to restructure and to produce new advanced
technology vehicles. Suppliers and dealers can’t get loans for routine business, and
customers can’t get loans for new cars.
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Bankruptcy would not be in the interests of our employees, stockholders,
suppliers or customers.
6) GM chose to do its early hybrid development on transit buses, where the fuel
savings per vehicle are substantial. Since 2003, more than 1,000 buses using the
GM-Allison hybrid system have been put in service, and another 1,700 are on
order.
GM introduced a Saturn Vue hybrid for the 2007 model year, and one of GM’s
first 2-mode hybrid models, the 2008 Chevy Tahoe Hybrid, was named Green Car
of the Year for 2008. GM’s hybrid sales reached 1,975 in September 2008.
According to Edmunds, this moves GM into third place in the U.S. hybrid market,
just a few vehicles behind Honda.
And the GM hybrid lineup will continue to grow. By the middle of next year, GM
will have nine hybrid models for sale in the U.S. GM intends to offer 15 hybrid
models by 2012.
7) GM sells cars and trucks in every major market in the world, and it is clear to us
that oil alone cannot fuel the world’s rapidly growing vehicle fleet. That’s why
GM is aggressively pursuing a broad range of advanced propulsion technologies.
These include:
Improved internal combustion powertrains, which can squeeze more miles from each
gallon of gasoline or diesel;
GM Chairman and CEO Rick Wagoner outlined this strategy at the 2006 Los Angeles
Auto show.
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Chevrolet is not new to India – tracing Chevrolet in our sub continent
Maharajas, freedom fighters and the common man – the Chevrolet has ferried them all.
The bowtie has been an integral part of India’s automotive landscape from the early
twenties till today.
Chevrolet came to India in 1928. An office was set up in Bombay with an assembly plant
constructed in Sewree. General Motors (GM), Chevrolet’s parent company, was the first
automobile company to open an assembly plant in India.
Production started in 1928 with the National Series AB Touring. The AB series came
with Chevrolet’s well proven and reliable 171 cubic inches, 24.7hp four-cylinder engine.
It featured Chevrolet’s first four-wheel mechanical brakes and wooden wheels. In the
first year of production, 13,903 GM cars and trucks were built at Sewree, including
products from other GM brands.
The Chevrolet brand quickly proved trustworthy and dependable. As a result, a large
amount of Chevrolets were imported between 1918 and 1928. The Chevrolets imported
during these years mainly consisted of small four-cylinder Tourers, because they
delivered the most impressive fuel economy and were simple to run. Even the Nawab of
Hyderabad – considered the richest man in the world at the time – used Chevrolet
Tourers as official cars.
In 1930, the Indian market became even more competitive as Ford introduced the popular
Model A, whose all-steel body made it a great success. Chevrolet replied with a
revolutionary six-cylinder engine that developed 46 horsepower. And it was this very car
that gave Chevrolet its highest sales in India in 1931.
Sadly, the years 1952-53 marked the end of an era for the Indian automobile industry.
The ‘socialist’ Government forced General Motors India to shut shop, along with other
foreign car companies.
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