Session 5: Case Analysis #1
Kevin Keating
Kkeating3@ivytech.edu

Of the four strategies suggested by Robert E. Miles and Charles C. Snow General Motors used the defenders strategy.  By getting back to “what it did best” GM concentrated on its core strengths, which were engineering, production and marketing.  However, the challenge was to do it in such a way as to be efficient while increasing quality and decreasing costs on all levels.  They had to take advantage of the fact they were now a leaner and meaner corporation because they had shed debt, workers and product lines.  In addition they had to compete with companies that had already reached many of the goals they were aspiring to meet.
General Motors vision is to make a $10 billion annual profit.  Based on the case set forth it seems a realistic goal.  GM is basing it upon the assumption that by increasing their profit margins to 10% from its current 6% level the company profit will achieve the $10 billion goal.   Since Hyundai Motor Company and BMW AG both are estimated to have 2011 profit margins of 10% it would appear that would be a realistic goal for GM.  In addition, General Motors 2011 profit was estimated to be close to $8 billion (actual earnings were $7.6 billion).  By comparing these two figures to the goal, it certainly seems attainable.
Two SMART goals General Motors used based on this case are increasing profit margin in each unit sold and reducing the number of platforms used in their total line of products. Both goals would appear to be challenging but attainable. The first SMART goal used is specific. GM specifically stated the goal to use fewer “common” platforms for vehicle production. The second SMART goal was Target dates. GM set target dates of 2014 and 2018 to have the number of platforms reduced to 24 and 14 by the year 2014 and 2018 respectively.  Both goals seem attainable basing it on a comparison to Ford.  Ford is planning to use only 5 platforms to produce 75% of its global vehicles and is currently making $300 more profit per vehicle than GM.  So in order to stay competitive GM should also have an orderly transition to fewer platforms.  By reducing the number of platforms the engineering, tooling and thereby production costs per vehicle would be reduced, as a result the profit margin per vehicle should be increased.
It is evident that GM is constantly using the planning/control cycle, as illustrated in figure 5.5.  GM observes what their competitors are doing and alters their plans accordingly, such as comparing themselves to “best-in-class peers”.   GM keeps sight of the difference between their products and their best competitors.  By doing this, General Motors is able to constantly gauge the gap between their performance and their competitors’.  General Motors also monitors how it reacts to situations and modifies its behavior when necessary.  For example, in December of 2011 the sales executives decided not to offer sales incentives to dealers and customers in order to keep their profit margins up.  Previously market share had been more important than profits.  As a result of the executives decision not to offer incentives to dealer and customers, evidence shows that the 2012 profit per unit for the North American market was $166 higher, however, market share decreased.  
The lesson learned from this case is that there always needs to be a plan and that the time spent planning and controlling it delivers better results.  In addition this case involved having a vision, tactics and specific goals.
The vision was to make an annual profit of $10 billion dollars, certainly attainable given that fact it made $7.6 billion dollars in 2011. 
To achieve that, General Motors must plan tactically, increasing margins and comparing themselves to their “best-in-class” peers. 
Using SMART goals, General Motors specifically made reducing the number of platforms a way to reduce vehicle costs.  By doing so,  the engineering, tooling and productions costs would be reduced. GM also gave itself Target dates of reducing the number of platforms from 30 in 2010 to 24 in 2014 with the last goal of 14 in 2018. Meanwhile, as they implemented the plan they controlled how the plan was proceeding. The example cited was how the sales executives didn’t offer more incentives to either the dealers or the customers in January of 2012 in order to keep per unit profits up.  This resulted in a $166 per unit increase.  In addition General Motors also realizes that more has to be done.  The costs in the European operations need to be reduced as well as upgrading the products in the South American market.  However, by analyzing what has and hasn’t worked in previous plans GM can implement more effective plans to achieve the desired results.  It is obvious that while they have come a long way, they still have a long way to go and that the process is ongoing and ultimately never ending.  While GM has been successful in surviving, in order to thrive they need to be vigilant in the planning/control cycle.