Kingfisher School of Business and Finance

Lucao District, Dagupan City

1st Semester, Academic Year 2017-2018

Group III

GENERAL MOTORS

Prepared by:
Arenas, Sharmila Joy
Cacatian, Joanalen M.
Macaspac, Angelica
Morales, Paulino Paulo III
Pioquinto, Mark Lester
Poscablo, Aila Mariella
Reyes, Joperdave
Tiong, Troi Daniel

Submitted to:
Mr. John Leo Ambuyoc, CPA
I. Problem statement
The main problem of General Motors India is the recurring capacity constraint. It was
previously resolved by building a facility at Talegaon in Maharashtra yet due to labor unrest of its
production facilities in Gujarat the same problem might once again arise. With its presence certain
issues will once again be experienced by the company one of which is low sales and the
encumbrance of obtaining optimal profit due to unmet demands caused by inadequate capacity
to produce. For the same reason, the company might fail to take advantages some opportunities
like rising sales, customer loyalty and extension of its portfolio since supply of their products is
not running in an efficient manner. Hence, the company should be able to determine the right way
of preventing and solving their problem with capacity constraint if it happens again while
considering determinants of effective capacity and major considerations and approaches related
to capacity planning.
General Motors has been struggling with various problems over the past years. Through
this paper a recommended action will be presented applying what we learned regarding to these
problems. And to start, here are the following problem statements to be resolved.
1. One of their biggest and persistent problems is the capacity constraint. Though it was previously
resolved it seems that due to labor unrest on some of its operational facilities the same problem
might occur again. And consequently, issues like low sales caused by this capacity constraint will
once again arise. So, the company should also know how to immediately remove the capacity
constraint once it happened.
2. With our further research we found out that GM is reportedly pays their employees on a lower
scale with no overtime and doesnt include health care and retirement. If GM continues to do the
same thing even they could stop the existing labor unrests, it will always come to the point that
another one will happen. Hence, to resolve capacity constraint, the company should find out how
to prevent labor unrests from happening.
3. Moreover, the company had faced recall of its vehicles caused by the negligence of the
manufacturer which adversely affected the image of the business in the eye of the public. So, the
business should be able to come up with ways to cleanse its image.

II. Problem Analysis

After launching the Chevrolet spark with a major campaign, the Chevrolet spark still failed
to ignite the general motors fortune. Since, Chevrolet spark are offered at a low price, the
company did not meet the strong consumer demand because of the limited supply due which
resulted to a capacity constraint. Because of capacity constraints Chevrolet spark was offered
only in various places specifically northern and western part of the country. The company
overcame the capacity constraint by building a facility in Talegaon in Maharashtra. This resulted
as not only in overcoming the capacity constraint but also had an excess production capacity.
During 2010-2011, since the company wanted to meet the consumer demand the company had
a major problem due to labor unrest which again resulted in a capacity constraint. Labor unrest
happened because the company wanted to meet the demand of the consumers. to be able to do
that, the company needed more labor hours to create the supply needed to meet the demand.
This problem resulted in a production loss.

III. SWOT Analysis

STRENGTHS

Economies of Scale

It empowers the company to maintain competitive advantage based on extent of market

reach and production capacity to address market demand. Its sales have then increased
in Asia Pacific and Latin American countries.

Large Scale Operations

Its products are produced at a high volume yet with fewer input costs. They are being
sold at various locations around the world.

Strong Brands

General Motors has brands that are known worldwide like Chevrolet, GMC, and Cadillac,
just to name a few. It supports General Motors competitiveness in in terms of customer
loyalty and the attractiveness of its automobiles.

WEAKNESSES

Limited market presence in developing countries

The companys potential growth is restricted in the markets of developing countries.

General Motors offers only Chevrolet automobiles in India. Also, there are no Cadillac
automobiles in Argentina and Brazil.

Limited business diversification

The company has only two main businesses which are the automobile business and GM
financial, a financial service business. It exposes GM to a greater market-based risk.
 Decline in financial performance

Its revenues had decreased resulting to an increase in net operating loss, one of it
caused by the recalls in 2007.

Declining market share

Market share had declined because of direct competition.

OPPORTUNITIES

Growing opportunities in Asian markets

Countries in Asia that are expected to drive global demand for automobiles due to their
exponential population growths and increased wealth within the countries.

Growing demand for fuel efficient and electrical vehicles

GM brought its hybrid vehicles to the market and has focused on the fuel efficiency and
eco-friendly vehicle, this mean higher popularity as well as sales

Reduction of bureaucracy in the organizational structure and culture

Exploiting this opportunity can help in enhancing GMs organizational competencies.

Expansion of market presence in developing countries

The company can offer products other than Chevrolet automobiles in developing
countries as a way of increasing revenues

Integration of advanced computing technologies in products

This can improve General Motors competitive advantage

THREATS

Increasing price of raw materials

The cost of labor, technology and raw materials has increased. While the brand has been
able to manage its costs of production well and some of the risk also gets mitigated by the
increased in profits, the rising costs still mean higher pressure
 Bankruptcy

GM experienced bankruptcy over the last seven years, it might happen again when they
dont fix their companys problem

RECALLS

Once, negligence of manufacturer has resulted in the driver deaths, which has greatly
impaired the GM brand names in the public eye.

High level of competition

GM fell from its position of number 1 during the recession and lost some of its brands

Government interaction

Can counteracts the growth of automotive companies, when they promote public
transport and other alternatives rather than these automobiles

IV. Alternative courses of action

General Motors experiencing rough years because of their bad environment and lack of
competitiveness cause by their wrong policy and lack of key employees. Thats why we make and
recommend this set of alternatives which we believed will be the key to maximize all opportunities.

Offer better wages and employee benefits.

Advantages
It will help recruit and retain talent
Increasing what you pay now will help you stand out to job seekers. Draw in top
talent before its too late and theyre working for somebody else and will make your
present employee to be loyal and more committed.

Cease future labour unrest because of better employee satisfaction

Increasing the amount you pay your employees will not only alleviate their present
stress, but also help them feel more secure about their futures which can be resulted
to satisfied and well performing employees.
 Improves Company brand
A better application of Corporate Social Responsibility attracts more customers and
believe in your company, because of greater salary they can do a great job in making
your customers happy. After all, a happy customer is a repeat customer.

Disadvantages

Bigger operating expense

Better wages and employee benefits will cause additional expenses.

Firing some employees

In order to keep their expenses as low as possible they will just retain their potential
employees and let go some employee that they think can be compensated by better
performance of the employees that will remain.

Employ better product quality control

Advantages

Encourages quality consciousness

In our further research we discovered that GM experience product recalls of their
negligence and for the employment of better product quality encourages quality
consciousness among the workers in the factory which is greatly helpful in achieving
desired level of quality in the product and help them avoid recalls.

Better Customer satisfaction

Consumers are greatly benefited as they get better quality products because of
quality control. It gives them satisfaction.

Reduction in production cost

By undertaking effective inspection and control over production processes and

operations, production costs are considerably reduced. Quality control further checks

the production of inferior products and wastages thereby bringing down the cost of

production considerably.
 Most effective utilisation of resources

Quality control ensures maximum utilisation of available resources thereby

minimising wastage and inefficiency of every kind.

Disadvantages

Quality is Expensive

Implementation often comes with additional training costs, team-development costs,

infrastructural improvement costs, consultant fees and the like, especially for the

short runs.

No assurance for success

The company will risk some resources that will be a future loss if the application is

failed.

Hire an expert

Hiring an expert who will act as an analyst to analyze and forsee the companys

production needs can be very beneficial to General Motors. The added cost

associated with this action can be outweighed by its potential benefits. This can lead

to a better utilization of the companys resources therefore increasing efficiency.

Do nothing
 Based on the case, despite the fact that GMI experienced a capacity constraint, still

they manage to grow for about 68% annually. Thus, the management can just ignore

the issue.Not doing anything might be the possible action to deal with the constraint.

Doing nothing could also aggravate the companys current labor situation. Employee

satisfaction will decrease and the companys capacity problem will continue to persist.

V. Recommendation

General Motors is not in a delightful position. Improvements in every area of

the company are needed if the company is, in the first instance, to survive and
then grow. Based on the provided statements, we propose that the company
should offer better salaries and benefits to its employees. This would address
the current labour situation and reduce the likelihood of a similar event
recurring in the future. Offering better wages could make the company stand
out in the job-market; attracting top talent and better skilled workers.

Hiring an expert may be a better solution for GMI company in dealing with the
constraint.Though this may result to a high operating expenses in the short
run, the present and future benefit cause by the reliable forecasts will be
higher. A much higher annual growth than 68% can result if the presence of
the capacity constraint is reduce or if possible, completely eliminated.Thus, the
benefit will outweigh the cost.

The group also proposes the enhancement of the companys current quality
control process. The costs that a product recall imposes on a company
transcends potentially expensive litigation and settlements it also destroys
the companys image. The improvement of the companys current quality
control process would promote better product stanards, ensure consumer
safety and help the company reduce its costs by avoiding expensive litigations
and settlements.