MARKETING
Marketing is one of the major segments of the economy of this country. Through this area of economic activity, goods and services flow from producers to consumers, thereby completing the basic mission of the economic system of the country, that of satisfying the needs and wants of the people. In the marketing of industrial, commercial, and consumer goods, certain inescapable tasks or functions must be performed. It is through their performance by the marketing institutions involved that the costs of marketing arise and competitive advantage is gained by those firms who are able to achieve greater efficiency and lower expenses in the execution of these tasks. Although there are some differences of opinion among marketing authorities as to which activities to include in the marketing functions, the following is generally accepted: buying, selling, transportation, storage, standardization, market finance, market risk, and market information. For this paper, the case of General Motors Corporation will be used to further understand the basics of marketing and its activities, as well as how to strategically plan marketing and distribution in order to be continually productive and successful in this globally competitive world.
COMPANY OVERVIEW
General Motors Corporation (NYSE: GM) is a multi-national corporation with headquarters in Detroit, Michigan. Founded in 1908, with the first large merger in the automobile industry, GM has grown into a global leader in automobile design and manufacturing, financial services, and advanced technology electronics. GM contributes substantially to the national and world economies, with annual revenues exceeding 5 billion. GM today employs about 325,000 people globally. It has manufacturing operations in 32 countries and its vehicles are sold in 200 countries. The largest national market of GM is the United States, followed by China, Canada, the United Kingdom, and Germany.
INTERNAL ENVIRONMENT
GM, using corporate managerial techniques introduced by Alfred P. Sloan Jr. surpassed the previously nearly monopolistic Ford organization in terms of sales and profits (Berger, 2001). GM in the last few years has focused attention more on market share. Although they have earned record profits in some of those years, their strategic objective of management has been to stem market share erosion. Their stated objective is not to fall below 30 percent market share in the United States, implying that they would price aggressively to gain market share or prevent market share from falling. In 1999, they also announced that they would be aggressive in gaining market share in Europe (Iacobuccid, 2001).
The GM organization represents a high degree of decentralization. Divisional heads have considerable autonomy. Control over divisional heads is exerted chiefly through committees--the administration and policy committees and so-called policy groups. These eight "policy groups," were set up to deal with 'policy formation' in each of the important functional activities of the Corporation. There is a policy group for each of the following: distribution, engineering, manufacturing, public relations, labor relations, overseas operations, executive personnel, and finance. These groups review all executive plans that call for fresh capital outlay or major changes in design (Gordon, 1945).
As an indication of decentralization, no staff officer can overrule the head of a division. The nature of decentralization in the second sense is indicated by the fact that there are eight "policy groups," in addition to two general management committees, the president, chairman, and regular staff officers (Gordon, 1945).
Individual name-branding is used by GM (Beckman, 1967). Individual and unrelated names are applied to each of their products, and little or no attempt is made to associate the products with each other or with the parent company (Baker, 1970). GM has had its own power steering, battery and spark plug divisions at one time or another, to supply the automobile's 4,000 to 8,000 individual parts, depending on the size and options ordered (Lewis, 1993).
GM cars invariably have lower depreciation rates, although GM's advantage does not seem to be any greater in the low price class than in the middle price class. GM also used other tactics to keep their customers and win over a larger section of the middle classes. GM has the annual model change, and competed vigorously over quality and over who supplied the best quality for price (Bardou, 1982).
EXTERNAL ENVIRONMENT
A business needs to adapt itself to fluctuations and changes in demand. GM worked this out in the 1920s under the leadership and management of Alfred Sloan. If the American automobile industry had continued to produce cars that were essentially simple, homely, and cheap, the result would have been to stop its own expansion, however desirable this might have been for society (Bardou, 1982). Ford's model 'T' remained unchanged for years while GM's Chevrolet was making changes often using new technology. In the late 1920s Ford nearly went out of business as a result of this myopic approach (Proctor, 2000).
Competition, typically the most powerful external force, is increased by the advent of globalization. The number of companies and the number of countries where these companies operate and the way governments are dealing with the impacts of globalization is accelerating. The interaction of changes in government policy and business innovation has actually made globalization even faster. If a company does not become a global, it would simply be shut out of new markets.
There are many purely economic reasons for building plants or acquiring companies outside the home market. However, what gave way for investments abroad rather than merely exporting products was the removal of trade restrictions following World War II.
GM has considerably expanded its operations abroad in the last few years, taking advantage of new opportunities following the fall of communism in Europe as well as other new growth opportunities in other areas. During the past few years, GM has built new assembly plants in European, Latin American and Asian countries. The main difference between these new plants and the plants built in the past is their size and intended markets. The plants built in the past were designed to serve the market of only one country because of the existence of trade barriers limiting their sales. Since most markets were small, these plants were unable to take advantage of economies of scale available in a capital-intensive business such as auto manufacturing. Even so, there are still gains because they were protected from competition from outside the country.
ANALYSIS
According to most theories on strategic marketing management, the customer is the ultimate judge of competitiveness; that is, by buying the products of a firm, the customer indirectly decides which firms will continue to exist and which firms will go bankrupt. This corresponds to the famous slogan by Alfred Sloan of GM: doing better by doing good; that is, if a firm makes money then that is good for society (Drejer, 2002).
Among automakers, GM is recognized for its marketing techniques. The management of GM led the field with their new focus on advertising, installment financing, and the art of styling low-priced automobiles. GM also benefits from the systematic use of industrial research and flexible methods of mass production so as to increase consumers' choices and change styles each year. These factors became easily recognized ingredients in explaining GM's success as the world's number 1 automaker.
The key requirement for revolutionizing an industry is fundamental environmental change that can stimulate rapid growth in a particular market segment. GM's bid to oust Ford as industry leader in the 1920's was vitally helped by many environmental changes taking place then. Automobiles were being driven longer distances and at greater speeds, thus raising consumer interest in auto safety and comfort. Yet Ford continued to offer only the Model T, an essentially open automobile without significant comfort options. Disposable income was also growing during the 1920s, so more consumers had the means to pay for improvements and distinctive features. Ford, however, continued to base its strategy primarily on low price. By developing "families" of cars suited to a wide range of consumer needs at different prices, GM quickly gained a dominant share of the total market and achieved the leadership position it holds today (Reddy, 1994).
GM targets multiple attractive segments with each mix appropriately adapted to fit each segment. It gives some scope for scale and raises effectiveness (Ruskin-Brown, 1999). Energy and environmental values were seen as product starting points for GM; as core business values to shape and guide vehicle design, engineering, and marketing--or for strategic business planning.
A satisfactory product design suitable to customer tastes is not always easy to create. A well designed product is functionally superior. Also, a good design should be aesthetically pleasing, safe to use, easy to service and repair, and economical to produce. It is unfortunate that most firms typically under-invest in developing good product design. It took major reawakening for some American firms to recognize the importance of design. GM's Cadillac division, for instance, hired an Italian designer to redesign its stodgy looking line (Reddy, 1994).
The market representation policies now practiced in automobile distribution have evolved over a period of some thirty years. In the 1920's distribution received comparatively little attention. Very little centralized market research was carried out. Most decisions were made at zone offices with little centralized supervision. For a time, manufacturers delegated market representation policy to regionally appointed distributors. GM had been moving in the direction of systematizing their market representation policy in the late twenties.
The committee system in management serves an important and useful function of GM operations. Much depends on the choice of men, the kind of leadership provided, the manner in which responsibility is allocated, and similar factors. Properly organized and led, committees can provide an invaluable, though probably not a complete, antidote to the narrowness that comes from specialization.
Determining why people buy and why they make the purchase choices that they do is complex. Various product features such as status, prestige, economy, price, style, color, service, and warranties may appeal to different market segments. Purchase decisions extend from routine to major purchases that require deliberation and planning over extended time periods. Learning what motivates consumer-purchasing behavior is not easy. GM has invested nearly billion to make far-reaching changes in Cadillac and Saab luxury brands. There is a risk that existing product brand images may become tarnished but the automakers are willing to assume that risk based upon changing purchasing behavior patterns (Greco, 2003).
PRESENT PROBLEMS
Companies large and small are these days scrambling to adapt to a fast changing set of conditions. This doesn't include just those companies in financial straits. GM plans to shut down one of its Buick engine plants in 2008, one of nine factories the company aims to close. This would eliminate 30,000 jobs. GM's decline has been accelerating lately, compounded by competition from Japanese and Korean automakers, another burst of high gasoline prices, the bankruptcy of its largest parts supplier, Delphi, in Troy, Michigan, and perhaps most critically, an excess of SUVs and sedans.
The reasons for the turmoil are numerous: a sputtering economy, increased global competition, the implementation of new technologies that displace jobs, the deregulation of certain industries, and the general consolidation of other industries, such as banking and health care.
RECOMMENDATIONS FOR THE MANAGER
Continued vertical integration in an industry driven by brisk competition will help GM succeed even further. GM must manufacture the individual parts and subassemblies in their own plants than purchase them outside in order to reduce transaction costs.
Consideration should be given by the management to training needs to enhance quality employees. For GM, web-based training (WBT), also called on-line training—specifically, educational applications that integrate hyperlinked text and graphics with interactive testing, feedback forums, and other functions—could make training accessible to employees who have not previously had access to company courses or who have had to travel long distances just to participate.
For established firms in a product category, focus is initially on current customers because marketing to this target is most cost-effective if saturation has not occurred. At some point, firms discover that targeting current customers limits brand growth. Exiting needs of the customers should be given priority in the design and manufacture of cars. Traditional market research methods such as in-depth interviews, focus groups, and market surveys can be used to identify such needs and to test new product concepts.
What is an appropriate strategy when faced with the situation of targeting customers? Should the firm focus on its loyal but declining customer base or should it shift its attention to higher growth segments? The answer depends on both the reason for stagnant or declining growth and the relationship between current customers and higher growth segments of the population (Iacobuccid, 2001).
Communication has been an essential tool of the network both in terms of transferring best practices from one plant to another and in building an atmosphere of trust in which collaboration and knowledge sharing can happen.
With regards to the present pressing problem faced by GM, the best option is for GM to sell cars that people want to buy. GM could solve a lot of its problems by producing fewer cars with more distinctive differences. Since it's so costly for GM to close factories, the company has been reluctant to cut capacity, allowing vehicles to pile up almost regardless of demand and forcing the dealers of GM cars to lure shoppers with huge incentives like discounts, rebates and cheap financing.
Improving the efficiency and competitiveness of every plant GM operates should be a considered by the management as an important factor in achieving long-term competitiveness, survival, and success as a producer. Major new products should be introduced and market coverage expanded. The new products should be designed and engineered to score with customers, the people whose voice really counts. Accelerating the process will benefit suppliers, employees, investors as well as customers. Continue re-configuration of the manufacturing network. The total production system should be leaner, faster, and more flexible. This is necessary to anticipate and respond to an ever-changing market and fast-moving competition. Building some new assembly plants to replace and consolidate older plants should be planned.
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