GM - Shifting Gears, Driving Towards the Electric Vehicle Promised Land

Strategic Management, MGCR 423

Professor: Jonathan Fast

June 12, 2022

Élodie Frenette Brodeur (260990721)

Cassandra Tutelea (260985729)

Cédric Nicolas Beaulne (260943187)

Hassan Elrakhawy (260925086)

Lisa Sarrazin (260960469)

Gabriel Salonichios (260863690)

Memo:

The automotive industry is a mature industry which makes the competition in it very
intense. It is a fast cycle market which makes it harder to sustain a competitive advantage and
makes it important for GM to always be looking out for new opportunities for growth. There is a
huge shift in the industry as a whole towards electric vehicles, which is encouraged by new
technologies, a change in consumer preferences, and government regulations. GM understands
the importance of this shift in the industry and it is why their vision is as follows: “Our vision is
a world with zero crashes, zero emissions and zero congestion. Through electrification, vehicle
safety, the path to autonomous and social impact”. Moreover, according to the company website,
GM’s mission is “to earn customers for life by building brands that inspire passion and loyalty
through not only breakthrough technologies but also by serving and improving the communities
in which we live and work around the world.”.
In line with these mission and vision statements, GM has been investing in R & D for
years to prepare for the shift to electric vehicles, however, they did not have many successes,
especially when compared to their competitor Tesla who has already created profitable Electric
Vehicles. GM’s biggest challenge today is finding a way to strategically position itself in the
electric vehicle market in order to be profitable and grasp market share. The company has been
struggling with the creation of the technology required to create dependable, affordable electric
vehicles and they need to find a solution to this as fast as possible in order to stay relevant in
today’s environment.
While considering our internal, external, and SWOT analysis we arrive at the
recommendation that GM should pursue a focused cost leadership strategy. By aiming for
affordable electric vehicles and focusing on the pick-up and SUV market, GM can achieve a
first-mover advantage in terms of affordable vehicles in those segments. While GM has been
making investments in driverless technology and electric vehicles for a long time it has yet to
reap any benefits from it. Our solution to this problem would be to create a new organizational
department within GM that would manage potential acquisitions and partnerships that GM could
benefit from and monitor their profitability and usefulness. Aggressive marketing campaigns will
also help GM build its image as an electric car company with the general public.
In order to implement these recommendations, we encourage GM to keep up its R&D
investments to create affordable pick-up and SUV products. Secondly, the establishment of a
new Emerging Brand department under the North American division of GM would further its
partnerships and acquisitions and monitor them. Thirdly, a transition of its physical facilities to
increase its EV production capacities and negotiations for subsidies through two phases should
secure GM’s position in the industry. Finally, a robust marketing campaign for each of its EV
products will solidify GM's status as an EV company.
By following these recommendations and this implementation plan, we believe that GM
will be able to position itself as a strong player in the EV market and grasp a significant share of
the market. The creation of affordable EV SUV and Pick-Up trucks will allow them to
differentiate themselves from their competitors and gain a competitive advantage in this market.

External Analysis

1. General Environment
The general environment is composed of segments that are external to the firm and that
affect all industries and the firms competing in it. The challenge to each firm is to scan, monitor,
forecast, and assess the elements in each segment to predict their impact.
a. Demographic
Globally, we observe an increase in the rate at which the population is growing older; the
share of the population aged 65 years or over increased from 6% in 1990 to 9% in 2019 (United
Nations, 2019). This change is even more drastic in some specific regions of the world such as the
United States (Appendix E) and in China (Appendix F), two important markets in which General
Motors operates and competes. This demographic trend creates a real challenge for the auto
industry considering that people tend to drive less when they retire. To maintain senior customers’
interest in the car industry, the challenge for car manufacturers is to create new features that ask
less of the drivers (Moran, 2019).
Companies operating in the auto industry also have to take into account changes in incomes
of the population in their targeted markets to adapt their offers and prices. For example, the share
of adults living in middle class (once the economic stratum of a clear majority of American adults)
has steadily contracted in the past five decades (Kochhar & Sechopoulos, 2022) going from 61%
to 50%. This change has been accompanied by an increase in the share of adults in the upper-
income tier as well as an increase of the lower-income tier (see Appendix G).
One demographic trend that also impacts the auto industry is the phenomenon of
urbanization. Indeed, those who live in big cities are currently less likely to own vehicles as other
options like public transportation are available to them. However, this difference is only very
slight. In a survey conducted in the United States, 80% of respondents said they consider having a
vehicle to be a necessity and 76% of those living in big cities declared the same (World Economic
Forum, 2016). Finally, the worldwide growing population increases the size of the market
available for companies operating in the auto industry.
b. Economic
The annual inflation rate in the United States reached a 41-year high of 8.5% in March
2022 (U.S Bureau of Labour Statistics, 2022). We also observe an energy price increase (32%),
namely in gasoline (48%) and fuel oil (70.1%). These macro factors influence car-buying decisions
as they not only alter customers’ financial conditions but also will make it more expensive to buy
and use a car (Root, 2022). Added to this, the negative impact on the cost of production of cars
will be reflected in the selling price. Moreover, the recent significant increase in gas prices is also
pushing more consumers to move towards electric vehicles.
c. Political/Legal
 Ongoing increasing government regulations regarding car designs, fuel efficiency, and
emission rate are making it difficult for smaller players to operate in the Auto Manufacturers
industry, leaving more room for powerful companies such as GM to increase their customer base
(Investopedia, 2021).
To operate worldwide, car manufacturers have to respect WTO regulations and laws.
However, the operating system of the WTO is often called into question, as at the end of 2019,
when the EU, US, Japanese and Korean automobile manufacturers have joined forces to express
their concerns about the impending blockage of the decision-making process in the World Trade
Organisation’s appellate body structure (ACEA, 2019). Overall, as the WTO regulations and laws
are difficult to enforce in various markets, legal procedures have become expensive and long-
drawn process. Additionally, we can observe a changing political environment, notably with the
US&China trade war or Brexit impacting the European Union, which both impact the auto industry
in local and international markets.
Finally, a few days ago (June 9, 2022) the European Parliament approved a proposal made by the
European Commission, to ban the sale of new fossil fuel-powered vehicles in the EU from 2035.
d. Sociocultural
Today’s consumers demand more from brands on every level. Driven by easy access to
information and fast adoption of technological products, customer preferences and needs are fast
changing; it’s a challenge for car manufacturers to keep up and not get left behind. The average
age of new car buyers in the US increased by more than seven years between 2000 and 2015
(United States Federal Reserve, 2015). This change might be explained by the aging population
but is still important for car manufacturers to take into account. Moreover, consumers are also
looking for more sustainable brands and want to encourage companies who are trying to make the
world a better place.
e. Sustainable physical environment
A cross-generational study led by the Southern Cross University in the US and in Australia
revealed that 77% of people want to learn how to live more sustainably and are ready to act on
them (Forbes 2019). This willingness to live a more sustainable lifestyle is crucial to the auto
industry considering the shift towards EVs that we are currently experiencing. With the same idea
of addressing climate change, President Biden's administration kicked off in February 2022 the
process of spending $7.5 billion on electric vehicle charging.
f. Technological
Overall accelerated technological innovations and advances are improving industrial
productivity, allowing suppliers to manufacture a vast array of products and services. Indeed, next-
generation intelligent automation along with the implementation of cognitive manufacturing
powered by AI, advanced analytics, etc, will optimize production processes and cut costs. The
emergence of material science is also making available a range of new materials such as additive
manufacturing, and human/robot collaboration that will significantly change the face of
automotive manufacturing (Slansky, 2021). The global auto industry is currently experiencing a
monumental shift to electric vehicles (EV) which will significantly change the production lines,
workforce skills and technology used.With more players in the industry, the quality of electric
vehicles is increasing through improved battery life and faster charging stations.
g. Global
The COVID-19 pandemic has had a huge impact on the auto industry. The forced
lockdowns they suffered at the start of the pandemic have greatly impacted their finances, starving
R&D funding for advanced technology initiatives and other discretionary projects (Deloitte, 2022).
Additionally, the pandemic leads to a widespread loss of consumer confidence, significantly
impacting the companies' revenues. On the other hand, the pandemic also elicited a consumer shift
back towards personal mobility over public shared transport due to health concerns (Slansky,
2021). The world recovery from the pandemic combined with the war in Ukraine also had an
impact on prices of already precious raw materials leading to a drop in vehicle production because
of shortages of materials and parts and an increase in vehicle prices.

2. Industry Environment (Porter’s 5 forces)

Compared with the general environment, the industry environment has a more direct effect
on the competitive actions and responses a firm takes to succeed. To study an industry, the firm
examines five forces that affect the ability of all firms to operate profitably within a given industry.
a. Threat of entry (low)
There are extremely high barriers to entry to the auto industry making it very difficult for
new players to enter. Among them are the fact that it requires a high capital investment to set up
manufacturing facilities and a distribution network, existing multi-national benefits from
economies of scale and scope (making it very difficult for a new entrant to offer competitive
pricing), buyers base their impressions of a model on the manufacturer’s previous performance on
these issues, meaning new entrant will have extreme difficulty competing for giant competitors
that have built a strong image and reputation.
b. Bargaining Power of buyers (high)
General consumers, commercial companies and governments are the primary buyers in the
auto industry. As switching costs are low (both for fuel-powered vehicles and electric vehicles),
buyers can easily choose alternative car brands, increasing their power over manufacturers.
Moreover, if private individuals usually buy one car, commercial companies or governments
usually buy a large fleet, which gives them more bargaining power. However, buyers do not
threaten backward integration; the costs would be monumental with no guarantee of a significant
improvement in efficiency.
c. Power of Suppliers (low)
There are numerous existing potential suppliers and materials are widely accessible,
weakening the suppliers’ power. Additionally, in the case of GM, the company is so powerful that
it represents a huge part of its suppliers’ revenues, lowering, even more, their bargaining power.
Thirdly, suppliers do not pose any threat to forwarding integration. The only factor strengthening
the power of suppliers is the switching costs that are relatively high as establishing part designs
and specification requires a fair initial investment (UKEssays, 2018).
 d. Threats of substitutes (moderate)
Substitutes of cars exist in the form of electrical bikes, trains, public transportation, car
sharing, scooters, etc. If the threat is intensified by the increasing price of fuel, it remains relatively
low as these substitutes can rarely offer the same convenience. Also with the recent increase in gas
prices, public transportation has become a more appealing option for many consumers, therefore
increasing the threat of substitutes.
e. Intensity of rivalry (very high)
Numerous fairly balanced players compete for market shares in the US and worldwide (see
Appendix A& B), increasing the intensity of rivalry as companies are likely to respond to any
attack from one of their competitors. Additionally, the auto industry is very mature meaning the
industry growth is relatively flat. As a result, competitors fiercely fight for existing market shares,
each one with huge capital leverage. As there are clear “standard prices” in the car industry,
switching costs are low, intensifying again the rivalry between each firm which has to clearly
differentiate themselves to attract/keep customers. Finally, high exit barriers also exist as these
companies have already made investments in machinery and facilities. As a result, they usually
either bankrupt or stays in the automotive industry for a lifetime.

3. Competitors
GM has several well-known competitors such as Ford, Toyota, and Honda. However, for
the sake of this project, we identified Telsa as GM’s strongest competitor. Indeed, GM is on its
way to an all-electric future and promised to invest heavily in the coming years (with a
commitment to 30 new global electric vehicles by 2025) to surpass the currently ranked world’s
best-selling EV manufacturer; Tesla. Tesla is better known for luxury EVs and sustainable energy
solutions. On the other hand, GM is a more established automobile manufacturer that has more
than 100 years of experience in the industry. In terms of vehicle models, Chevy and Cadillac
models typically offer more traditional styles and features, while Tesla EVs tend to be more
innovative and unique in their designs and capabilities.

Internal environment:
Analyzing the internal environment of a firm is very important in order for companies to
be successful. This will allow firms to match “what a firm can do (a function of its resources,
capabilities, and core competencies in the internal organization) with what it might do (a function
of opportunities and threats in the external environment)” (Hitt et al., 2020). This is especially
important because it will allow the firm to formulate a strategy that will allow them to be successful
in their industry.

To begin, a firm needs to look at the different resources they have and which ones provide
them with capabilities and core competencies. In terms of resources, there are normally two types:
tangible and intangible. GM is a very large company and therefore has access to a wide variety of
resources. A few of their most important resources will be evaluated here.
 In terms of tangible resources, one of the most important ones for GM is physical resources.
In fact, since GM is a well-established company and has been operating for many years, they have
accumulated a lot of property, plant and equipment. According to their 2021 financial statements,
they have $41,115M in property, plant, and equipment (2021). Moreover, they have over 12,358
car dealerships around the world (2021). They also have a very large production and distribution
system. Finally, they have many different product lines and generally have $12,988M worth of
inventory (2021). GM also has access to many financial resources. Operating since 1908, GM has
accumulated a substantial amount of capital to finance its activities. Although the corporation
experienced difficult times in the past, it recovered and is now financially stable. Through these
financial resources, the company is able to invest significantly in R&D and can make meaningful
acquisitions. More specifically, in the last year, they spent $7.9B in R&D for electric vehicles, and
they have recently acquired Cruise, a company that specializes in autonomous driving vehicles
(Carlier, 2022).

Finally, they have a lot of technological resources. They have many copyrights and patents
that protect their research and development processes as well as their production processes. In
total, the company has 72,642 patents (2022). The company also has intellectual property rights to
maintain the privacy of its production processes. The company currently values their technology
and intellectual property at 764 million dollars (2021).

GM also has other intangible resources. One of the most important intangible resources the
company has is its reputational resources. Since the company has been operating for more than
100 years now, it has a very strong and well-established reputation. Anyone who has a little bit of
knowledge about cars will know GM (Bigman, 2013). Around 2009, the company’s reputation
was tarnished when it filed for bankruptcy (Bigman, 2013). At the time, it was known as the largest
bankruptcy in history. However, over the years, the company managed to restore its reputation as
they have been able to bring the company back to a profitable stage. Moreover, the simple fact that
the company has been around for so many years is enough to give the brand a positive reputation.
In fact, GM currently values its goodwill at $1.9B (2021).

When it comes to innovative resources, the company struggled with this in the past. At one
point, the company was so big that they were unable to adapt quickly to a rapidly changing
environment and were not able to take advantage of its innovative resources. However, over the
past few years, GM has started to invest heavily in R&D for electric vehicles as well as self-driving
cars to try and become the market leader in these categories (Wayland, 2022). Overall, GM is seen
as an innovative company as they have been innovating for the past 100 years, having invented
many technologies such as the rear video camera and the first airbags (Tsien). When these
resources are combined, they create capabilities for the firm. This is referring to “what the firm
can do”. According to the VRIN framework, when these capabilities are valuable, rare, costly to
imitate and non-substitutable, these capabilities create a sustainable competitive advantage for the
company (Hitt et al., 2020). These capabilities will be evaluated using the VRIN framework.

One of GM’s capabilities is its effective distribution and logistics network. The company
has over 12,358 dealerships and is producing vehicles in 37 countries (Lopez, 2021). Through
these locations, they can effectively distribute products to customers around the world and have a
strong global presence. According to the VRIN framework, this capability is valuable because it
allows the company to exploit new opportunities. The company can deliver their products around
the world and this adds value for customers making the products more desirable. This capability
is considered rare since not many other firms have access to such a wide distribution network. This
is the result of being in operations for over 100 years and being a market leader. GM’s distribution
channel would also be costly-to-imitate because it comes from a historical resource. The company
has access to such a wide network because they have been operating for so long and it would be
extremely difficult for other companies to imitate this. Finally, this capability is non-substitutable
because there is nothing else in the industry that could be equivalent to having such a wide
distribution network. According to these 4 criteria, GM’s distribution network would be part of
the company’s core capabilities and it would provide the company with a sustained competitive
advantage.

Another important capability for the company would be the ability to create innovative
products through its investments in research and development. The company invests substantial
amounts of money into their R&D operations, and they have a wide variety of patents that protect
its innovations from being copied (2021). Although this capability would have the potential of
being valuable if the company was able to create value through these investments, as of right now,
GM is having difficulty creating value with the large investments they are making in R&D. This
capability is rare because not many other companies have the financial resources to be able to
invest in R&D as much as GM does. This capability is also costly to imitate because of historical
reasons and it is non-substitutable because innovation is crucial for a company to be profitable and
stay relevant over time. Therefore, as of right now, the company does not have a competitive
advantage in creating innovative products, but if they are able to find ways to create value and use
R&D investments to create good quality electric vehicles, they could have a sustainable
competitive advantage.

The last capability that will be examined is the company’s production capability. The
company has recently invested $6.6B in order to boost its electric vehicle production capabilities
to the next level (Wayland, 2022). Moreover, in 2020, they had a production output of 6.829
million cars which is more than Honda and Ford, 2 of GM’s biggest competitors (Carlier, 2022).
According to the VRIN framework, this capability would constitute a core competency because it
satisfies all 4 requirements.
 Although GM has access to many resources and does have some competitive advantages,
they also face some challenges. More specifically, they have been having some difficulties when
it comes to the development, production and marketing of their electric vehicles (Markman, 2022).
Like most car companies right now, GM has embarked on the EV race and is trying to grab as
much market share as possible. However, this has not been very easy for them. Even though they
have been heavily investing in these new products, GM just doesn’t seem to be able to create a
good quality electric vehicle that will be able to compete against well-established brands in the
market such as Tesla. They do already have some EV models on the market however, they have
been facing some problems with these (Markman, 2022). More specifically the Chevrolet Bolt had
to be recalled because of its batteries which could cause the car to catch on fire (Voelcker, 2022).
This recall slightly tarnishes GM’s reputation when it comes to electric vehicles and the company
will definitely have to work to change that. Moreover, they might want to evaluate the possibility
of doing some partnerships in order to get the expertise they seem to be currently missing when it
comes to electric vehicles.

Overall, the company has many core competencies that it should be taking advantage of.
Although they are investing in a lot of R&D and have great distribution and production capabilities,
they are not using them to their full potential. The company needs to realize this and match their
strategy with their strengths and possibly outsource what they are having difficulties with. By
partnering with companies who have the knowledge they are missing and then taking advantage
of their production and distribution capabilities, GM should be able to gain a significant market
share in electric vehicles.

SWOT Analysis

Strengths
a) International Presence
- Despite GM concentrating their manufacturing operations in the United
States, they’ve managed to diversify their end markets and tap into
different geographies. General Motors bolsters an impressive 4,042
dealerships concentrated in the United States and 12,358 dealerships
internationally. This allows GM to expand their total addressable market
by reaching consumers around the globe through their different car brands.

b) Strong Reputational Resources

- GM has built a very strong brand for themselves in the United States,
they’ve positioned themselves as the “American brand”. They’ve
accomplished this unique positioning through their manufacturing and
marketing campaigns. As it relates to manufacturing, they’ve historically
concentrated their operations in the United States despite the attractive
characteristics outsourcing presents. By purchasing a GM vehicle,
 consumers have the added benefit of contributing to their local economy
and supporting employment in their communities. GM has 91,872
employees in the U.S., 118 facilities in the U.S., 500,000+ retirees in the
U.S., $31.1 Bn invested in the U.S. since 2011 and $8.8 B taxable wages
in the U.S (GM Website – USA operations).

c) R&D & Patents

- Considering the scale of and success of GM, R&D has historically been a
key driver in terms of reaching this level of success. GM has continued to
stay true to their roots relating to strong R&D capabilities by continuing to
invest in the operations. Whether that’s to develop new products (such as
electric vehicles) or to improve existing products, GM has always invested
a lot in R&D. Additionally, through R&D, the company has developed
many copyrights and patents that allow them to defend their innovations
and unique operational efficiencies.
Weaknesses
a) Large Debt Burden
- Upon analyzing GM’s financial capabilities and closely reviewing their
balance sheet, it’s clear that they have an uncomfortable amount of debt
on their balance sheet. They’re currently sitting on $16,893million of total
debt, upon which $16,404 is unsecured debt. This equates to a leverage
ratio of 5.12x EBITDA. As rates rise in the coming months and years, the
debt on their balance sheet will only increase, ultimately hurting their
profitability through a higher interest expense and ultimately will need to
attribute financial distress costs to the company’s valuation. This may
affect their flexibility moving forward as they’re constrained to paying off
this debt. It may hurt their abilities to raise more cash in the form of
financing or debt, or if they plan on participating in any acquisition
activities, they may be constrained to certain maintenance ratios.
b) Product Recalls & EV Transition
- GM has suffered product recalls in the past year relating to their Chevrolet
Volt. (Bernard 2021). GM had originally recalled models from 2017-2019
and have now expanded the recall to include models produced in 2020-
2022. This large fleet includes every Chevrolet Volt in circulation. The
issue stems from the batteries, there’s been instances of the battery
catching fire when charged at 100%. This points to a broader issue, GM
has historically been a legacy car company with not much exposure to EV.
The rapid adoption of EV is forcing GM to transition their operations and
target a new market with vastly different underlying technologies.
Opportunities
a) Global EV market
- In the past couple of years, tighter emission regulations, advancements in
batteries (affordability & greater range) and the development of the
underlying network infrastructure needed to charge the vehicles have
resulted in quicker EV adoption. The Russia-Ukraine war has caused oil
and gas prices to increase tremendously in the past months. Russia has
historically been a net exporter to the world and supplied about a quarter
of the oil EU countries imported. As a result of the skyrocketing gas
prices, this will be a potential catalyst for the rapid adoption of electrical
vehicles. Canada announced new vehicle sales goals targeting a 10% share
for electric vehicles by 2025, 40% by 2030 and 100% by 2040. This
equates to ~ 3% of the vehicle fleet in 2025, 11% by 2030 and 60% by
2040.
Threats
a) Intense Competition
- There are many firms currently competing in the automotive industry,
with low switching costs and minimal product differentiation, it’s very
hard to establish a sustainable competitive advantage within the
automotive industry. The majority of companies compete on the
competitive advantage stem from reputational resources. Their
competitive strategy often imitates a low-cost or differentiation strategy
and aggressively markets and caters their products to individuals within
those categories.

Recommendations: The Solution to affordability

Firms that integrate the differentiation strategy target products that customers perceive as
being different as it creates additional value. In other words, the firm sells non-standardized
products to customers that have very unique needs. On the other hand, firms that implement a cost
leadership strategy render products more accessible to customers at a lower price in comparison
to their competitors. The last strategy is the focus strategy which is a set of actions that targets the
particular needs of a particular industry. In order to have a competitive advantage, we suggest that
GM adopts a focus strategy that is strongly influenced by the principles of the cost leadership
strategy to penetrate the EV market. This is mainly caused by the shift in the sociocultural trends
adopted by different stakeholders such as customers and governmental agencies.
In GM’s case, we recommend that GM adopts a similar market position in the industry of
electric SUVs and pickup trucks. Currently, GM has a market share of 41,5% (Jeltema, 2022)
when it comes to heavy-duty pickup trucks in the industry. As the North American market is the
fastest-growing geographical region in terms of market value, we recommend that GM deploys its
resources into a strategic plan to enter the untapped electric pickup and SUVs market by branding
itself as the main player in that specific segment of EVs. As the EV industry is a fast-paced industry
where market movers that enter the market first have a huge lead in comparison to competitors.
This is mainly due to the fact that the initial competitive action will help build GM’s competitive
advantage in this emerging market. For instance, Tesla aggressively entered the EV market as a
first-mover and still has a huge competitive advantage compared to other automakers. This is also
another reason why we specifically are targeting the pickup truck and SUV product segments.
Since Tesla has been GM’s, Hyundai’s, and Toyota’s principal competitor, GM will and is facing
great difficulty in terms of penetrating the market considering the surge in popularity of EV cars.
The electric pickup truck and SUV industry remains relatively untapped, which signifies that GM
can be the first one to enter the market and have a similar advantage to Tesla with regard to standard
cars.
In the case of the EV industry, this is very significant as it is a fast-cycle market where
changes will occur rapidly and it may be more difficult to sustain a competitive advantage in the
long term due to technology obsolescence. For instance, GM was one of the first companies to
develop driverless cars in 2007 in a collaboration with Carnegie Mellon University. However, they
were not able to capitalize on their first-mover advantage at all, and as of today, Tesla is a few
years ahead of them in this market segment although they are a new company with fewer resources
than them (2021). Moreover, Tesla’s quick rise in the automotive industry is a clear indication that
although the industry is mature, disruptive technologies can have a big impact even on the big
players. The fierce competition in this industry makes it imperative for companies to have an
entrepreneurial mindset by continuously seeking to identify new growth opportunities. In the past
couple of years, GM has been seeking new opportunities like driverless cars and shifting to EVs,
they are also investing a lot of money in R&D, even more than Tesla (Root, 2022). However, the
company wasn’t able to benefit financially from these technologies. It is true that with any new
technology, it takes time to produce returns, but the company has been investing for more than a
decade and has not yet reaped the benefits of these incurred costs.
Thus, we recommend that GM establishes a new department for managing emerging
brands. This department’s main objective will be to organize and manage the company’s new
emerging brands by focusing on the acquisition of technology companies, and creating and
fostering good relationships with strategic partners. It will also be responsible for innovating and
transforming the new inventions into commercial and profitable products. Firstly, this department
will be on the look for new startups with new technologies. This is because startups are way more
nimble than large corporations and can create new technologies. Also, GM’s real strength is in its
distribution network, and manufacturing capabilities, so by focusing on their strength and
acquiring the technologies they will be able to create the most value. The benefits of acquisitions
over outsourcing R&D, are being able to use and also lead the acquired companies to best align
with GM’s objectives. If these technologies were not acquired, there is always the threat of
competitors using these new companies.
 Secondly, the emerging brand departments will try to build more relationships with
suppliers and manufacturers that serve different functions in the value chain. The shortage of raw
materials because of recent events showed how important it is for GM to have some control over
the suppliers of materials as well as a strong network that manages these suppliers.
In fall 2020, GM had to recall thousands of Chevy Bolt cars because batteries could
potentially catch on fire. We suggest a strategic rebranding of the company that showcases GM’s
recently changed logo that depicts the clean skies of a zero-emissions future and advertises GM’s
commitment and progress through the marketing of each new electric product launched in the
market such as the GMC Hummer. Some examples would be television advertising of the new
models, billboards, social media posts, etc. These strategic actions are recommended in order to
change customers' existing perception of the company and announce that GM really is committed
to following its mission statement. This is also a method to shift from the bad press received by
GM, all while showcasing the progress that has been done.
Implementation:
The recommendations stated above will bring many opportunities and challenges for the
corporation. As a result, we recommend a strategic plan that mainly focuses on entering the EV
market, more specifically, with a strategic focus on the pickup truck and SUVs product segment
which includes a cost leadership strategy.
In 2022, GM just started releasing new electric pickup trucks such as the Chevrolet
Silverado and the CMG Hummer Electric which were priced at around $80,000. The current
average price at which people purchase vehicles is $47,000. The difference is significant, leaving
a large part of the customer segmentation limited by their purchase power. We suggest that GM,
who has deployed $7.9B in research and development, continues with this strategy in order to keep
up with this fast-cycle industry. Similarly to IKEA, GM should focus on rendering the pickup truck
and SUVs more affordable without compromising the quality of the vehicles. This is particularly
important in this industry since the customer’s security is a top priority and lives are at stake.
GM has a regional divisional organizational structure which involves grouping business
activities according to geographical areas of operations, this means that GM’s operations in North
America are grouped as one segment. The second structure is based on business-type divisions.
GM’s automotive business operations are grouped as one division. We suggest that GM’s budget
would be concentrated in the North American electric automotive business operations, more
specifically, it would be targeted at hiring the best engineers and equipment.
After focusing on our strong position in the SUV segment, GM should create a new
division in North America in its organization structure, called Emerging Brands. This department
will oversee all the new businesses and partnerships of GM and will develop criteria to evaluate
success. For example, GM has an Innovation team that acquired over 20 startups for different
technologies with the total addressable market (TAM) of the smallest startup valued at $3B and
the TAM for the largest of these companies is valued at around $500 Billion (2021). However, as
previously mentioned, GM has invested a lot of money in these new inventions and new
technologies but has yet to receive returns. That is why the main objective of this new department
is to make sure that there is accountability for the company’s new businesses, and partnerships to
return profits. The new team will develop clear strategic controls to evaluate how these new
technologies or brands have helped the company get closer to its vision. They will also develop
clear financial controls to objectively measure the impact of the partnerships on the bottom line.
The most relevant issue to focus on in the next year would be Ultium cells, the joint venture
of LG and GM which is focused on lithium-ion battery production. The two companies have two
massive facilities in Ohio and Tennessee that will be able to produce enough batteries for around
750,000 cars annually. These new batteries are approaching a cost that is 90% of the cost of the
older batteries, a point where GM can finally be profitable to shift away from internal-combustion
engines (Vanderwerp, 2021). These battery cells are also a lot more efficient than Tesla, GM only
needs 100s of battery cells in its packs while Tesla needs 1000s. Moreover, the new department
will have three main issues to manage in this joint venture. Firstly, they will have to work with LG
on getting a more exclusive contract, because as of now, although the batteries offer great
competitive advantages such as that fast charging doesn’t reduce the battery’s capacity over time,
any LG customer can buy these cells. Secondly, it has to make sure that its engineers are aligned
with all the new innovations in the batteries. Thirdly, it must closely monitor the advancements in
the production of these new batteries, to make sure that they are manufactured in time to help in
the reduction of costs that are needed for the planned launching of 30 new EVs by 2025.
GM should also launch aggressive marketing campaigns. As an example, Tesla currently
has an advertising budget of exactly $0 because the products speak for themselves and Tesla does
not need to showcase its product line. Additionally, having an active CEO like Elon Musk on social
media also helps to promote the company’s image. In the case of GM, we believe that launching
an advertising campaign is imperative. The reason being is that GM is a legacy company and
customers identify the company to its existing branding. Since GM is transitioning towards a more
technological and sustainable brand image, GM must inherently advertise this shift in order for
customers to know that GM is seriously committed to its mission statement. In fall 2020, GM has
to recall thousands of Chevy Bolt cars because some batteries were defective and could cause a
fire. GM should launch a separate marketing campaign for each new product that is introduced to
the market so that potential customers, this includes SUVs and pickup trucks,
Transition and incentives

Recently, there has been an increasing amount of discussion in regard to clean energy and
a renewed societal and political will to move away from dependence on fossil fuels. This push is
influenced by many factors such as the increasingly alarming climate warnings, the war in Ukraine,
as well as big leaps in EV technology development abroad. The COVID pandemic has also made
companies and states rethink their global supply chains. The disruptions that the pandemic caused
have made companies wary of overextending their global supply chain. This has resulted in new
bills and subsidies being proposed to boost the development and manufacture of EVs in the U.S.’

At the federal level, multiple subsidies are already in place in order to boost the production
of electric vehicles and batteries in the U.S. For instance, there is a 7500 US$ tax credit on US-
made electric vehicles. Furthermore, as the U.S. government has a plan on making 50% of vehicles
sold in the U.S. electric by 2030, more bills and incentives are being put forward. In August 2021,
a bill was proposed to raise the tax credit on U.S. vehicles from 7500 to 12500 US$ for automakers
operating in UAW (union of auto workers) areas(Shepardson, Reuters). As the federal government
takes a more green perspective on the auto industry, GM can play its capabilities as a well-
established and large automaker to align itself with the federal government’s vision. In this way,
GM can hope to obtain more subsidies for its electric vehicles and gain an upper hand over its
competitors.

At the state level, GM’s size and its capability to create a large amount of employment and
capital in the areas where it operates give it substantial leverage to negotiate subsidies. In
Michigan, GM negotiated a 7 billion US$ investment in the manufacturing of electric vehicles in
exchange for 824 million US$ in incentives (Vock, 2022). As the auto industry is a big employer,
the monumental change in the industry we are seeing right now translates into investment and
capital commitment. States are rushing to give incentives to auto companies in order to attract their
investment to them. However, the U.S. is not the only place where GM has manufacturing
facilities. It also has plants in other countries in the American continent and South Korea.
Thankfully, countries such as Canada are keen to subsidize EV development in their respective
countries(McKenzie-Sutter, 2022).

For GM’s strategic focus on EVs to work, it must reduce the financial burden that the
repurposing of its facilities into EV plants or building of EV or battery plants causes on its
company. The disquieting amount of debt that GM owes needs to be softened and its investors
reassured. In order to obtain the best subsidies for its electric shift, GM would have to implement
a subsidy-negotiation initiative in order to pinpoint the locations in which it will benefit the most
from repurposing manufacturing plants and building battery plants in accordance with partners
such as LG.

GM has as a goal to make its full lineup of vehicles electric by 2035 (Boudette &
Davenport, 2021). Therefore, all its facilities must be repurposed or relocated by at least one year
before this mark. Especially, as we are trying to reach the SUV and pick-up truck market, the
facilities necessary to manufacture these models should take priority. We will use this data to build
an implementation timeline for GM’s manufacturing and supply chain needs in the U.S and abroad
that is ready to produce by 2034. Keeping in mind that volume and production capacity is a firm
competitive advantage of GM it is important that it is done properly.
 GM wants to have 30 EVs on sale by 2025. This means that, by 2025, GM will need the
physical capacities and facilities to produce 30 EV lines. (Beresford, 2021). The 1st step of the
stage will therefore be scouting and negotiating with states and governments in order to obtain
subsidies and incentives for its EV manufacturing facilities with a priority on SUV and pick-up
truck facilities. Once these have been established by the end of 2023, the second step will
commence, and GM will be able to spend the 2 next years building and repurposing the facilities
while developing new pick-up truck and SUV EV models in parallel.

Stage 2 involves gathering the data from the new EV lines and manufacturing transitions
in order to better equip and prepare for the full transition to EVs in 2035. The 1 st step will be the
same as in phase 1, scouting and negotiating for subsidies and incentives. However, a big emphasis
will be put on facilities outside of the U.S. such as in Mexico, Canada, or South Korea. In this
stage, whether GM has had success with their previous EV lines will be crucial as it will add or
lessen leverage in the negotiations. Negotiations and selection should be done by the end of the
2027 year. Design of the models and plant transition plan should be drafted during the next year,
2028. The third step of the stage will involve simultaneous decommissioning of old plants as well
as repurposing and transition as well as the building of more battery factories for 2034,
progressively opening new plants during this period. If implemented correctly, this plan will allow
a complete transition and construction of GM’s physical facilities into EV-producing ones in line
with its 2035 goal.

To conclude, in order to strategically position itself in the electric vehicle market, GM

should focus on developing reliable electric SUVs and pickup trucks in order to maximize its
competitive advantage by relying on its reputation and capabilities in this market segment. It
should also create a new division for emerging brands, that will oversee the company’s acquisition
of technology companies as well as manage the relationships with strategic partners. This
division’s main objective will be to put the new technology into use and make sure that all the
investments in R&D can be converted to profits by reducing manufacturing costs(well managed
innovative technology, relationships with suppliers). Moreover, the company should start an
aggressive marketing campaign to inform consumers about GM’s shift to EV’s in order to prepare
for the launch of 30 EV’s in 2025. Finally, GM should try to benefit from the subsidies and
incentives offered to help companies move away from dependence on fossil fuels. All these
recommendations are part of a strategic plan that will help GM’s mission statement.
Timeline of the implementation schedule:
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Appendices
Appendix A

US Best Selling Car Manufacturers year to date

Appendix B
Worldwide Best Selling Car Manufacturer
Appendix C

USA - Automotive Sales Volume, 2022

Appendix D

Worldwide - Automotive Sales Volume, 2022

Appendix E
Share of old age population (65 years and older) in the total U.S. population from 1950 to 2050

Appendix F
Share of population aged 60 and older in China from 1950 to 2010 with forecasts until 2100

Appendix G
https://www.cnbc.com/2021/09/07/heres-why-gms-electric-vehicle-push-is-a-big-risk.html
Appendix H