PRESENTATION ON TWO TOPICS:

1. GENERAL MOTORS IN 2005.

2. THE COMEBACK OF CATERPILLAR.

Anuj K.G. (2904)

Juanitha (2912)
Matt Alexander (2919)
Raksha Rao (2927)
Shweta Gupta (2935)
 Origin of General Motors
•Founded on September 16, 1908 by William C.
Durant.
•Company was founded by merging 25
independent car companies including Buick and
Cadillac together.
•Initially, all companies were separate individual
identities producing hundreds of models. General
Motors was the holding Company.
•GM’s principal competitor- Ford Motor Company.
 Strategies followed by Ford Motor
Company
• In 1908, produced the Model T car by mass production
so that economies of scale could be generated.
• Ford’s production technology was based on moving
conveyor belts assembled by unskilled workers.
• Pioneered the use of standardized auto parts that could
be easily fitted together to make assembly easier and
less costlier.
• Ford’s T Model was an inexpensive car targeted at the
middle of the market.
• Ford captured the market share during 1910-1920.
 Strategies and structure adopted by
General Motors under Alfred Sloan’s reign
• Sloan took control as CEO of GM in 1920.
Sloan’s Observations:
1.Ford’s strategy of producing only 1 model gave less
offering to the customers who were in the luxury car
segment.
2.Opportunities to produce cars for market segments
between those served by the Model T and the expensive
GM models.
 PROBLEM:
How to organise GM’S 25 car divisions to achieve
superior efficiency and customer responsiveness?
SOLUTION:
• Divided the production into 5 major operating
divisions, namely Chevrolet, Pontiac, Oldsmobile,
Buick and Cadillac.
• Chevrolet would produce entry level, inexpensive
cars. Pontiac, Oldsmobile and Buick would cater to
the prosperous middle market segments and Cadillac
would manufacture high end luxury cars.
• Each division had to perform its own
operations.
• Insisted on each division to develop a range of
cars that had a unique image so that
differentiation in different divisions could take
place.
• As a result, Ford lost market share because
customers preferred GM cars as they were
similarly priced and offered more luxury.
• From 1925- 1975, GM expanded
Ch as vans an its product
range to include all models of cars, full size
trucks, lightweight trucks, and specialised
vehicles such as vans and ambulances.
• GM started vertical integration by acquiring its
suppliers such as Fisher Body Company.
• GM dominated the U.S. car market, controlling
over 65% of the domestic sales.
• Together, GM, Ford and Chrysler commonly
referred to as the Big Three Carmakers,
controlled over 90% of the U.S. vehicle market.
Changes in the automobile industry affecting
GM’s strategy in the 1970’s
• GM’s dominant position in the U.S. car market
ended in the 1970’s by a combination of two
factors, namely:
1. The oil crisis and
2.The emergence of low-cost Japanese
competition.
• U.S. customers began to demand smaller, more
fuel-efficient vehicles which GM was not
equipped to build.
• There was also a huge demand for inexpensive
and reliable Japanese cars, such as Honda Accord
and Toyota Celica.
• One major survey reported that while Japanese
cars averaged 1.3 flaws per vehicle, Ford averaged
2, G.M. had 2.5 and Chrysler had almost 3.
• Japanese car makers which had been developing
efficient, quality enhancing lean production
techniques to reduce manufacturing costs began
to make enormous profits by selling their
economy cars to U.S. customers.
• From 1973-1978, the Big Three was proved
expensive and low quality car makers.
• Advent of European luxury cars like Jaguar,
Mercedes and B.M.W. also stole GM’s market
share in the 1970’s.
 Strategies adopted by G.M. to regain
competitive advantage
Corporate Level Strategies
• In 1920s when G.M. was losing its market share to Ford,
CEO Alfred Sloan changed the structure and grouped the
25 different companied into 5 operating divisions:
Chevrolet, Pontiac, Oldsmobile, Buick and Caillac.
Expansion Program
•G.M. started to become vertically integrated by acquiring
suppliers like Fisher Body Co.
•Delco Division set up to for electrical and electronic
components.
• Expanded operations into various countries throughout the world
in 1990s.
• Joint ventures with Toyota to produce cars in America(1983),
Isuzu Motors and Suzuki to learn lean manufacturing techniques.
• Acquired Korean conglomerate Daewoo in 2000 to enter Asian
and Chinese markets.
• Collaborations with Shanghai Automotive Industry Corporation of
China and AvtoVaz of Russia
Organisation Structure
G.M. changed its organisation structure several times to improve
its performance and deal with competition
• 1984 – had 21 levels in its hierarchy. Added another layer to the
bureaucracy- group managers to centralise decision making at
the group level.
• 1988- failure of the centralised decision making strategy
led them to decentralise various engineering teams at each
division to come out with new and innovative cars.
• At Present – has a global matrix structure consisting of its
main business units and its main value chain activities to
improve communication and efficiency in operations.
Diversification
• Acquired Electronic Data Systems and Hughes Aircraft in
1980s to help its core automotive business and create
synergies with its vehicle making operations.
Exits Businesses
• Split off from EDS and Hughes DIRECT TV in 1996 and 2004
resp.
• Sold its defense unit in 1999 which built light armored
vehicles to General Dynamics Corporation.
Business Level Strategies
• Grouping of its 25 different companies into 5 major profit
centers(SBUs) to increase operating efficiency and car
design.(1920s)
• Established strong, professional centralised headquarters
staff to determine transfer prices between divisions. The
staff was to also audit divisional performance and plan
strategy for the total organisation.
• Invested $50 billion to improve competitive position in cars
and update its technology by introducing automated
factories and robots.
• In 1984, G.M. consolidated its 5 divisions into two business
groups-smaller cars and luxury cars to speed product
development and reduce costs.
• In 1990s G.M. replaced all of its midsized cars with a coupe
and sedan again to reduce costs and the number of platforms.
• Formed a new power train division by integrating two
independent divisions to cut costs.
Functional Level Strategies
Brands and Marketing
• Every product has a separate marketing strategy to
differentiate its vehicles.
• G.M. has invested hundreds of million in building its brand
name.
• Signed an agreement with AM General Corp to acquire the
exclusive rights to the Hummer automotive brand in 1999.
• Began a major CRM program that resulted in selling 1.5
million more vehicles in 2004 than in 2003.
New Supply Chain
• Finding cost effective ways to manage its supply chain
has been a major part of G.M.’s Strategy in the last
decade
• To reduce costs, G.M. engineers would visit supplier
plants and work with them to reduce costs.
• Extended supply chain management globally and
developed alliances with overseas suppliers.
Information Technology
• Has harmonized all its IT systems across the company
by using software and consultancy services.
• No conversion work is required to transmit information
from one G.M. facility to another anywhere in the
world.
Human Resources
• in 1992 the company realised that they had at least 10000 white collar
workers and even larger excess production employees.
• By 2002 the company laid off 80,000 workers, froze salaries, reduced
health care benefits, etc to improve the position of the company.
• G.M. pays its workforce more than its competitors to retain its employees
and resistance from the trade unions.
Manufacturing
• In 1982 to compete with Ford, G.M. began to manufacture low cost,
quality cars called Saturn.
• Joint venture with Toyota in 1983 to produce Chevrolet Novas to gain
knowledge of lean manufacturing techniques.
• Used flexible work teams to improve productivity at every plant.
• Automated factories and introduces robots to reduce costs and improve
productivity.
 G.M.’s Structure
• Intense competition form the Japanese forced
G.M. to take a look at its multidivisional structure
and its effect on competitive advantage.
• G.M. had hundreds of divisions, many internal
suppliers and 30,000 managers. this increased
cost across divisions and slowed down
innovation because the organisation took a long
time to adopt to technological advances and
respond to changing needs of customers.
• Reorganisation of its structure in 1984 as well as 1988 was a
disaster.
• Various decisions taken as a result of reorganisation resulted in
cars starting to look alike and fall in market share.
• None of the new cars introduces after reorganisation became a
major seller compared to competitors like Honda, Ford and
Toyota.
• Throughout 1980s the Japanese carmakers continuously gained
market share mainly by stealing sales from G.M.
• In 1990s it again changed its corporate structure.
• Various departments were combined to accelerate the vehicle
development process.
• This led to flexible decision making, better use of resources,
increase in management accountability and an improved ability
to serve its customers. The new structure has also promoted
innovation.
Position of G.M. to become a market leader

• The company filed for bankruptcy in 2009 and a new entity,

NG.M.CO Inc. purchased the ongoing operations and trademarks
from General Motors Corporation and has now become a
government owned company
• The company presently has 9 brands under its name.
• G.M. earned $865 million in the first quarter of 2010, its first
profit since 2007. The company repaid a government loan in
April 2010, a sign that it might be turning its operations around.
• It continues to be the second largest automaker in the world ,
the first being Toyota.
• With a different company and the government
taking over its management, it is not in a very
good position to regain its lost market share
and become the leading car maker.
• It may take a while before the company gets
used to the new management and for changes
to be implemented.
CATERPILLAR
 FALL IN CATERPILLAR

Caterpillar faced huge crisis due to 3 main

reasons:
• global recession
• A costly strike
• Unfavorable exchange rates

Competitor : Komatsu
 George Schaefer
1985-1990
“respond and respond vigoursly”
• Global Outsourcing
• Broader Product Line
• Labor Relations
• Employee Involvement
• Plant with a future
 Donald Fite
1990-1999
“we needed to change”
• Leadership
• Reorganization
• Marketing and Dealerships
• Information Technology
• Diversification
• Labor Relations
 OPPORTUNITIES
 There was intense competition in the market, By
introducing light products it became the light
equipment market leader.
 Two important acquisitions helped the company
compete in the engine market which increased
the sales of power generators.
 Company had a opportunity to enter into new
markets of developing countries.
 Joint ventures.
 Threats
 Global recession
 Strike.
 Unfavorable currency exchange rates.
 Competitors.
 Strengths
•The demand in the global economy in the heavy
construction equipment was Earthmoving
Equipment & Caterpillar had 45% of its revenue
from this earthmovers
•Replacement of parts was profitable for the
company
•Economies of scale
•Successful Marketing was a major advantage
•The agreements made in sharing production,
technology sharing between engine makers and
equipment manufactures helped the company
• Labor Relations
Free flow of ideas between different levels of
employees.Employee involvement plan and
plant modernization and automation
• Reconfiguration of manufacturing plants into
flexible work cells
 1990-2002
• Revamping of the Cat’s product development process
• Labor Relations close to Japanese
• “Profit centers”
• Decentralisation
• More customer driven
• Encouraged the business to be continued in the family itself
• Discounts for the dealers
• Free to dealers
• Development in IT
• Fast Delivery(within 48 hrs)
 Weakness
• Concentrated more on the smaller clients
1982-1984
Company couldn’t handle the global crisis
in a proper way, by maintaining a proper
relation with the employees
Appreciation of Dollar led to increased
manufacturing costs
 Firms distinctive competencies
 The company was able to differentiate itself from its competitors
by producing reliable , durable, high quality equipment and good
after sale services.
 It has established foreign manufacturing subsidiaries either
wholly owned or joint ventures in many countries.
 It has fifty five joint ventures with Mitsubish in Japan.
 Catterpiller distribution and dealership network
 Strategically located throughout the world
 The company has retained its relationship with its old suppliers
 Variety of products- heavy machinery and light machinery.
 Huge market share
 Caterpillars business level strategy
Under George Schafer’s
 Caterpillar sought to purchase parts and components
from low cost suppliers who maintained high quality
standards.
 Caterpillar doubled its product line from 150 to 300
models of equipment, introducing many small machines
that ranged from farm tractors to backhoe loaders.
 Caterpillar reconfigured the layout of its manufacturing
plants into flexible work ‘cells’.
Under Donalds Fites’s
 Reorganisation.
 Caterpillar’s invested in expanding and upgrading its
worldwide computer network
 Caterpillar introduced new products.
Under Glen Barton’s
 Caterpillar entered into developing countries to increase its
sales.
 It expanded its engine business.
 It expanded its rental business to reach a new category of
customers both at home and Abroad.
 It entered into joint ventures to expand into new market
and diversify into new products.
 Is this an appropriate strategy for Caterpillar to pursue?

• Caterpillar has changed according to the changing

environment.
• The company was into the heavy machine segment
at first but later have done the diversification of
product line.
• The employee labor relations increase the overall
efficiency.
• The company has got better marketing and better
relations with the dealers which inturn gave the
company competitive advantage.
 Changes made by two CEOs Of Caterpillar at
Functional level.
George Schaefer strategies
 Global outsourcing.
 Broader product line.
 Employee involvement
 Labor relationship.
 Modernization.
Donald Fites’s strategies
 Reorganization.
 Marketing and dealership.
 Information technology.
 Diversification.
 Labor relations.

Effectiveness of the strategies

In Schafer’s five year long tenure caterpillar became a globally
competitive, lean flexible and technologically advanced.
 Market share increased from 43% to 50%(19841990)
 Revenue increased by 66%.
 Improved product quality.
 Employee satisfaction.
 labor productivity.
 Reduced employee absenteeism.
Donald Flites- Strategy effectiveness
 Sales grew from $10 billion to $15 billion in first half of the
1990’s
 Number of managers employed by the company fell by 20 %
 Due to changes in distribution network Catterpiller
dealership became extensivse. It generated the annual
revenue of $1 billion in 1996
 Catterpiller market share in small equipment was growing at
the rate of 10% every year.
 The major strike broke out in 1994-1995 but still it didn’t
affect the profit and market share of the company.
 Work done by Glen barton during its
leadership
Assumed leadership in 1999.
Four leadership strategies.
 Expansion into new markets.
 Diversification.
 Development of a new distribution
channel.
 Build up of alliances with global
competitors.
Effectiveness of the strategies implemented
by Glen Barton’s
 Increased Sales (increase in sales of truck
engines, electric gas generators).
 Expansion of business.(rental equipment
business).
 Joint ventures of the company with Damiler
Chrysler helped in increasing the revenue and
sales of the company.
 Future prospects for Barton
 Introduce employee satisfaction program.
 Build strategy to increase its market share in
developing countries.
 Make use of e-commerce facilities.