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Decline in General Motors of 2007
Introduction
The year 2007 to the present time has been a bad business period for most companies. In motor industry, General Motors have had a bad experience in most of their markets. The period, 2007 to the present time have seen General Motor sales decline consistently. General Motors internal production and marketing strategies, together with economical recession could have contributed to this decline.
Discussion
The reasons for decline in sales and turnover in General Motors are not easy clearly figure out but various factors can indicate to the reasons. General Motors had been enjoying a major share in motor industry for a long time. Product from General Motors could be found in all parts of the world. Lack of major competitors for General Motor had made General Motors to adopt poor incentives for their market (Bots, 2009, par 2).
As new players in motor industry came in, General Motors was not prepared to counter the competition. Competition from motor industry firms from Japan such as Toyota led to the decline in a wider way. Japanese companies took advantage of poor incentives offered by General motors to offers aggressive incentive that gave it a good share of the market (Phillips, 2009, p 67). General Motors is heavily affected by production cost disadvantage. Having their industries in high cost areas, General Motors production cost have been higher relative to those of its competitors. This has affected GM ability to compete leading to lower sales.
With drop in sales in European market, General motors decided to withdraw from the market. The internal position of General Motor made the company to be poorly placed in competition for the market. Internal financial in General Motors was poor. This reduced access of needed resources to counter competition (Hutchinson, 2009, par 5). Production cost disadvantage in General Motors, geographical position of their industries, poor marketing structure were disadvantageous to General Motors.
Externally, General Motors position motivated its decision to withdraw from European market (Michael, 2007, par 8). General Motors had already established itself in European market, however, entry of other aggressive competitors and change in buyers power heavily affected General Motors (Hutchinson, 2009, par 7). Japanese motor firms in European markers have high capacity in terms of volume and expertise.
The firm brought other brands in the motor industries creating a competition toward General motors brands. Buyers power in European market has dropped since 2007 leading to preference to more affordable products. Aggressive competition from new players in motor industry was very high (Crimson, 2009, par 3). In analysis, the level of rivalry for General Motors in European market was high.
General Motors faced various threats in European market. The main threat was internal financial problems, increase in cost of production and competition (Helpman, 2008, p 67). General Motors experience in motor vehicle industry for many years is its major strength. The weaknesses included poor incentives, geographical position and static marketing strategies (Grimaldi, 2007, par 4). The main strategies issues that faced General Motors included economical, political, social cultural and globalization (Thomas, 2008, p 7).
The decision to withdraw from European was revoked after the company received financial assistance from the American government. U S government offered the company a $19.1 billion loan that allowed owning 70% of the company(Bots, 2009, par 3).
Conclusion
The period between 2007 and now is one of the worst time of General motors existence. The period saw General Motors face a major financial problem, losing to competitor and drop in sales and turnover. General economic recession and competition from others players in motor industry are the main threat that faced General Motors. The decision to withdraw from European market due to poor business was reversed after General Motors received financial assistance from the US government. Today, US government own seventy percent of the company.
Reference List
Bots, A 2009. US Government Will BE gms Major Stakeholder. Web.
Crimson, M 2009. gm June Sale Decline 24%. Street Directory. Web.
Grimaldi, V 2007. Can Automakers Make Us Dream Again? Web.
Helpman, G. 2008. Reasons behind General Motors Decline. Journal of Economics.
Hutchinson, M 2009. The Slow Death OF general Motors. Money Morning. Web.
Hutchinson, M 2009. Three Main Reason For General Motors Decline. Seeking Alpha. Web.
Michael, E 2007. Porters Five Forces . Web.
Phillips, M 2009. Effect of Global recession to General Motors. Journal of Financial Economics.
Thomas, C 2008. General Motors Strategic Analysis. Web.
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