Factors Affecting GM: Chevrolet India (SLEPT Analysis) : Legislation
Factors Affecting GM: Chevrolet India (SLEPT Analysis) : Legislation
Factors Affecting GM: Chevrolet India (SLEPT Analysis) : Legislation
• POLITICAL
Legislation
o Environment
o Company Cars
o Competition
Taxes and Duty
Subsidies
• ECONOMIC
– Excess Capacity
– Economies Of Scale
– Diversification
– Mergers and strategic alliances
• POLITICAL
– Legislation
o Environment
o Company Cars
o Competition
Taxes and Duty
– Subsidies
• SOCIAL
– Environment
– Car Culture
– Fashions and taste
– Redundancies
• TECHNOLOGICAL
– E-Commerce
– Safety
– Plant efficiency
– Gizmos
SWOT Analysis
Strengths
2. Global Experience
As explained above even with GM's recent decline they still have the market share and the
experience to bounce back. They have been a worldwide company for nearly a century now and
have established themselves as the global leader for most of them. If you recall I mentioned
above that a current opportunity for GM is to expand globally and as we can see they already
have the experience to do so. It is just a matter of the correct planning and proper implementation
of those plans that will decided whether or not GM's goals are achieved.
Weaknesses
Opportunities
2. Growth of Competitors
GM no longer has the luxury of being the known leader in the automotive industry and faces the
reality that they are in serious trouble. As I mentioned earlier Toyota took the first step in the
direction of hybrid technology and has since drastically grown and become the questionable
automotive frontrunner to start the 21st century.
3. Pension Payouts.
Part of this threat is their own doing and the other is simply unavoidable. GM is responsible for
providing generous pension benefits to its employees, which at the time seemed like a great idea,
however they are now experiencing problems as more and more people begin to collect.
With the rise of foreign competitors like Toyota, Honda and Nissan in the 1970's and 80's,
rivalry in the American auto industry has become much more intense. Firms compete on both
price and non-price dimensions. The price competition erodes profits by drawing down price-
cost margins while non-price competition (e.g., new car rebates and interest free loans) drives up
fixed cost (new product development) and marginal cost (adding product features). One of the
other reasons there is such high rivalry is that there is a lack of differentiation opportunities. All
the companies make cars, trucks or SUVs. The competitors are compared to one another
constantly. In recent years there has been significant market share variation, another indication of
rivalry and its very strong threat to profits.
The presence of new firms in an industry may force prices down and put pressure on profits.
There are, however, barriers to entry that tend to protect established firms. One would expect the
production of automobiles to require significant economies of scale, an important barrier to
entry. The new entrant would have to achieve substantial market share to reach minimum
efficient scale, and if it does not, it may be at a significant cost disadvantage. While the evidence
suggests that economies of scale in the auto industry are substantial, there are also indications
that large size may not be as important as commonly assumed. Nevertheless, entry would
represent a large capital investment to any new firm and the body of research still indicates that
economies of scale represent a substantial barrier to entry. Consequently, entry is currently a
weak threat to profitability.
While five-forces do not directly consider demand, it does consider two factors that influences
demand ― substitutes and complements. Although new cars generally are slightly price elastic,
suggesting few real substitutes (e.g., bus and rapid transit), the demand for a particular model is
highly sensitive to price because of the availability of close substitutes for a given model. A
change in the price of a complementary product (e.g., gasoline, batteries, and tires) could have a
significant impact on the demand for automobiles. The rising price of gas, an important
complementary product, is likely to affect some firms more than others depending upon the
vehicle composition. Recent rising fuel prices are likely to have a greater impact on the big three
(GM, Ford Motor and Daimler-Chrysler) whose most profitable models are energy inefficient
pick-up trucks and sports utility vehicles. On balance, the overall impact on "industry"
profitability from substitutes and complements is weak to moderate.
Buyer power refers to the ability of individual customers to negotiate prices that extract profit
from the seller. Individual consumers have some influence over price within a given dealership,
but little power over manufacturers. Customers can easily, and with little cost, switch to other
auto dealers. Furthermore, customers now have access to market information (prices and costs)
from the Internet that enhances their negotiating power. But when you have many individual
customers, each representing a small proportion of total sales, they will have little bargaining
power with manufacturers and therefore pose a weak threat to industry profit.
Auto manufacturers require inputs-labor, parts, raw materials and services. The cost of these
inputs can have a significant effect on profitability. Whether the strength of suppliers is weak,
moderate or strong depends on how much bargaining power they can exert. The auto
manufacturers have large supplier networks that appear to exert little bargaining power.
Nevertheless, the United Auto Workers (UAW), the only supplier of labor, has historically
exerted a great deal of leverage over the benefits and wages provided by the big three. Because
of this historical dominance by the UAW and the uncertain results of their current negotiations
with the big three, one has to characterize supplier power, at least in this segment of the
American market, as a strong threat to profits.