Three issues precipitated the fall of General Motors (GM); unacceptable corporate culture, bureaucracy leading to reduced innovation and increased product lines leading to product non-differentiation. General Motors performances were affected by its corporate culture, which emphasized a lack of accountability regarding production designs. The corporate culture at GM focused on past glories and unaccountability regarding the production process. The values were driven from the top executive to the bottom level employees, and the resistance to the culture led to a dismissal. The corporate culture also comprises the proliferation of committees, thus leading to long delays in solving production issues. In addition, there was a reluctance to raise issues leading to product defects. The long-running corporate culture where nobody took responsibility for problems led to production errors that culminated in the 2014 recall of the Chevrolet Cobalt’s and Saturn Ions, which had ignition switch issues. General Motors engineers and quality control experts turned a blind eye to the ignition switch problem leading to at least 13 deaths and approximately $1.7 billion in compensatory damages, further increasing the company’s debt burden.
General Motors executive’s bureaucracy and status quo led to resistance to change regarding product enhancements. The lack of innovation to create better quality, client-oriented cars led to a decrease in sales and ultimately increased operational costs. The financial crisis of 2008 led to an increase in fuel prices; thus, car buyers shifted their preference towards small, fuel-efficient cars. General Motors bureaucratic management continued producing Sport Utility Vehicles (SUVs), which consumed a lot of fuel as the company struggled to maintain its identity. The slow development of fuel-efficient vehicles led to the loss of market share and reduced sales from 16 million in 2007 to 10 million in 2009 (Dess, Lumpkin, Eisner, & McNamara, 2021). General Motors continued production of cars that did not meet client expectation’s eventually led to cash flow issues.
Another issue was the product non-differentiation which led to lowered product quality. General Motors had built its dominance by offering differentiated cars for different markets as it had eight brands competing for the US market produced by different divisions. However, the cost reduction policies led to increased collaboration among distinct divisions in terms of design and production. The collaboration led to the loss of the company’s competitive advantage as a leader in product differentiation, resulting in decreased car sales. The non-differentiation led to the fall of the company’s market share.
General Motors should replace the top executive to influence corporate change. Top executives can change the corporate culture by implementing systems to ensure accountability among the employees. In addition, GM should recruit younger technologically savvy employees as the company prepares to invest in technological advancements. The most viable option is the change of leadership since it leads to the change of organizational values and principles to incorporate accountability in terms of product designs and costs.
General Motors should change its bureaucratic process and adapt to the changing world dynamics regarding innovative car designs such as environmental-friendly cars. General Motors should invest in electric car production and integrate autonomous driving technology into their vehicles as the world shifts to technological advancements in vehicle production. The most viable option is the introduction of zero-emission vehicles such as electric cars due to the increased demand globally and tax incentives such as federal tax credits, which reduce production costs (Boudette & Davenport, 2021). General Motors should also reduce its product line to enable improved quality control in terms of design and production. In addition, GM should revamp its product line by introducing customer-oriented products to increase its market share and competitive advantage. The company should introduce new SUVs and pickup trucks suitable for the client base, such as power for the American market.
Boudette, N. E., & Davenport, C. (2021). G.M. Will Sell Only Zero-Emission Vehicles by 2035. The New York Times. https://www.nytimes.com/2021/01/28/business/gm-zero-emission-vehicles.html
Dess, G. G., Lumpkin, G. T., Eisner, A. B., & McNamara, G. (2021). Strategic management: Text and cases.