General Motors AnalysisGeneral Motors AnalysisTeam 7Li.docx

General Motors Analysis
General Motors Analysis
Team 7
Lisa Shepherd
Ashley Walker
Justin Iranpour
Heather Dobson
Jeremy Hensley
International Management
Kennesaw State University
Spring Semester
2/25/2016
1. Module 1 - Industry Analysis - General Motors
1.1 Which industry does your firm operate in?
According to IBISWorld Industry reports (n.d.), General Motors
operates in the car and automobile manufacturing industry.
1.1.1 What is it’s SIC code (with description)?
General Motors SIC Code isSIC-3711 Motor Vehicles &
Passenger Car Bodies and 37140000 Motor vehicle parts and
accessories. According to Barchart.com (n.d.), the description
is, “General Motors Company is engaged in the designing,

manufacturing and retailing of vehicles globally including
passenger cars, crossover vehicles, and light trucks, sport utility
vehicles, vans and other vehicles. Its business is organized into
three geographically-based segments- General Motors North
America (GMNA), General Motors International Operations
(GMIO) and General Motors Europe (GME). General Motors
Company is headquartered in Detroit, Michigan, the United
States of America.”
1.1.2 Which IBISWorld Industry reports apply to your firm?
Car & Automobile Manufacturing in the US - 33611a
1.1.2.1 What is the IBISWorld definition of your industry?
According to the IBISWorld (n.d), “Companies in this industry
manufacture cars and automobile chassis. These operations,
which are referred to as automakers, typically produce cars,
including electric cars, in assembly plants. The manufacture of
light trucks (e.g. vans, pickups and SUVs), heavy trucks and
motorcycles is excluded from this industry.”
1.1.2.2 Please summarize your industry structure from the ten
items in the table on the industry at a glance page. Additionally
please briefly explain the implications of each item for firms in
that industry
Life Cycle Stage
This is a mature industry in existence since the late 1800s.
The IVA, industry value added, was expected to grow at a rate
of 7.6 percent per year from the years 2010 to 2020, despite the
industry suffering greatly after the 2008 recession. This rate is
three times the growth rate of the GDP, yet the industry is still
mature; the elevated IVA shows that the industry is recovering
well from the recession. Another sign that the industry is
mature is that the number of industry locations decline at an
annual rate of 1.2 percent per year over the same time frame.
The final reasons that the industry is mature are that production
efficiency has been improved and any threat of a real decline

has been alleviated by recent performance (Industry Outlook,
n.d.).
Revenue Volatility
From the years 2010 to 2015 the industry has seen high revenue
volatility levels. In the automobile induernment policy
(Operating Conditions, n.d.).
Concentration Levelstry new features and models can influence
sales. When innovative features are introduced buyers have a
greater incentive to upgrade to newer models more frequently.
Higher volatility levels might sound like a good thing but it
causes higher risk for the industry. If a firm does not plan
properly and demand suddenly falls or rises, it will either see
capacity shortages or surpluses (Operating Conditions, n.d.).
Capital Intensity
The automobile industry is one of the most capital intensive of
the manufacturing industries to due to the highly complicated
process involved in producing a car. Complex machines and a
large labor force mean that the level of capital needed for the
automobile industry is high (Operating Conditions, n.d.).
Industry Assistance
The automobile industry has a high level of industry assistance;
it is trending to remain the same in the future. The industry is
often the recipient of government assistance; the bailout during
the recession is an example. The industry also acts as lobbyists,
meaning it proactively seeks to frequently benefit from gov
The concentration of market share in the automobile industry is
modest. The top four companies account for approximately 50
percent of industry output but that can easily change over a
short period of time. Top companies are expected to be ones
that can most effectively manage affordability, technological
advances, and style (Competitive Landscape, n.d.).

Regulation Level
The level of regulation in this industry is moderate, but with an
increasing trend. Automobile manufacturers are required to
abide by federal laws and regulations on many different levels.
Automakers are being pushed by the government to make more
fuel-efficient cars with lower emissions (Operating Conditions,
n.d.).
Technology Change
The level of technology used in the automobile industry has
increased greatly in the past several years. In terms of actual
automobiles, there has been an increase in the production of
more fuel-efficient cars that are lighter and produce fewer
emissions. There has also been an increase in technology used
to create and build the cars and automobiles. The most drastic
technological change has been through the introduction of green
technologies; companies are introducing diesel, hybrid, and
electric models into production. There is much time and money
invested into researching new technologies for this industry
(Operating Conditions, n.d.).
Barriers to Entry
This industry has a moderately high barriers to entry. Due to
many of the issues already discussed it is difficult to break
those barriers, which can be seen in the chart below from
IBSIWorld. Any company wishing to enter the industry must
comply with government regulations, be willing to participate in
a heavily competitive market, work hard to brand itself, and
have the ability to produce the technology needed (Competitive
Landscape, n.d.).
Industry Globalization
Globalization in the automobile industry is high and the trend is
increasing. There are several foreign automobile manufacturers

with a heavy presence in the United States as well as several
American manufacturers with a heavy presence internationally.
Much of Ford, GM, and Chrysler’s revenue is generated by sales
outside the United States just as Toyota, Volkswagen, and
Honda generate many sales internationally (Competitive
Landscape, n.d.).
Competition Level
The competition in this industry is moderate. It is fairly
difficult for new companies to enter so the majority of the
competition is between existing firms. Automobile firms
compete mainly through price, reliability, style, fuel economy,
and utility. A firm will typically see higher sales after the
introduction of a new redesigned vehicle making that firm more
competitive (Competitive Landscape, n.d.).
1.1.2.3 What are the key external drivers for your industry?
According to the IBISWorld Database, there are seven key
external drivers for the car and automobile manufacturing
industry. These are the consumer confidence index, demand
from new car dealers, the world price of crude oil, the world
price of steel, the trade-weighted index, and the yield on 10-
year industry notes (Industry at a Glance, n.d).
Consumer Confidence Index
The consumer confidence index is a tool used to measure
consumer confidence; when consumer sentiment is low
customers will typically postpone larger purchases like cars.
Therefore, when consumer sentiment is low, this industry takes
a direct hit. During the recession, consumer confidence hit rock
bottom greatly affecting the industry. Consumer confidence
was expected to increase in 2015 (Industry at a Glance, n.d).
Demand from New Car Dealers
The industry for new car dealers was expected to increase

in 2015 with consumer confidence. The performance of new car
dealers is directly related to the performance of automobile
manufacturers as car dealerships serve as a retailer. Consumer
demand drives demand for car dealerships which drives demand
for automobile manufacturers; if dealerships have low demand,
the industry will suffer as there will be fewer people to sell the
newly manufactured automobiles to (Industry at a Glance, n.d).
World Price of Crude Oil
The world price of crude oil directly affects the cost of
gasoline. As the cost for fuel rises, consumers demand smaller
more fuel-efficient cars even though the industry has typically
focused on larger, less fuel-efficient vehicles. The price of
gasoline and crude oil has dropped since the year 2015, but I
feel consumers will continue to demand more fuel efficient and
environmentally friendly vehicles in fear of the effects on the
environment and global warming (Industry at a Glance, n.d).
World Price of Steel
Because steel is a key material for the manufacturing of
cars, its cost is of great importance to automobile
manufacturers. At times the cost is too great to pass on to
consumers so high steel costs directly affect the health of the
industry (Industry at a Glance, n.d).
Trade-Weighted Index
Exchange rates are important because they affect the
industry’s ability to remain competitive. When the dollar
appreciates, there is typically a decrease in exports which
negatively affects industry revenue (Industry at a Glance, n.d).
Yield on 10-Year Industry Notes
This directly affects the industry because this yield
determines the interest rate set by the central bank. Interest
rates affect consumer willingness to buy because it costs much
more to finance a car when interest rates are high. As interest

rates decrease, demand for new cars increase because it costs
less for a consumer to purchase a new vehicle (Industry at a
Glance, n.d).
1.1.2.4 Please summarize the current performance for your
industry
The Automobile Engine and Parts Manufacturing industry is
directly tied to the performance of vehicle sales. . According to
IBISWorld data, total US vehicle sales rose 15.5% and 16.4% in
2013 and 2014, respectively.(Industry Performance. n.d.). This
growth lead the automobile manufacturers to increase overall
production of vehicles which would receive higher demand.
Declining steel prices lowered input costs and increased profit
for industry operators, as steel is the major commodity used in
engine manufacturing... According to IBISworld, industry
revenues are expected to increase at an average annual rate of
6.2% to $32.4 billion over the five years to 2016; this includes
expected growth of 1.0% in 2016(Industry Performance. n.d.).
1.1.2.5 Please summarize the current outlook for your industry
The automobile engine and parts industry is expected to
decrease in the five years. Based on IBISworld an appreciating
dollar and high interest will be the reason for this decline,
however, strong customer confidence could possibly counter
this decline. Large investors of engine parts are seeking
alternatives for their technologies due to concerns over climate
change and aggressive fuel economy regulations. Investors are
seeking usage of diesel, hybrid-electric and fully electric

powertrain technologies to reduce gas consumption and carbon
emissions (Industry Outlook.n.d.). Over the next 5 years,
revenue is expected to grow at an annualized rate of 0.7% to
$33.6 billion (Industry Outlook. n.d.).
1.1.2.6 Considering the industry’s supply chain, what are the
key buying and selling industries
Key buying industries consists of new,used, and recreational car
dealers, local and long distance freight trucking, automobile
towing, and couriers and local deliveries(Supply Chain
n.d.).New cars accounts for the industry’s largest share of
revenue at 68.7%. Used automobile segment is share of industry
revenue to roughly 6.2% in 2015.Light trucks and SUVs will
account for an estimated 14.0% of industry revenue in 2015.
Trailers buses and motor homes products will account for an
estimated 7.2% of industry revenue in 2015. . Motorcycles are
anticipated to account for roughly 2.3% of industry revenue in
2015.
Key selling industries consist of car, SUV, light truck, trailer,
and motor home manufacturers (Supply Chain n.d.). Vehicles
sold in this industry are primarily distributed to retail
dealerships, with the remaining demand stemming from freight,
delivery and transportation service companies. Courier and
freight services account for an estimated 31.5% of industry
revenue. Transportation services account for an estimated
15.4% of industry revenue in 2015
The automobile and parts industry have already identified their
key selling and buying industry locations. The automobile
engine and engine parts manufacturing facilities are clustered in
the Great Lakes, Southeast and West regions. These are the
regions where most revenue is generated within the US.
IBISWorld estimates that the Great Lakes region will account
for 26.6% of industry establishments and 66.2% of revenue in
2016 (Products and Markets, n.d).

1.1.2.7 Pie chart for the products and services segmentation for
your firm’s industry
(Industry at a Glance, n.d.).
1.1.2.8 What are the demand determinants for your industry?
The introduction of new products by manufacturers has a major
impact on the demand for automobiles. For example, “in the
large car segment, when Chrysler replaced the Concorde with
the Chrysler 300 for the 2005 model year, advertising
expenditures on Chrysler’s large car entry increased by
400%”(Korenok, Hoffer, & Millner, 2009). Also, restyling of a
model has a major impact on increasing the demand for
automobiles. When manufacturers restyle the same model, it
becomes more appealing to the market, therefore driving up
demand. Economic factors also play role on determining
demand for automobiles. The strength of business demand for
new vehicles, car buyer income relative to the price of cars, cost
and availability to finance the vehicle, and the cost of operating
the vehicle.
The strength of business affects demand for new automobiles
refers to vehicles bought to be used as fleet vehicles. Examples
of fleet vehicles includes automobiles used by police officers,
taxi drivers, and company vehicles. Due to automobiles being
normal goods and have high income elasticity of demand, they
have a positive correlation with the rise of income. When the
rate of income rises higher than the rate of inflation, also known
as real income, the demand for new vehicles will rise due to
becoming more affordable. The cost and availability for an
individual to finance a vehicle has a major impact on demand.
Interest rates have a direct correlation with the demand for

purchasing new and used vehicles. When interest rates are high,
the amount of buyers in the industry will decrease. When
interest rates are low, the amount of buyers in the industry will
increase. The cost of operating a vehicle is very important to
buyers. Variables such as gas prices, maintenance, and
insurance are important aspects that buyers take into
consideration prior to purchasing a new vehicle. Consumer
confidence is an important determinant in demand. The state of
the economy will guide consumers to purchase more or less
vehicles based on how well the economy is performing. If there
is lack of consumer confidence in the economy due to a
recession, consumers will not purchase as many big ticket items
such as automobiles.
1.1.2.9 Pie chart illustrating the major market segmentation for
firms industry
(Products and Markets, n.d.)
1.1.2.10 What is the basis of competition for your industry?
There are many basis of competition across retail automotive
industry market segments. However, safety, quality,
technology, and environmental sustainability are universal key
factors of competition. These are major points of consideration
for retail customers when making a purchase decision.
Constant innovation is required in these four areas in order to
capture a larger market share and gain product awards and
recognition. In 2014 auto manufacturers spent over $100
billion globally on research and development. The auto
industry leads all companies on R&D spending worldwide and
3-5% of all US Patents are issued to the auto industry (Auto
Innovation, 2014). Manufacturers strive to bring their product
improvements to market first and gain competitive advantage.
1.1.2.11 What, if any, are the barriers of entry to your industry?
There are many barriers to entry in the automotive industry;

concentration is moderate, there is a high level of capital
requirement, and rapid technological change is present
(Competitive Landscape, n.d.). It is very difficult for new
companies to enter the market. Well established manufactures
hold brand image and customer loyalty, take advantage of
economies of scale, government regulations are strict, supply
chains are massive, and start up costs are high. IBIS indicates
barriers to entry in this industry are medium and steady
(Competitive Landscape, n.d). Failed start-ups include: Fisker
Automotive Inc, Aptera Motors, Coda, Delorean Motor Co,
Think Global, and Tucker Corp (6 car companies, n.d.). Most
companies cannot overcome these barriers, however, there are
start-ups like Tesla Motors who seem to have promising futures.
1.1.2.12 Who are the major players in your industry and their
market share
(Major Companies, n.d.)
Toyota, General Motors, and Ford are the major players in the
auto industry; their market share comprises about 45% of the
total market (Major Companies, n.d.) According to a separate
study reported by Statista.com, Volkswagen was among the top
3 auto manufacturers in 2014, but due to the recall and scandal
surrounding their emissions for diesel vehicles, market share
fell drastically (Leading carmakers worldwide, 2016). Below
are charts from IBIS Major Companies page, showing the
volatile financial performance of the top 3 companies over the
past few years; net income and operating income changed
frequently from year to year.

1.1.2.13 Briefly summarize the operating conditions for your
industry
Auto manufacturers operate on a global scale and must be
managed across political, geographical, legal, cultural, and
economic conditions. Demands from theses environmental
factors greatly vary. Manufacturers attempt to organize
business structure to address these challenging situations.
According to IBISWorld, the auto manufacturing industry is
capital intensive, has ever-increasing demands for technological
advances, suffers from high levels of revenue volatility, is
moderately regulated, and heavily government supported
(Operating Conditions, n.d.)
As mentioned previously, the auto industry is highly capital
intensive. It requires large payroll expenditures for the
substantial labor force necessary to support operations and
significant capital equipment investment. Changes in labor
compensation and equipment failure can radically affect
profitability.
The level of technology change is very high. Manufacturers
devote resources to research and development to meet the
demands of consumers and gain competitive advantage.
Recently the most significant changes are in the areas of
production automation and green technology.
Consumer demand is ever changing; gasoline prices, new
product features, and financial incentives drastically affect auto
sales. Because of these multiple factors, revenue volatility is
high in the industry. According to IBIS, “A higher level of
revenue volatility implies greater industry risk, Volatility can
negatively affect long-term strategic decisions…”(Operating
Conditions, n.d.).
Government regulation is considered to be medium with an
increasing trend in the auto industry. The government oversees
areas such as: safety, fuel consumption, pollution control, and
defect posing safety threats. Organizations such as the National
Highway Traffic Safety Administration and Environmental

Protection Agency enforce laws passed to regulate these areas.
Automakers receive a high level of assistance from government
agencies in the form of subsidies and tariffs. Because of this
steady trend, lobbyists make sure to keep manufacturer's best
interests at the forefront of policy debates.
Works Cited
6 car companies that failed. (n.d) Retrieved from
http://www.autonews.com/gallery/20140113/PHOTOS01/113009
998/6.
About General Motors. (2016). Retrived from
http://www.gm.com/company/about-gm.html
Auto Innovation 2014 Car Report Just How High-Tech is the
Automotive Industry. (2014) Retrived from
http://www.autoalliance.org/auto-innovation/2014-car-report
About This Industry. (n.d.). Retrieved from
http://clients1.ibisworld.com.proxy.kennesaw.edu/reports/us/ind
ustry/default.aspx?entid=816
Competitive Landscape. (n.d.). Retrieved from
ustry/competitivelandscape.aspx?entid=816#MSC
General Motors Company (GM). (n.d.). Retrieved
fromhttp://www.barchart.com/profile/stocks/GM
Industry at a Glance. (n.d.). Retrieved from

ustry/ataglance.aspx?entid=816
Industry Outlook. (n.d.). Retrieved from
ustry/industryoutlook.aspx?entid=816#IL
Korenok, O., Hoffer, G., & Millner, E. (2009). Non-Price
Determinants of Automotive Demand: Restyling Matters Most
[Scholarly project]. Retrieved from
http://www.people.vcu.edu/~okorenok/JBR090809.pdf
Leading carmakers worldwide - global market share 2014.
(2016) Retrived from
http://www.statista.com/statistics/316786/global-market-share-
of-the-leading-automakers/
Major Companies. (n.d.). Retrived from
ustry/majorcompanies.aspx?entid=816#MP348601
Operating Conditions. (n.d.). Retrieved from
ustry/operatingconditions.aspx?entid=816#RV
Products and Markets. (n.d.) Retrived from
ustry/productsandmarkets.aspx?entid=816#MM
Industry Performance. (n.d.) Retrieved from
ustry/currentperformance.aspx?entid=826
2

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