Looking at figures 3 and 4 in particular, stakeholders are of great importance to firms. It is vital for a firm to satisfy as many of its stakeholders as possible, whether they have high levels of power and interest or not. General Motors started off doing just this. During the successful years, they were satisfying every stakeholder possible. This is almost certainly why they were so successful. It was when they started to dissatisfy certain stakeholders, that they became unsuccessful. Taking a few examples in turn, General Motors started to dissatisfy its customers.
The products started to fail safety tests and the popularity of the vehicles reduced. As customers are considered to be Key Players – of high power and interest, this posed problems. The government, another stakeholder, stepped in and investigated. This would have portrayed General Motors as being an unsafe car manufacturer, and with a product as lethal as a motor vehicle, profits reduced. Employees are a very important group of stakeholders as they hold high power and interest and are therefore classed as Key Players.
Ranging from manual labour workers to directors of the company, and the president, all employees should be considered equally. General Motors had a good reputation with its employees in the 1970’s. Employees were encouraged to be loyal to the firm, never questioning decisions. This had a negative effect on the company though. It was in the 1970’s that a major change affected the company. New employees were brought in to turn around the ongoing misfortunes of the company. These people were not from an engineering background however, but a financial background.
This was the catalyst, which saw the direction of the company change. Short term increases in profit were demanded, instead of the long term strategic decisions that had been implemented in the past. It was at this time that the company started having problems regarding its ‘sense of community’. Managers were located on the 14th floor of the building, separated from the other employees by locked double doors. They even had their own heated car park, somewhat segregating themselves away from other employees.
This would have had a negative impact on the motivation of fellow employees, who more than likely felt that they were being treated unfairly. The directors, at this time, started implementing strategies to reduce reliance on blue collar workers. Roger Smith said “Every time you ask for another dollar of wages, a thousand more robots start looking more practical”. This would have had a negative effect on the company’s employees, drastically worrying them regarding their future within the company. Managerial decisions were drastically different in the Japanese firms though.
They had far fewer levels of management (5 compared with 14 in General Motors). If General Motors were to implement this structure into their company it would have positive results. Managers could work closely together instead of having so many different opinions, and the firm could possibly go back to being as successful as it was in the past, when it had a similar structure to this. Conclusions Having now discussed the main points regarding the question, I can now conclude my findings. You can clearly see that the relationship of General Motors and its external environment has changed over time.
When the company was in its early stages, being successful was normality. However, when it started to struggle financially, steps were made to adapt to the new situation the company found itself in. These steps were made, with consideration to the external business environment. Generally, competition has a negative effect on a firm’s sales and profits; General Motors was no exception. They adapted to this by implementing new strategies, which included the inclusion of a new car – the Corsair. This car was a disaster.
It had safety problems which escalated out of control. This case shows an example of the thinking of the managers at the time. The president wanted to add a safety bar to the vehicle to make it safer, but the finance department didn’t want the extra ‘unnecessary’ expense. This was just an example of the poor managerial decisions which lead to the downfall of the company. The managerial structure altered from a team with experience in engineering, to a team of experience in finance. This resulted in the change of objectives from a manufacturing point of view.
They had altered their internal environment, to try and keep in contact with the changing nature of the competitive and general environment. Today, the company has moved on from being solely a car manufacturing firm, to one in the financial services market. It is profitable in making cars in other countries, such as the UK, but cannot attain strategic advantage and be profitable in the US market. This could be due to its past in the country, having changed from being such a successful company to an unsuccessful manufacturer in a short space of time. I have found the question posed a little difficult to answer.
Although it is easy to talk about the external threats that General Motors faced during their successful and turbulent times, it is difficult to assess these factors without also talking about the internal factors that affected the business. I have concentrated on the external factors; however, the majority are not worth mentioning without the addition of internal factors. For example, talking about the managerial structure of the Japanese firms would be of little point if I did not compare the structure of those firms, with that of General Motors, and thus talking about its internal environment.