Assignment 1 Case Study GM Its Changing Organization Design MBA001 PDF

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Program Master in Business Administration-Entrepreneurship

Student Name Carlos R. Banayad Student No. 20180060480

MBA001- Subject Organization and Management (Pre-MBA) 1 ( One ) Assignment No:

CASE STUDY GENERAL MOTORS: ITS CHANGING ORGANIZATIONS DESIGN

Submitted to: Dr. Ali Fallahchay

Summited by: Carlos R. Banayad May 30, 2018

Page 1 of 12

Case Study: General Motors- Its changing organizations design

By: Carlos Banayad

Table of Contents

I. II.

Introduction- Background of General Motors Point of View

3 4

III.

Time of Context

5

IV.

Statement of the Problem

5

V.

Statement of Objectives General Objective Specific Objective

5 5

VI.

Areas of Consideration (SWOT)

6

VII.

Alternative Courses of Action Alternative No. 1.

7

Alternative No. 2.

7

Alternative No. 3.

7

VIII.

Strategy Formulation

7

IX.

Action Plans

8

X.

Conclusions

9

XI.

Assignment Answer

9

References

12

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Case Study: General Motors- Its changing organizations design

By: Carlos Banayad

I.

Introduction – Background of General Motors

As we all know General Motors (GM) is one of the world's largest automakers was initially founded by William Durant in 1902 and made a remarkable presence in the automobile industry for almost a century. GM’s predominantly engaged in the designing, manufacturing and marketing of cars, trucks, and other automobile parts in North America, Europe, Latin America, and Asia Pacific regions. But during 1980’s and 1990’s GM’s experienced trails and tribulation, from being in the position of market leader in automobile production, its sales began to falter along with market leaders in other industries due to competitive forces throughout the world.

Under the leadership of Alfred P Sloan Jr, he created a modern version of GM through the development of the divisional organizational structure which consisted of five independent divisions such as Chevrolet, Pontiac, Oldsmobile, Buick and the Cadillac, including the competing product strategy. And this traditional divisional design was in place throughout the post –World War II period when GM’s grew into the largest manufacturing organization in the world. But something happened along the way. The divisional structure as it evolved over time began to be identified as an impediment to progress and market response. One of the outgrowths of the structure was the development of a massive corporate support staff which when created was supposed to provide expert advice and consultation to the divisions. But over time these staff members began to take over the decision making of the line units, and the decision making began to grind to a halt in endless discussions in endless committee meetings at corporate headquarters. On this condition of General Motors, Roger Smith took the reins and he began the process of redesigning the GM’s organizational structure with the specific purpose of pushing decision making down into the operating divisions and reducing the number of staff at corporate headquarters . He announced his first move by created of two autonomous groups, the BOC and the CPC, BOC composed of Buick, Oldsmobile and Cadillac divisions and the CPC composed of Chevrolet, Pontiac and GM of Canada. Smith delegated complete authority to each of the groups to organize in whatever way the manager thought was necessary to get GM back on the – to regain its competitive , growing and profitable status in the market. But around 1993 rolled around, GM had replaced Robert Stempel, who had replaced Roger Smith, with Jack Smith. Stempel had been in the office barely two years, yet the board of directors was unhappy with his deliberate management style, as he simply was moving too slowly in carrying out the turnaround that Roger Smith had begun. On this scenario of GM, the new CEO which is Jack Smith, responded to the news that GM’s market share had dropped to its lowest point in 23 years, 29 percent, by creating a single operating division which is the North American Operation (NAO): reducing the corporate staff, number of car models, by combining different purchasing departments into one and eliminating hourly jobs by offering early retirement. According to Jack Smith, these seemingly harsh measures were necessary to assure the survival of GM as an automaker. Now through this organizational design, GM counts on to enable it to survive and compete identifies the five traditional divisions- Chevrolet, Pontiac, Oldsmobile, Buick and Cadillacas marketing units. But still all production, product design and purchasing will be done in one separated unit, so Jack Smith success at eliminating the Page 3 of 12

Case Study: General Motors- Its changing organizations design

By: Carlos Banayad

remaining vestiges of bureaucracy that persist even in the midst of massive efforts to make the company more responsive to market conditions and technological development. Thus, the reorganization efforts of GM’s remains unfinished as what the progress the company makes will depend upon on which is the appropriate response , it could be by centralization-some functions such as purchasing and production or it could be by decentralization the other functions such as marketing. Thus, despite all the efforts of its CEO’s from Roger Smith to Jack Smith, GM continues its long slide down the profitability curve. The efforts made by the management to reverse this slide through organization redesign and other measures seem to have yielded little gain. The most important issues based on the article General Motors are faces on the following issues; Being in the position of market leader in automobile their sales began to falter in the early 1980’s along with market leaders in other industries; General Motors facing more competitive forces around the world, as more competitors from Asia and Europe challenged their market supremacy, technological development in manufacturing and an information processing through production advancement; General Motors management responded on the challenges that they are facing by implementing changes on their organizational design, to maintain their profitable status in the market and traditional organizational structure design has changed into the new organizational structure.

II.

Point of View

I think the significant point of view on this case study article clearly shows that nowadays in the business world, as the organizations are growing there are many environmental factors that could be affected organization’s structure, processes, strategies and operations. It could be an internal or external factors of a business environment. Same like what happened and have experienced of General Motors, along the way of their success and being top on the position in the market of automobile industry production, some environmental forces affected their organizational structure that brought them implementing change on their organizational structure design. Furthermore, the author also was contemplating alternatives courses of action that will address bottom-line profits and increase chances of General Motors survival versus competition. The first is complete reorganization of the company structure, by decentralizing or centralizing certain functions and divisions that will impact its workforce and operations. And another possible alternative course of action is finding other root causes and address on issues such as changed and aggressive marketing strategy that will rival competition and reducing the number of corporate staff and increasing production line staff. These options will be discussed in detail in the alternatives course of action discussions.

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Case Study: General Motors- Its changing organizations design

By: Carlos Banayad

III.

Time of Context

As stated on the article the problem started since back 1921 the first loss of the General Motors but it was just began to appear in 1981, as per the report of General Motors. This report coincided with the appointment of Roger Smith as the sixth CEO of GM, and the changes implementation of organization design continues into the second half of the 90’s. On the particular situation, it might possible that the problem started since when the General Motors is on the situation of increasing corporate support staff as they are the same people who took over the decision-making processes in the line units. As this was led to an endless series of meetings and unresolved issues that affected overall capacity of General Motors to maintain supremacy in the market of automobile industry.

IV.

Statement of the Problem

This study focuses on the problems encountered by General Motors, specifically to find answer on the question that may lead to find out the solutions based on the case given situation;

What organizational changes must General Motors implement in to earn above average returns and improve its ability to compete in future developing markets?

V.

Statement of the Objectives

The general objective of this study is to identify possible solution/s or alternative course of action/s that could apply on the situation of General Motors to recover its above average sales and to determine organizational structure changes must General Motors implement to improve its ability to compete in future developing market. Will it be by reorganizing the division structure by centralizing or decentralizing some of the processes and procedures? Specific objectives also are possible to answer along the way of the discussion based on the situations given; Element

Specific objectives

Specific

The objective states that the organization would like to increase its market supremacy as well as technological developments by implementing organization design.

Measurable

The objective states that the organization would like to implement the organization design that continue into the second half of the 90's.

Achievable

To assess the capability of organization in adjusting on changes for organizational structure design

Realistic

The objective gave direction on specific purpose of pushing decision-making down into the operating decision and reducing staff at corporate headquarters.

Time Scaled Redesigning organizational structure which continues even to this day and started since 1981

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Case Study: General Motors- Its changing organizations design

By: Carlos Banayad

VI.

Areas of Consideration (S.W.O.T)

Below are some of the Internal and External factors affecting the General Motors organizational structure design that write into details using (S.W.O.T) Strengths

Weaknesses

Internal

1. With new technologies and aggressive marketing, the CEO of GM restructure its organizational design. 2. Development of 5 independent division with complete authority to design, market, produce and sell its own particular line of cars. 3. Constant redesigning of CEO's organization structure when a problem arises.

adjust with the constant organizational structure.

4. Reviewing the data of the recent changes in structure

3. Existing bureaucracy organizational structure

and how to improve the organizational structure.

4.Limited market presence in developing

5.Being market supremacy and leader in automobile

countries

industry

5.Limited business diversification

Opportunities

Threats

1. Readjusting the organizational structure to cope up with global competition. 2. Investing to research new technology and market for better profitability.

External

1. Massive corporate support staff whom began to take over decision-making of line units resulting to an endless discussion in committee meetings. 2. Difficulty of members of the organization to

1. High level of competitive forces from ASIA and Europe challenged the firm's market supremacy. 2. Wage of competitors are significantly lower than GM.

3. Promotes new ideas and innovation. 4.Reduction of bureaucracy in the organizational structure 5.Expansion of market presence in developing countries 6. Integration of advanced computing technologies in

3.Potential problem using of new technologies 4.Governmental promotion of public transport and other options

products

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Case Study: General Motors- Its changing organizations design

By: Carlos Banayad

VII.

Alternative Courses of Action

Below are alternatives course of actions that could be applied on the situation of General Motors that possibly could help increase General Motors sales and improve the organizational redevelopment. 1. I think one possible alternative course of action for organizational change is to consider that instead of trying to change the organization’s structure and creating two groups with different work agreements and policies; it might be more feasible if there will be a decentralization of strategic business units (SBU) for different car brands to be marketed differently, and centralization of more general functions such as research and finance to create economies of scale. Hence there will be an alignment from the top management of GM as a whole, even with autonomous SBUs. General Motors is the parent company that will lead overall targets, but it allows different car brands to operate on its own divisions and flourish on its targeted consumers. General Motors will provide scale on research, provide and ensure financial capacity, and overall provide leadership per division. Each division then reports back to top management for all innovations on marketing, sales, and distribution of their cars to consumers. 2. Focus on sales loss recovering I think the alternative course of action that General Motors need to consider is to change product design to create a more hybrid and energy efficient vehicles. Through this it will bring to General Motors to remain competitive in different markets, enticing to change consumer taste, and remain competitive with other automobile manufacturers. Additionally is to develop and adopt change in marketing strategy to compete internationally by this General Motors be able to attract new customers. The possible disadvantages are high training cost, in the beginning not being competitive in other market and it might possible losing or decreasing the old customer. 3. Another possible alternative course of action is by reducing the number of corporate staff and increasing production line as mentioned that massive corporate staff become burden on the decision making of the organization. Top Level Management could just assign Managers to focus on the goal and objectives that the organization wanted to achieve to recover especially the sales. I believe they will have more focus now in production that will meet the new demand of the customer in the market by increasing production line employees.

VIII.

Strategy Formulation

To identify the strategy solution based on the situation of General Motors, I think that understanding on the internal and external environmental factors that affected the General Motors environments are importance.

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Case Study: General Motors- Its changing organizations design

By: Carlos Banayad

I believed that there must be a management leadership team in every core function. The top management must be centralized to achieve the organization's common goal and objectives. In this way, Top Management per division may appoint a specific personnel to oversee the execution of its function but must be limited in number to avoid the overflowing of support staff.

Now finance, division, marketing and other functions representative may have the discretion to innovate and develop strategies of building their brand and provided that it is still aligned with its organizational goal and objectives.

IX.

Action Plans Action

Specific Tasks

Responsible Area

Research for capitalization

Investing for new technological advances and market strategies.

Researchers of the organization

Identify -The market

Identify new trends and styles based on general customers liking.

Management evaluation

-Competition

Identify how to optimize the strength of the firm and take advantage of its current status Identify things that may prove as a liability

-Customers taste -Strength of the Organization -Weakness of the Organization

to the organization as well as current issues preventing the company's growth and improvement

Create and implement

Implement a job distinction between support and line units.

CEO, Top Management and Low Management.

Establish an organizational structure which will create a formal system of roles to avoid bureaucracy system.

Promoting coordination of work in every division especially in SBU's.

Middle Management

X.

Conclusions

After experiencing intense competition and bankruptcy, now General Motors improved recover its performance and still leader in the market of car manufacturing company. The company has change recently which has also improved the working condition. But the company will must see also the weaknesses and public perception to increase the sale. It was recommended that before implementing any changes and strategies, General Motors should analyze first and consider environmental factors that will affect the entire organization. Accordingly, changing of organizational structure design is not an easy task, rigid research and collecting information are needed for its success. Internal environment of organization must be measured for its adaptability of change. With the continuous change of trends in the business

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Case Study: General Motors- Its changing organizations design

By: Carlos Banayad

world, technology and market, Top Management must identify the factors which hinders with the objectives and goals of the organization particularly the internal factors where bureaucracy is rampant and how to minimize losses and maximize profitability. The CEO and Top Managers must think of strategies to outplay emerging competition which hinder its profit, developing aggressive marketing strategies and trending technology and cost cutting may be necessary for its growth. I believe that appropriate execution of objectives are also could help in any organization by using “top down approach or bottom up approach” to communicate clearly the specific objectives into the various level of organization which will be handled by the management of an organization according to their “ Organizational Hierarchy” structure that corresponds to the “Hierarchy of Objectives” of an organization. Therefore, it was clearly shown also on this article that as a leader or as a manager, we should be knowledgeable and we must prepare always on how we will solve challenges in our respective organizations. It’s needed that before ...