Graduate Mindset Change
by Faizan Syed '09
Issue date: 4/14/08 Section: Perspectives
Now there are a couple of organizational reasons that led to this persistent decline of market share. First and foremost, the organization had been set up to manage top down, since the early 1920's when Alfred Sloan was running the company. Since this style had worked in the past, GM had no desire to change it when faced with stiff competition from the foreign car companies. Executives in the firm continued to stay insulated from the rest of the organization and were unable to respond to competitive threats. There are examples of John Delorean, who in his heyday was responsible for starting the muscle car wars of the 1960's by introducing the Pontiac GTO, getting paid nearly half a million dollars annually perched in his 14th floor luxurious office, while the company was languishing with sluggish sales in light of stiff competition.
Secondly the company employed a divisional structure where the brands operated as silo's and didn't work together to reduce over costs and increase efficiency for GM as a whole. This created a lot of overlap through look alike products, increased costs and reduced efficiency. For example, Toyota, in the 1990's used the same door handle and power window switches in the, Camry and Lexus ES300. In the case of GM, a Chevy Caprice and Cadillac Seville wouldn't have such part sharing.
Then the relationships with the suppliers started becoming sour. The erstwhile strong relationships were now being poorly handled as GM would constantly ask suppliers to resubmit bids to lower costs and would often have longer turnover of their accounts payable liabilities. This approach was very different from that of Toyota who would work together and closely with suppliers and wouldn't destroy relationships over a few dollars.
Finally, GM was completely disconnected from the customer and the sales network. Today the company has close to 8,000 dealers selling roughly 3.8 million vehicles a year. Toyota sells nearly the same number of vehicles through half the number of dealers.
Secondly the company employed a divisional structure where the brands operated as silo's and didn't work together to reduce over costs and increase efficiency for GM as a whole. This created a lot of overlap through look alike products, increased costs and reduced efficiency. For example, Toyota, in the 1990's used the same door handle and power window switches in the, Camry and Lexus ES300. In the case of GM, a Chevy Caprice and Cadillac Seville wouldn't have such part sharing.
Then the relationships with the suppliers started becoming sour. The erstwhile strong relationships were now being poorly handled as GM would constantly ask suppliers to resubmit bids to lower costs and would often have longer turnover of their accounts payable liabilities. This approach was very different from that of Toyota who would work together and closely with suppliers and wouldn't destroy relationships over a few dollars.
Finally, GM was completely disconnected from the customer and the sales network. Today the company has close to 8,000 dealers selling roughly 3.8 million vehicles a year. Toyota sells nearly the same number of vehicles through half the number of dealers.
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