General Motors Pestel Analysis
General Motors is one of the leading automobile manufacturers in the world, based in the United States and with operations across 6 continents. It is one of the best selling car brands in the United States. Apart from the United States, China is also one of the leading markets of General Motors. However, the automobile industry is an intensely competitive industry and to maintain its leadership position and strong sales globally, the automobile companies need to retain a strong focus on innovation, marketing, and brand image. There are several factors that affect the demand and sales of automobiles globally.
These factors vary in nature and several of them are outside the control of the firm and therefore require strategic focus in order to minimize their impact on business operations and sales. Apart from the higher competition in the automobile industry worldwide, other factors that may be economic or regulatory in nature also have a direct impact on the sales of automobiles. General Motors has a strong competitive advantage which arises from various sources including technology and customer experience as well as product quality. This is a Pestel analysis of General Motors analyzing the various factors in its macroenvironment which have a direct or indirect impact on its business internationally.
Political factors are now playing a central role in the context of international business and multinational automobiles businesses. They affect operational efficiency as well as the profitability of businesses to a large extent. Governments and other regulatory agencies, as well as the regulatory framework in a specific market, affects the level of freedom and ease businesses have in terms of operations as well as their profitability. Political stability in any region of the world is also related directly to the economic stability and economic growth there. The regions that see a higher level of political stability also experience higher automobile sales. Apart from that the local political environment and government’s policies also have a direct impact on automobile sales.
While some markets are more open to foreign investment, others are less and the environment for business is not equally conducive around the world in all regions. The United States and China are the two important markets of the highest strategic value for General Motors. However, the Chinese market is much more complex as compared to the American market. Entering the Chinese market is difficult without local partnerships because of complex government policies and regulations. However, General Motors was successful at entering China and setting a strong foothold there through a local partnership with SAIC motors.
“SAIC General Motors Co., Ltd. (SAIC-GM) is a joint venture between GM and SAIC that was established on June 12, 1997. SAIC-GM has four major manufacturing bases – Jinqiao in Shanghai, Dong Yue in Yantai, Norsom in Shenyang and Wuhan – with eight vehicle plants and four powertrain plants. SAIC-GM offers over 20 product lines under the Buick, Chevrolet, and Cadillac brands. Its products include luxury vehicles, economy and premium sedans, MPVs and SUVs, and hybrid and electric vehicles.”
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Economic factors also have a central role in the context of business and their impact on small and large businesses is generally much more direct than the other forces in the macroenvironment of international automobile brands. This was obvious at the time of recession when big brands like GM, Chrysler and Ford had to be bailed out. Economic fluctuations can have a very direct effect on the sales and profitability of businesses worldwide. It is why the level of economic activity in the local and global environment is a key strategic consideration for automobile businesses like General Motors.
Level of unemployment, GDP and other such economic indicators are key to understanding the economic environment of the leading markets where General Motors operates. The United States which is the core market of General Motors has seen healthy economic activity during recent years leading to improved sales of automobile brands. The level of unemployment over the past few years in the United States has remained low leading to the growing purchasing power of consumers. Apart from the United States, the Chinese market has also been enjoying healthy growth over the past several years leading to growth in automobile sales in the market. China is strategically a very important market for almost all automobile brands including GM and it is mainly because it has risen fast to become the world’s second-largest economy.
Sociocultural factors are also playing an integral role in the context of international business and have strategic importance for businesses operating in the international environment. They affect operations as well as the image of a brand and their effects have grown more highlighted with the rise of social media. Social changes are a key factor that can impact vehicle sales throughout various regions of the world and it is why automobile brands like General Motors need to study these trends in order to satisfy customer needs efficiently.
Several sweeping changes including demographic changes worldwide have affected the sales of automobile brands globally. Millennials are the largest customer base of automobile businesses and they prefer stylish vehicles, mainly SUVs compared to other models. They are also a price-conscious and tech-savvy generation. Vehicle brands are also focusing their marketing strategy on attracting millennial customers. Other changes like the spreading fear of Coronavirus are also affecting sales of various products worldwide including that of vehicles.
Sociocultural factors have also acquired a new dimension in the context of marketing. Marketing has grown more culturally sensitive and brands need to focus upon these factors to design promotional strategies and campaigns that suit the taste of the local customer segments.
Technological factors have an integral role in the context of business and with time the role of technology in all the areas of business from manufacturing to supply chain, marketing as well as HRM has grown. Technological innovation has become the key to faster market expansion and profitable growth. Technological excellence is now no more just about the growing influence and market share but it is now a key component of the business strategy of individual automobile brands including General Motors.
Emerging technologies like autonomous driving as well as virtual reality and AI are some of the most researched areas where automobile brands including GM are dedicating a large part of their annual R&D investment. Digital technology is now an integral part of the customers’ lives worldwide and therefore General Motors is dedicating its research and innovation efforts to building cars with digital features and connected cars that integrate well in the lifestyles of its customers worldwide. Passenger security is also an important focus area for automobile businesses which are investing more in making their vehicles safer and environment-friendly. Growing competition has also grown the focus of automobile businesses on technology since technological innovation has become compulsory to hacking growth in less penetrated markets.
Environmental factors are now acquiring a central role in the context of the automobile industry. Apart from growing regulation in this area, the level of the public’s awareness in this context has also grown. Apart from creating incentives to grow the production of environment-friendly vehicles, governments around the world have also created laws to punish the manufacturers whose cars have a higher negative impact on the environment. GM has also grown its R&D efforts in this area to bring more efficient electric cars to the market. According to CNN, GM has developed new electric battery cells that can power a car for 400 miles or more. This is a challenge for Tesla, the leading electric automaker of the world. GM plans to use the battery in its new fully electric car models including the self-driving electric car Cruise Origin. The Latest changes at General Motors show that the company is strongly committed to embracing an electric future and all four of its brands including Buick, Cadillac, GMC, and Chevy are going to bring new EVs to the market.
Law and legal compliance have become the most important challenges that automobile companies are dealing with. Compliance is essential from the ethical point of view as well as financially. Companies cannot risk reputational damage caused by noncompliance. Apart from that, there is also a risk of financial loss caused by heavy fines as happened in the case of Volkswagen’s diesel scandal. The overall level of strategic importance that legal matters held in the context of the automobile industry has grown manifold in a decade. The automobile industry is facing a high level of legal control and around the world, several brands are dealing with legal challenges including Nissan and VW. Some years ago, GM was forced to make a large number of recalls as well as pay hefty fines over defective ignition switches fitted in its cars. Companies make a large number of recalls each year to avoid the fines. If any defective part or technology is discovered it will be the manufacturer’s liability. These defects can also cause reputational damage.