GENERAL MOTORS 12
Globalizationhas made it feasible for businesses to seek international expansionCompanies have been seeking international expansion in order toincrease their revenues and profitability however, when seeking theinternational market, it is critical for companies to understand theinstitutional environment of the countries or markets that theydesire to expand their business. Failure to adhere to the regulationsprovided in the market that an organization wants to operate in maylead to the company being denied operating power. In this report,Canada’s institutional environment will be discussed and howGeneral Motors can gain competitive advantage in the market. GeneralMotors’ competitiveness, industry context, products, andperformance will also be discussed. In addition, recommendationsconcerning how the company can handle the institutional challengespresent in the Canadian market will also be discussed.
Initially,General Motors of Canada was known as McLaughlin Motor Car Companybut changed its name in 1918. The company became founded in 1907 andis usually based in a place known as Oshawa, Canada. The GeneralMotors of Canada is a subsidiary of the General Motors Company, whichis based in the United States. General Motors Canada designs,engineers, produces, and markets cars, crossovers, and trucks(General Motors Canada, 2015).
GeneralMotors Canada is a key manufacturing facility, which builds severalautomobiles. The factory, based at Oshawa, is deemed as one of thebiggest auto plants in the entire globe. The products of GeneralMotors Canada include Chevrolet Equinox, Cadillac XTS, Buick Regal,Chevrolet Camaro, Impala limited and Chevrolet Impala.
GeneralMotors Canada markets the entire range of fuel-efficient Chevrolet,GMC, Cadillac, and Buick automobiles as well as related servicesthrough Canada’s largest automotive dealer network. The marketperformance, as of March 2015, indicates that Chevrolet total salesincreased by 1% for the month and increased by 7% for the year.Alternatively, the sales of Buick regal increased by 75% for themonth of March and by 33% for the first quarter of 2015. The BuickLaCrosse proceeds to gain momentum in sales since it posted its 7thsuccessive month of sales increase by 44% in March and 73% for thefirst quarter of 2015 (General Motors, 2015). On the other hand, GMCrecorded its 9thsuccessive month of total sales increase. For the month of July 2015,the company reported that Chevrolet saw a sales increase for themonth, where Sonic increased by 303%, Buick crossover sales increasedby 9% in the month of July. On the other hand, GMC total sales forthe month of July increased by 0.5%.
Institutionalenvironment entails political institutions like national structureused in policymaking and regulation, economic institutions like thestructure of a country’s factor markets and terms of accessinginternational factors of production, and the social-culturalinstitutions like the informal norms of a country (Gokcekus, 2011).All companies are usually exposed to an influence of a host nation’sinstitutional environment however, different firms are likely toexhibit varied responses to the influence on the ground of residentcapabilities. The variation in cross-national environments bringsuncertainty to foreign operations. This is critical since it affectsthe international strategy decisions like the entry mode to be used,when to enter the market, and the performance of a foreign company.Therefore, it is important for managers of a multinational company toensure that they align their strategies with the opportunities aswell as hazards that they encounter in a given institutionalenvironment (Sine& David,2011).
Politicaland Legal Environment
Canadaconstitutes a self-governing nation, which comprises of 10 provincesand three territories. Every province has a democratically electedlegislature, which is an indication that the country’s politicalenvironment is stable. The country has a strong tradition of loyalty,tolerance and compromise. Generally, the country’s politics are notoperated through swift, revolutionary changes. Change process in thecountry is usually slow and involves the compromise of differentinterest groups. Besides, regional consultations are done andgovernment in place has to be consulted prior to making changes. Thelegal system is usually overseen by an independent judiciary. In itsattempts to protect the environment, the federal government of Canadaintroduced vehicle criteria emission requirements that have to befollowed by the companies involved in the production of automobiles.These requirements entail vehicle exhaust emission standards, vehicleevaporative emission standards as well as OBD system requirements(GeneralMotors Company, 2014).The Canadian government agencies continue to introduce newlegislature and regulations associated with the selection and use ofchemicals or substances of concern through mandating wideprohibitions, life cycle analysis, green chemistry and productstewardship initiatives. Such initiatives offer broad regulatoryauthority of banning or restricting the use of certain chemicalsubstances. Chemical restrictions in Canada progress very fast as aresult of Environment Canada’s Chemical Management plan ofassessing existing substances and implementing risk managementcontrols on any substances that are deemed to be toxic. Furthermore,there is ignition switch recall from the Canadian regulations(GeneralMotors Company, 2014).
Thecountry has traditionally supported a free market economy having asubstantial government control. The size of the Canadian economy hasincreased immensely in recent years and is still projected tocontinue increasing in size. The economy is projected to grow toapproximately $2.11 trillion by the year 2018. Service sectordominates the economy, where it was estimated to provide around 72%of the GDP in 2012 (Pomfret,2013).Automobile industry is one of the chief industries in the country andhas attracted different leading players to the country such as Toyotaand J.D. Power. The country is ranked sixth in biggest exporter ofroad vehicles in the entire globe. After the North American FreeTrade Agreement (NAFTA) became signed, it made it possible for freetrade to exist between companies of United States and Canada as wellas Mexico. With this information, it is evident that the country’seconomic environment is favorable for the company’s operations.
Thesocial and cultural environment is exceedingly essential in ensuringthe success of a multinational entity. Industries in Canada areperceived as being of immense importance in maintaining the cultureof the Canadians. Canadians have a car culture, which is veryimportant to the General Motors Canada since it is possible to get aready market for the cars that the company produces. Besides, theadoption of technology has helped the company to produce automobilesthat the Canadians identify with (Ade, 2012).
IndustryContext of General Motors Canada
Inanalyzing the industry context of General Motors Canada, fiveporter’s forces will be applied.
Rivalry amid Existing Competitors
Withthe emergence of competitors such as Toyota, Nissan, and Honda,competition in the automobile industry has increased. Pricecompetition amid the automobile firms erodes returns through drawingdown cost margins. On the other hand, non-price competition in theautomobile industry drives fixed cost and marginal cost up forautomobile firms. A lack of differentiation opportunities in theindustry is another reason leading to high rivalry in the industrythat General Motors Canada operates. Therefore, rivalry is very highin the industry that General Motors Canada operates.
Threat of Entry by New Competitors
Theavailability of new entrants in an industry may lead to lowering ofprices, which may result in putting the profitability of firms in theindustry down. This is because, as new entrants lower their prices,existing firms will also be forced to lower their prices which maymake existing firms make low profits or even losses since the newprice may not be a reflection of their operating cost. Nevertheless,where there are barriers for new firms to enter an industry, theexisting firms are protected. In the automobile industry, threat toentry in the industry is a weak threat to profitability of firms.This is because economies of scale act as a barrier to entry in theindustry. Therefore, new firms would see it difficult to enter theautomobile industry.
Threat of Substitutes
Substituteshave the effect of affecting the profitability of firms in a certainindustry since they influence the pricing of a product. In instances,where there are close substitutes, lowering of the price of onecommodity would result in lowering f price of the other commodity,which is a close substitute. On the other hand, some products thatare complementary also have an effect of the manner in which theautomobile firms price their products. Take, for instance, the risingcost of fuel is likely to influence the pricing decisions of theautomobile firms. In the automobile industry, the threat ofsubstitute is weak to moderate since it does not have a lot of effecton the profitability of the firms in the industry.
Bargaining Power of Buyers
Thepower of buyer can be seen as the capacity of a customer to influencethe selling price of a product in a manner that would extract returnsfrom the seller (Roy,2009).Consumers have some negotiating power over prices of products withina certain dealership however, they have little power in dictatingthe price that manufacturers will sell their products. Consumers havethe ability of switching, but with little cost, from one auto dealerto another. Besides, consumers have access to information existing inthe market which make them well positioned in negotiating the pricethat exist in the market. However, since there are many individualconsumers, each representing a meager proportion of total revenues,buyers are likely to have modest bargaining power with themanufacturers, which make them have a weak threat in the industry.
Bargaining Power of Suppliers
Manufacturersin the automobile industry require inputs such as raw materials,services, parts, and labor. The price or rate charged on the inputscan have an impact on the profitability of firms operating in theindustry. The automobile industry, where General Motors Canadaoperates, has vast supplier networks, which implies that they exert asmall bargaining power.
Competitiveness/Competitorsof General Motors Canada
Thereare three major competitors in the Canadian market that compete withGeneral Motors Canada these include Toyota, Ford, and ChryslerCanada.
Thiscompany is well recognized for its strong brands that are almost inevery part of the globe such as Mercedes Benz, Jeep, Chrysler, andDodge. The company has strength in that it is a leader in innovation,lacks financial constraints, outstanding reputation, and involvementin more than just autos. Besides, the company is very cost-effective.Furthermore, the company has strength in engaging in research anddevelopment.
Thisis another major competitor of General Motors Canada that does notdeal in autos only, but it is also involved in financial services.The ford company has been centering on mitigating costs in an attemptto increase their margins more compared to its competitors. Thiscompany has strength in financial strength as well as involvement ininnovative initiatives.
Toyotais best known for its brands as well as the use of the Total QualityManagement (TQM). The company has been in a position to maintain itscompetitiveness through its innovative culture. Besides, the companyhas strength in green car development.
MajorStrengths of General Motors Canada
Oneof the strengths of General Motors Canada is the ability of havingdifferent brand names. With the variety of brand names, the companyis in a position to keep on with the competition from other companiesin the market. Another key strength of the company is the use ofOnStar satellite technology. This technology is very beneficial sinceit allows automobile to be tracked in case there is an emergency orthere is a theft case. Besides, this technology allows drivers tocommunicate with OnStar personnel at just a click of a button. Safetyis also another critical aspect that constitutes the strengths ofGeneral Motors Canada. In addition, innovation of the company isanother strength of the company that makes it possible for thecompany to proceed competing effectively in the market.
Fromthe institutional environment of Canada, it is evident that theGeneral Motors Canada has some challenges that may make it notcompete effectively with other automobile countries that prevail inthe market. One of the institutional challenges that the companyencounters entails very regular chemical regulations Canadiangovernment agencies continue to introduce new legislature andregulations associated with the selection and use of chemicals orsubstances of concern through mandating wide prohibitions, life cycleanalysis, green chemistry and product stewardship initiatives. Suchinitiatives offer broad regulatory authority of banning orrestricting the use of certain chemical substances. In order toresolve this challenge, the company should consider using chemicalsubstances that have already been regulated by the Canadiangovernment agencies. This will help the company save the cost ofpurchasing chemical substances that may be deemed unsuitable.
Onthe other hand, another institutional challenge that the company isfacing entails failure to observe ignition switch and other recalls.In order to resolve the challenge, it should be recommended that thecompany should always be on the front line in ensuring that anyrecalls made are observed. This will help in the creation of afavorable business climate amid the company and the host country.Besides, observing regulations that become introduced will aid thecompany in avoiding costs such as court fines for not observing thenew regulations. The saved costs may be utilized in other areas thatthe company may wish to invest in.
TheGeneral Motors of Canada is a subsidiary of the General MotorsCompany, which is based in the United States. General Motors Canadadesigns, engineers, produces, and markets cars, crossovers, andtrucks. The company has strengths that are critical in themaintenance of competitiveness. One of the strengths is the abilityof having different brand names. These different brand names arecritical in making the company be in a position to keep on with thecompetition from other companies operating in the market. Another keystrength of the company is the use of OnStar satellite technology.This technology is very beneficial since it allows automobile to betracked in case there is an emergency or there is a theft case.Furthermore, this technology allows drivers to communicate withOnStar personnel at just a click of a button. Safety is also anothercritical aspect that constitutes the strength of General MotorsCanada. In addition, innovation is key to the company and constitutesstrength to the company. Major competitors of the company entailToyota, Chrysler, and Ford. The company faces two institutionalchallenges. One of the institutional challenges entails theintroduction of new regulations concerning substances that should beused in the manufacture of automobiles. The other institutionalchallenge facing the company entails ignition switch and otherrecalls. It is recommended that the company should consider usingchemical substances that have already been regulated by the Canadiangovernment agencies since this will help the company save the cost ofpurchasing chemical substances that may be deemed unsuitable.Besides, the company should always be on the front line in ensuringthat any recalls made are observed.
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GeneralMotors Canada (2015). Retrieved fromhttp://www.gm.ca/gm/english/corporate/about/ourcompany/overview
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