General Motors Company (GM) operates in the automotive industry, which plays an important role in the economy of US. The remarkable trend for this industry is that it consumes a lot of production from other industries such as electronics, textile, steel, plastic, iron, vinyl, rubber, and aluminum. In 2013, JD Power Initial Quality Survey revealed results of survey that ranked GM as a leading company (General Motors, n.d.). Automobile industry and its best companies interact in high extent with majority of other sectors of the economy, establish standards, and push the development of technologies.
Key Economic Indicators of the Automotive Industry
Firstly, the automotive industry is impacted by the overall inflation, which raised the prices. Prices of the automotive products depend on price of oil, as it is the large part of expenses in vehicle operation. There are more factors that influence the prices in terms of their elasticity, such as (Parmenter, 2010):
· Taxation. The government can promote the growth of the industry by the offering efficient taxation plans, and, on the other hand, can hamper industry’s growth by raising taxes. Taxation is also driven by the regulatory in terms to provide society with safer vehicles and clean environment.
- Costs of commodity materials. The automotive industry depends on prices of raw materials and, thus if prices for steel, rubber, iron, or aluminum increase, then the price of produced goods will increase respectively.
- Buying power of consumers. The balance between demand and supply is crucial. The biggest issue for the companies in the automobile industry is trying to predict consumer expectations for the cars as this product has a high price per unit. Consumer spending has a similar trend with the growth or decline in GPD, which can be predicted. Indeed, the structure of consumer spending is going to be changed from the buying smaller amount of units at higher prices. This trend is supported by the implementation of new technologies and high rate of innovation within the industry.
- Overall condition of economy and major activities.
The key economic indicators for current state of the industry are such that there is excess capacity. This indicator influences the prices pressure. It is another economic indicator, which also impacted by the innovation and development of technology. Excess capacity for the US was estimated around 17% and 13% for Europe in 2005 year (Harbour, 2001). The main category of excees production is light cars. Suvs and trucks are also overproduced. The car manufactures suffer from high price pressure, which is likely to grow. The growth in commodity prices is trigged by the larger demand for materials and is going to increase. The prices will increase relatively to it.
GM and Its Life Cycle
The automotive industry itself reached a mature life cycle as well as General Motors. General Motors is a leading company with a long history. The global car market is highly saturated. The competition is severe. There is little differentiation between companies, so obtaining larger market share is complicated and depends on superiority in the variety of indicators. It could be reached by the innovation, so the Research and Development department of each company is it impellent element (General Motors, n.d.). It is suggested that GM holds the leading positions due to biggest spending costs on this department.
Factors of Success in the Automotive Industry
As industry is mature and competition is saturated, it promotes to existence of many factors in order for companies to be successful. Competitive prices, excellent quality, positive brand image, efficient sales techniques and distribution networks, reliable stable suppliers, cost reduction capacity, and offering newer technological implementations are success contributors (Harbour, 2001).
The world leading companies in the automotive industry hold many responsibilities in front of a society and the environment (Harbour, 2001). Automobile industry has to be considerate not only with its performance and outcomes, but also has to be thinking about the engaged industries. The education about green technologies of suppliers, measuring impact of carbon pollution, water quality and energy consuming are important points for leading companies.
GM Position in relation to Success Factors
GM seems to have an optimal combination of the success factor relatively to others, as it is a leading company. Of course, there is a perspective of GM to fully obtain low-cost market share as in this segment prices considered to be higher (Harbour, 2001). Pricing policy of automotive companies is confusing for customers as it contains a lot of factors such as price of a vehicle, price of operating, costs of parts and repairs. Those factors vary among all companies and overlapping with one another.
GM brand image is easily recognized and associated with high quality, powerful performance, and assurance. GM gives suffiecient attention to developing its brand image and the costs of advertising in this company are high respectively. As result, good image is developed and the efforts are paid off.
In addition, the performance of GM can be characterized by the extensive efforts in cost reduction and establishing long-term contractual relationships whether it is a sales channel, or supply.
High Competitiveness and Volatility of Worldwide Market
The global economy has suffered from the crisis and currently is recovering. This state of the economy has increased competition among companies and is predicted to be more intense in years to come. Globalization issues affecting competition probably will lead to changes in organization of companies worldwide (Harbour, 2001). The main performance indicators are quality, price, ability to provide safe cars, fuel economy, services, innovation, and financial services (Parmenter, 2010).
Such big companies as GM operate worldwide, so the political, social, and economic environment differently affects the company’s performance in a given market. Thus, it leads to different outcomes for company in general (Harbour, 2001). The innovative direction of the industry affects stability and gives no assurance in future performance.
GM has found solution in implanting sustainable policy (General Motors, n.d.). Company determined that it would bring a value to the developing of the environment, economic and social factors in order to ensure the long-term success. It implies in the mitigation of the growth, risks and innovation. The key focus is customer orientation. Integration and transparency within company is a key element to stability, which is based on internationally accepted accounting techniques and financial standards (General Motors, n.d.).
Accounting Considerations in the Industry
Worldwide operations have formed the accounting considerations. The biggest companies in the industry that operates in international mode have to obey different accounting rules. Recent new standards in the industry, which has replaced the GAAD and IFRS, implied considerable changes in the revenue models for car manufacturers and parts suppliers (Harbour, 2001). Those changes relate to the revenue that comes from customer contracts specifically. Identifying of the accounting unit is the main issue as the contractual relationships with customers can consist of more than one contract. The trend is going in establishing separate contracts, for example for the tooling and for further activities.
The General Motors is a leading company in the automobile industry. It operates successfully in the volatile environment and with a variety of factors to be controlled. The operating in the international environment has its implications. The political, regulatory, social environment of each market is extremely strict and the market in the automotive industry is saturated. Safety and environmental protection pressure and force developing new technologies as well as high competitiveness. The major success factor is the innovation, which is greatly performed by GM.